Human Resource Management in Nepal

Human resources

Like many developing countries, the Human Resource Management (HRM) function is not yet fully established in Nepalese organizations. An attempt is made in this chapter to highlight the main factors which determine HRM policies and practices in Nepal. Business environment, national culture and national institutions all play a significant role in this regard. Three case studies provide empirical support to the discussion.

The most important law for the management of human resources in Nepal is the Labor and Trade Unions Act of 1992, which applies to any organization employing ten or more people. This makes detailed provisions for the employment of workers and the operation of trade unions. The main provisions include that every job has to be classified, every employee has to receive an employment contract, that non-Nepalese citizens cannot normally be employed, and that a file has to be kept for every employee. It also regulates that working hours are fixed at forty-eight per week and that overtime work is remunerated at one and a half times the normal wage. The Act also stipulates that employers have to provide welfare funds, compensation in case of an accident, a pension scheme, medical insurance and other social benefits. It permits strikes, except for employees in essential services, but also gives the government the opportunity to halt a strike. Finally, it makes provision for the settlement of grievances. If an individual and collective labor conflicts cannot be settled at the company level, a labor office can be approached for the resolution of the conflict. If any party is dissatisfied with the outcome at this level, appeals to the Labor Court can be made. Similar to other areas of the law, the rapid turnover of governments during the last decade has meant that a complete code of labor law has not yet been developed. Furthermore, the Labor Courts have not been effective in enforcing the existing law. This is one explanation why a system of collective bargaining has not yet evolved in Nepal.

Nepal Bank

Nepal Bank is the largest and oldest bank in Nepal. Founded in 1938, it has 218 branches all over the country. Until 1998, the state-owned more than 50 percent of the shares, since then it only holds 48 percent. However, the government retains a strong influence on the bank as four of the nine board members are directly or indirectly appointed by it. This explains why the employee rules and regulations are still guided by the ones for the civil service. Currently, Nepal Bank employs 6,600 people, more than one-third of all those working in the Nepalese financial sector. In 1990 the bank reduced its workforce by 800 people. This was achieved by a combination of voluntary redundancy and early retirement fostered by a generous incentive. Every year conferences are held at the regional level of the bank where all managers discuss problems and strategies for future improvement. Problems and solutions identified are then further discussed at the local, regional and central level of the bank. Nevertheless, morale of the bank employees is not very high. One indicator is that, similar to the civil service, there is a distinction between first and second hour’s practices’. This means that although there is no flextime, employees are only expected to be on duty during first hours between 10.30 and 14.00, but avoid duties and take doubtful leaves for the remainder of the day. Managers also complain about a strong bureaucracy in the bank. Among the nine staff departments are a personnel administration department and a training department. The establishment of a separate training department at the end of the 1980s was an attempt to institutionalize human resource development within the organization. The training department identifies training needs and organizes courses for bank employees. The bank has its own training center, but this lacks minimum logistic facilities such as computers, photocopying machines and a library. Before 1990, most external recruitment took place without a formal vacancy notice. Although today every vacancy is publicly announced and written examinations and interviews are conducted, there is still scope for politicians and relatives to exert their influence in the recruitment and selection process. In the absence of a formal human resource development system, promotion mainly depends on seniority. This situation has led to dissatisfaction among ambitious and innovative young employees who can progress only slowly through the ranks. With regard to paying, the bank has to operate under the restrictions of the government. This means that it cannot, for example, implement a performance related salary system. However, depending on the annual profit of the bank, all bank employees receive a bonus in the form of a certain percentage of their monthly salary. Similar to the first case study company, bank employees also receive a wide variety of allowances. There are three main banking unions in Nepal, each affiliated with a political party. In Nepal Bank the unions affiliated to the Congress and to the Unified Marxist-Leninist Communist Party are active. The unions exert a particularly strong influence in promotion and transfer decisions, as members ask them to represent their interests. The relationship between the unions and management is perceived by both sides as unsatisfactory. Management complains about constant interference by the unions in the banking operations and those unions are highly political and criticize mismanagement in the bank.

From the above discussion, it appears that contradictory contextual factors affect the HRM of Nepalese organizations. Over the last decades, the government has implemented several legal changes to promote investments by indigenous and foreign-owned firms, but a relatively unstable business environment still does not favor investment in human resources. On the one hand, the Nepalese culture fosters the adoption of traditional managerial practices such as centralized management and administration, but, on the other, it is quite open to modern Western-type management practices. Depending on factors such as the degree of state intervention and the openness to foreign influences, HR practices in Nepalese Firms differ widely as the three sample firms demonstrated. The example of Nepal suggests that there are opportunities and challenges for a transfer of Western-type HRM prescriptions to developing countries. Nepalese managers and policy-makers are generally not convinced about the benefits of investment in human resources. In particular, there is no recognition that people should be treated as valuable assets. Therefore, it is important to make Nepalese decision-makers aware of the Western literature which demonstrates the performance impact of HRM practices. However, the Nepalese context does not appear favorable to many aspects of American or European HRM concepts. Prescriptions for the devolvement of human resource responsibility to line managers are one example. This is difficult because of the limited knowledge and skills of many managers. Furthermore, Nepalese decision-makers often prefer to hold the power rather than delegate and devolve it. Therefore, there is a need to develop HRM concepts and prescriptions that are more attuned to the business

References

Flippo, Edwin B. Personnel Management. London: Oxford Press, 1980.

Gynwal, Ram Prasad. Know Nepal. Kathmandu: Bhundipuran Prakashan, 2012.

Hamilton, Francis B. An Account of the Kingdom of Nepal. New Delhi: Manjushri Publishing House, 1971.

Heywood, Andrew. Politics. New York: Palgrave Macmillan, 2002.

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