Festival Allowance: Mandatory allowance, not a bonus

As Nepal's festive season approaches, so do the expenses. Along with the excitement comes the concern of managing the expenses. Many employees look forward to receiving the Dashain Bonus.

For a fact, festive allowance, which we commonly refer to as Dashain Bonus, is not actually a Bonus. It is a festival allowance. 

Firstly,let's understand:

What Is the Festival Allowance?

The Festival Allowance is a mandatory benefit to be provided by the employers to its employees, in the form of an annual one-time allowance, generally provided as a gesture to celebrate festivals. This allowance is not a discretionary reward or a goodwill gesture, but a legally required payment designed to support employees in celebrating significant cultural or religious holidays such as Dashain, Tihar, Eid, or Christmas.

Unlike other bonuses which fluctuate based on performance, profitability, etc, the Festival Allowance is guaranteed for all employees as per the applicable Labour laws of Nepal. Hence, it's crucial to understand that:

The Festival Allowance is not a bonus but a mandatory allowance.

Why It’s Not a Bonus?

According to the Labour Act 2074, Chapter 8, Section 37, Sub-sections 1 and 2, the Festival Allowance is a mandatory payment that employers must provide. Mislabeling it as a "bonus" can lead to confusion, as some employers may believe it’s optional. To avoid any misunderstandings, always refer to it as the Festival Allowance, reinforcing its status as a legal requirement for all employees

When Is It Paid?

Employees can receive this allowance once a year for any festival, not just Dashain. In Nepal, generally it is distributed at the time of Dashain Festival, however an employee can request for it as per their own religion. If no request is made, Dashain time is used by default.

How Much Should You Receive?

This is a point where many employees often get confused. It's a common misconception that the Festival Allowance is uniform for all workers. However, that’s not accurate.

For employees with less than one year of service, the allowance is calculated based on the actual service period as on the allowance distributed date and based upon his/her basic salary. On the contrary, employees who have completed at least one year with the company as on  the distribution date, are entitled to a Festival Allowance equal to one month’s basic salary. Clarifying this difference is essential to ensure that you receive the appropriate payment during festival times.

Example Calculation: 

If your Total salary is NPR 50,000, with a basic salary of Rs 30,000 and you’ve worked for 6 months:

Festival Allowance = Basic salary × number of months worked/ 12

In the given example

Festival allowance = 30,000×6/12

                                = 15,000

The Festival Allowance ensures that employees can celebrate their religious and cultural festivals without financial stress. 

Make sure you’re receiving what you’re entitled to, and if not, you can claim it in writing for the time of your major cultural celebration.