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Hotel Association of Nepal; Issues of wages due to Covid-19

Background:  

Tourism, it is the most important factor for the development of economic sector of each and every country. Especially Nepal, which is rich in natural, cultural diversity, is depending on the tourist for the development of economic part.  It has been stated that tourism contributed 8.5 % of GDP of Nepal. It is said that nearly 9 lakh persons are employed in Hotel and Restaurant of Nepal. The cascading effect of the coronavirus has been found to cripple the Nepalese tourism and hospitality industry at an astonishing pace.

Issues:

The issue of wages has become very complicated after the Government said that all the organizations in the private sector should immediately pay 50 percent of the workers' wages in April and the rest should be paid after the start of business. On Sunday, private sector organizations, the Federation of Nepalese Chambers of Commerce and Industry and the Chamber of Commerce, issued a joint press release to review the government's decision, saying it could not pay more than 50 percent.

Hotel Association of Nepal has decided to close the hotels for six months and pay the employees an average of 12.5 percent of remuneration during the period. The association does not seem to pay attention to how the workers make a living on such a salary. Hotel Association of Nepal needs to pay attention to the fact that such a decision would degrade the employees who have been selling labor to the organization for many years and could ruin the relationship between employers and employees in the future.

Similarly,  Three Trade Unions related to Hotel and Casino release the press statement yesterday ( 4th April 2020) saying that Hotels are not providing the remuneration and benefits according to Labor Act 2074 and giving threat to the employees of retrenchment/termination according to section 145 of labor Act, 2074.  They expressed that the decision made by Hotel Association shall be withdrawn immediately.

Past Experience:

 In the past, it was difficult for Hotels to run its own business due to conflict between employers and workers, but that is no longer any more. However, it cannot be said that the problems of the past will not be repeated if Hotel pays enough to make a living to their employee. About 90 percent of the employees have not received their salaries for the month of Chaitra, while some have received only half of their salaries. Yes, Hotels are closed; the problem of how to pay the employee is justified when there is no income. Hotels with accumulated profits may be able to pay for few months only, but it is difficult to pay the remuneration that hasn’t to the operating Hotel is not able to pay.

Relief Package by Government

Nepal Rasrta Bank (NRB) has also provided facilitation directing banks and financial institutions to provide up to 10% additional current capital loan out of approved limit to those needy business enterprises that provides assurance as of effect on their projects or businesses and financial condition due to COVID-19. NRB has directed banks and financial institutions to reduce interest rate on bank loans by 2 % points for the purpose of reducing adverse impacts caused by COVID-19. The fourth quarterly calculation of interest amount for this fiscal year has to be done by reducing the 2% interest rate on the prevailing rate of interest. The “D” class microfinance transacting retail loan has to decrease interest rate on loan by 3% while microfinance transacting wholesale loan has to provide relief on interest rate by reducing the rate by 2% for the fourth quarterly interest calculation this fiscal year.

The package given by the Government is not adequate and the Government must provide loan to the Hotels of Nepal with the minimum interest rate of 3% to pay the remuneration to the employee for one year. Besides this several subsidies packages should be given in term of paying bank loan, tax and other payments to Government of Nepal. Besides this Government may use the employee of Hotel for promoting the tourism business in Nepal.

Conclusion:

In this time of crisis, it is imperative to reduce government spending on necessary things. In particular, expenditure should be reduced by reducing the salaries of high-ranking government employees, including ministers and parliamentarians, and by closing down commissions, committees, etc., which the government has recommended to dismiss all unnecessary offices.

In this time of crisis, even a small decision can have serious consequences. Employers, Hotel Association of Nepal and the government, need to be sensitive to solve the issues of employees' employment and salaries. Under normal circumstances, employees who sell their labor are embarrassed; Government and employer should not be forced to go hungry under the circumstances. If the government does not find a middle way solution to the problem through joint discussions with the Hotel Association and trade unions, this problem may escalate later and lead to close of all Nepalese Hotel industry and business.

Pradeep Thapa is corporate lawyer and providing legal service to different national and multinational companies in Nepal.  He is guest lecture to law school in Kathmandu and teaching business law from last 10 years in different business college too.  He has completed LL.M from Kathmandu School of Law and associates with Prime Law Associates. If you need any further information, you can directly write to him at pthapa@primelawnepal.com