The government, private sector and trade unions are bracing for a long fight ahead as scheduled two-yearly wage hike negotiations get underway.

Workers say they are being buffeted by high inflation while employers say they are having a hard time staying alive with the economy in a tailspin.

The unions have demanded that industrial workers be paid on a par with first level office helper in the civil service who get a monthly salary of Rs26,348.

A factory worker currently earns a minimum of Rs15,000 per month, and employers say their salary expectations are too high when the country is wallowing in an economic slowdown.

Four months ago, an 11-member committee was formed to recommend a minimum wage plan. The panel is expected to submit its report to the government in the next two weeks.

The committee is under the coordination of Dandu Raj Ghimire, joint secretary at the Ministry of Labour, Employment and Social Security, and consists of representatives from the Labour Ministry, Department of Labour and Occupational Safety, Ministry of Industry, Commerce and Supplies and Nepal Rastra Bank.

Representatives from the trade unions and employers' organisations also sit on the committee.

As per the existing provisions, the minimum wage is reviewed every two years. This year’s negotiations are particularly unusual and intense as they are taking place at a time when the economy is going through a bad phase and consumers are being battered by runaway inflation.

Hansa Ram Pandey, a senior expert at the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and a member of the committee, said they had alerted the government about the country's economic situation.

“Despite the legal provision requiring the minimum wage to be reviewed every two years, we cannot ignore the fact that the economy is in a slump. Many factories have shut down or have cut production. Manufacturing plants are operating at 50 percent capacity,” Pandey said.

“While we should consider workers' benefits, it is equally important to consider how industries will survive in a recession-like situation.”

As per the National Statistics Office, the country was officially in a recession until the second quarter of the current fiscal year, with the annual economic growth rate projected to slow down to 1.86 percent as a result.

The first meeting of the wage committee was held on January 27, according to Janak Chaudhary, vice-president of the General Federation of Nepalese Trade Unions (GEFONT) and one of the panel members.

“On behalf of the trade unions, we have asked that the government either provide subsidies to workers at the low end of the pay scale or hike the minimum salary to Rs26,348,” Chaudhary said.

The minimum monthly wage for industrial workers is currently Rs15,000 which includes Rs9,385 basic salary and Rs5,615 inflation allowance.

The last time the minimum wage was reviewed was in the fiscal year 2021-22. Prior to that, the minimum monthly salary was Rs13,450.

Nepal’s private sector employs around 4.93 million persons, nearly 86 percent of the country's labour force, according to a study entitled State of Private Sector in Nepal: Contributions and Constraints, jointly produced by the FNCCI and the International Finance Corporation (IFC).

Chaudhary said high inflation appears to have become the new enemy for workers who have a small salary. “We have demanded an end to pay discrimination between government and private sector employees,” he said.

“Why is the minimum pay for civil servants much higher than for private sector workers? The government has increased the salaries of government officials despite low revenue.”

According to Nepal Rastra Bank, the country’s central bank, the year-on-year consumer price inflation rose to 7.44 percent in mid-March from 7.14 percent a year ago.

Economists say that since inflation has risen from a higher base of 7.14 percent, Nepal is passing through hyperinflation, an extreme case of inflation. They say that higher inflation rates are more prevalent in Nepal because the country often lacks sufficient data and transparency.

Raising the minimum pay has not been so easy in Nepal. Insiders say that unions normally resort to a strike if their demand is not met. In the past, unions tried organising strikes and picketing government buildings to put pressure on it.

The unions are in a wait-and-see mode. Chaudhary says they haven’t planned their next move and are eagerly waiting for the committee report.

He said the government would not increase the minimum pay but make some adjustments to the pay structure in line with growing inflation.

Ghimire says they plan to submit the report to the government in the next two weeks with their recommendations. “The government will make an informed decision whether or not to raise the minimum salary based on the report.”