The government has approved a bill allowing civil servants to retire at age 55 or after 30 years of service, and cleared the way for its submission to parliament.

The Bill to Amend the Civil Service Act also includes a provision to ensure that employees who retire at age 55 or after 30 years of service do not lose pension benefits. This provision was not included in the initial draft, but was added after the Public Service Commission (PSC) advised the government that existing laws protect employees’ terms and conditions of service.

Government spokesperson and Minister for Education and Sports Sasmit Pokhrel said the Cabinet decided to forward the bill based on a proposal from the Ministry of Land Management, Cooperatives and Federal Affairs. Madan Bhujel, secretary at the ministry, said the draft had been revised by incorporating most of the recommendations received from the commission.

“I am not aware of the Cabinet’s decision,” Bhujel said. “Once the bill reaches Parliament, all its provisions will automatically become public, and discussions will begin.”

A ministry official said the bill retains the provision requiring employees who have reached 55 or completed 30 years of service at the time the new law comes into force to retire.

However, the bill seeks to ensure that such employees receive pension benefits equivalent to what they would have received if they had continued working until the existing retirement age of 58, according to the official. For those who retired solely because they have reached 55, up to three additional years of service will be counted when calculating their pension.

According to ministry officials involved in finalising the draft, employees who retire after completing 30 years of service may be credited with up to seven additional years of service for pension calculations. Under the existing law, the mandatory retirement age is 58. The proposal would therefore count the years remaining until an employee turns 58 towards pension eligibility.

For example, an employee who has completed 30 years of service but is only 51 would be retired but would have seven years added to their service period for pension purposes, the official said.

“Even if an employee has to retire before reaching the existing retirement age of 58, there will be no reduction in the benefits they receive after retirement,” the official said. “The bill was revised by incorporating the Public Service Commission’s recommendations and proposals received from the Ministry of Law during the drafting process.”

The ministry had also discussed removing a provision in the original draft under which only 30 years of service would count towards a pension, regardless of how long an employee had actually worked.

“The original draft, the suggestions received from the commission and the proposals that could be incorporated into the bill were sent to the Cabinet,” a ministry source said. “The Cabinet decided to register the bill in Parliament. Once the Cabinet decision is certified by the chief secretary, the bill will be sent to Parliament with the necessary revisions and its provisions arranged accordingly.”

The bill is set to reach Parliament six months after its draft was opened for discussion. A government action plan issued on March 27 had set a 45-day deadline for drafting the Civil Service Bill. In line with the plan, the Ministry of Federal Affairs and General Administration made the draft public for comments in the third week of April.

Discussions on the draft were prolonged after a provision was added requiring employees who had reached 55 or completed 30 years of service at the time the new law came into force to retire. The ministry sent the draft to the Ministry of Law, Justice and Parliamentary Affairs on May 26, but it took the law ministry three months to complete its work and return the draft.

The bill defines the 55-year age limit or 30-year service requirement only as a one-time measure. Employees who join or remain in service after this transitional provision would retire at 60. Civil servants currently have a mandatory retirement age of 58, which the government plans to raise to 60.

The commission had raised concerns over several provisions, including the one-time measure to retire employees who had reached 55 or completed 30 years of service; reduce the five-year term of secretaries to three years; limit pensionable service to 30 years regardless of actual years worked; retire some employees early without compensation; and raise the retirement age to 60 for those who remain in service.

The commission also questioned the fairness of having different retirement provisions for different groups of civil servants.

“The commission said these proposals would be contrary to existing legal provisions protecting employees’ terms and conditions of service. That is effectively the same as withholding its consent,” a ministry source said. “The draft was revised after considering the legal questions that could potentially be raised in court.”

Following a Cabinet decision on September 3, the ministry wrote to the Public Service Commission on September 9, seeking its comments on the draft. The commission sent its recommendations to the ministry on September 24.

The Civil Service Act, 1993, states that the terms and conditions of service, including salary, gratuity, pension and other benefits applicable when a civil servant was appointed cannot be changed to the employee’s disadvantage without their consent.

It further states that if the law is amended in a way that adversely affects those terms, the amended provisions will not apply to an employee who has not given written consent to accept them.

The existing law sets the mandatory retirement age for civil servants at 58 and does not prescribe a retirement requirement based on years of service. All years worked are counted for pension purposes.

The commission drew the government’s attention to these provisions and explicitly advised that civil servants should not be retired in a manner that adversely affects their existing terms and conditions of service. The ministry source said the bill was therefore revised to ensure that employees retiring under the new provisions would not suffer a reduction in pension benefits, also taking into account potential legal challenges in the future.

The long-awaited legislation governing the civil service was previously introduced in the House of Representatives in 2017 and 2022, but both bills became contentious and failed to pass.

This time, the retirement provisions introduced at the drafting stage triggered controversy and delayed the bill’s progress into the formal legislative process.

The commission had primarily raised concerns about provisions that could adversely affect civil servants’ existing terms and conditions of service. A ministry official involved in the drafting said those concerns were taken into account while finalising the bill.