As a social enterprise with a mission to empower marginalized people in Nepal, fair payment is very important to us. Purnaa conducts an annual survey with each of our Nepali team members to measure how well we are accomplishing our social objective of creating good jobs that empower marginalized people to transformed lives. We publish this social impact report because of our commitment to transparency. We are also Guaranteed Members of the World Fair Trade Organization (WFTO), and as members, we follow a regular process to review and update our understanding of a living wage and ensure all our employees receive fair payment. Today we want to share our calculations for ‘A Living Wage in Nepal’.
What is Living Wage
A living wage is usually defined as the total amount of money a family of 4 people needs for basic living expenses including housing, food, clothes, transportation, healthcare, education, and savings. It assumes that two adults will be working full time in a family of 4 people and therefore the living wage per worker would be one-half of the total monthly living cost of the whole family. A living wage is a very basic lifestyle and may be different based on the local context.
When we founded Purnaa in 2013, despite many, many hours of digging online, meeting with government officials and INGO workers who work in economic development, we could not find any reports on what Nepal’s living wage (not to be confused with the minimum wage*) ought to be. After running a company for 9 years that employs many who have little-to-no formal education, we are careful to ensure that we fully understand what a living wage should be in Nepal and ensure our lowest-paid workers earn at least a living wage.
Minimum Wage in Nepal
The current minimum wage in Nepal (updated in July 2021) for a full-time worker (6-days per week, 8 hours per day) is 15,000 NPR/mo. This is divided into two portions: 62.86% is called basic salary and 37.14% is called dearness allowance. 11% is deducted from the employee's salary and added to an additional 19% added by the company and deposited on the employee's behalf in the Social Security Fund. This provides old age savings as well as government health insurance.
Living Wage in Nepal
Each year, we then use the WFTO Fair Payment System to calculate of a living wage in Kathmandu Nepal. We use the WFTO Living Wage Ladder to compare metrics from several sources fully understand a living wage in Kathmandu. The process is as follows.
Find the total value of wages and benefits for the legal minimum wage
Research the average wages in our local area for comparable alternative work for Purnaa's workers. We check with our staff and families to find out what people earn in other similar jobs in our area and average together around five different options.
Research officially published data for living wage in Nepal. We found official data from Nepal Rastra bank and Wage Indicator.
Use the WFTO Living Wage Calculator to enter market prices of many types of food in our local area to get a daily cost of food estimate, then multiply this by a standard multiplier to get an estimated living wage.
Average together the monthly wages from steps 1-4 above to get an estimated Local Living Wage.
Meet with representatives of our staff to negotiate an agreed-on living wage at Purnaa, starting with information from the above steps but working toward agreement between workers and management.
Living Wages in Nepal 2022
We met with Purnaa's collective bargaining committee in July 2022 to update Purnaa's living wage. We knew that inflation in Nepal had been running above 8% and therefore our living wage calculation needed updating.
After stepping through the process outlined above, we agreed with our staff that a living wage in our area for 2022 would be Rs 43,108 for a family of four. At Purnaa, this salary breaks down as follows:
In our annual impact assessment, we ask employees to estimate their actual expenses in different categories. We recognize that the result of this inquiry will probably be different than the living wage amount calculated above because some Purnaa staff earn significantly more than a living wage and some have spouses that also earn significantly more and some live in various joint-family situations that can have a significant impact on expenditure. However, when we eliminate a few upper and lower outliers and find the median response across different categories, we get the following results, which we think is a good common-sense cross-check on our living wage calculation.
While our process isn't perfect, we are constantly working to improve salaries and benefits for our workers. We strive for transparency and are therefore happy to share this data in hopes that it is useful for other employers in the region and to help our customers know how we determine fair payment at Purnaa. We welcome any comments or questions on the process.
For more information about how Purnaa is working to ensure ethical and fair practices in our business, check out the blog posts below.