THESIS ABSTRACT

Abstract

Labour informality is a significant issue in Nepal’s construction industry, especially in residential housing projects in the Kathmandu District. Even with the rapid growth of urban areas, the employment practices in this sector remain largely unregulated, which raises serious concerns about worker welfare, productivity, and the overall performance of projects. This study aims to evaluate the level of labour informality, identify the key causes, examine effects on workers, and propose strategies to promote formal employment practices. The research adopted a mixed method approach, combining quantitative and qualitative techniques. Primary data were collected through structured questionnaires from 310 construction workers, while expert insights were collected using the Delphi technique. Data interpretation was carried out using statistical tools including Principal Component Analysis (PCA), descriptive statistics, and consensus analysis. The findings reveal a strikingly high level of labour informality, with 84.2% of workers falling into highly informal category based on a composite Formality Index. The widespread absence of written contracts, lack of social security coverage, informal wage payments, and absence of employment benefits points to how deeply informal employment is embedded within this sector. The PCA results identified five major factors contributing to labour informality, namely socio-economic drivers, institutional and regulatory weaknesses, labour market and employment structure, employer-driven incentives, and seasonal labour mobility. Similarly, the identified effects were organized into five key dimensions, including economic and employment instability, labour rights and social protection deficits, social and psychological impacts on workers, project performance and productivity constraints, and limited career advancement opportunities. These interconnected issues manifest as job insecurity, irregular income, insufficient social protection, and poor working conditions, all of which collectively harm workers’ well-being and hinder overall project efficiency. The analysis in the study concludes that informal labour markets in construction are complex, multidimensional, deep-rooted and structural, calling for incentives and 2 complementarity of interventions through policy and institutional arrangements. Based on expert consensus, key strategies include strengthening labour law enforcement through effective monitoring and compliance mechanisms, improving coordination among local governments and labour-related agencies, expanding social security coverage for construction workers, promoting the use of formal employment contracts, and enhancing awareness of labour rights and the benefits of formal employment. These strategies important to foster a more formal, inclusive, and sustainable construction labour market in Nepal.

Keywords

Labour informality, residential housing, construction sector, Formality Index, Principal Component Analysis, Delphi technique.