Bhutan’s unique approach to development, based on the philosophy of Gross National Happiness, sets it apart from other countries. This approach has helped Bhutan make significant progress in economic, social, environmental, and governance areas, making it an interesting case study for business and employment opportunities.
To promote foreign investment, the Bhutanese government has implemented policies such as the Foreign Investment Promotion Act and the Bhutan Economic Forum for Innovative Transformation, which aims to create a favorable business environment and promote innovation. With the government’s focus on sustainable development and a thriving business environment, Bhutan is an attractive destination for business expansion.
The relationship between employers and employees is governed by a comprehensive set of labor laws in Bhutan, which aim to improve working conditions and protect the rights of employees. These laws play a significant role in ensuring that employees are treated fairly.
Labor act rules in Bhutan also contribute to Bhutan’s economic development and growth by providing a supportive and stable working environment.
Learn more about the Bhutan employment rules below.
Who is Covered by the Employment Act?
The Labour and Employment Act of Bhutan, 2007, provides a legal framework for ensuring employers comply with minimum labor standards, including employee compensation, working hours, and work conditions. It also establishes mechanisms for resolving disputes between employers and employees.
The Labor Act rules in Bhutan cover the following individuals:
- Any person who is employed for hire within Bhutan, including foreign employees.
- To be eligible, individuals must be residents of Bhutan, above 18 years of age, and employed in any sector, including government, private, and nonprofit organizations.
- However, the Act covers all employers and employees in Bhutan, except for domestic employees and Royal civil servants.
Employment Contract
The employment contract of Bhutan is governed by the Labour and Employment Act of Bhutan, 2007. Here are some key points regarding the employment contract in Bhutan:
- The Ministry of Labour and Human Resources provides the model contract of employment.
- According to the Labour Act rules in Bhutan, every employer is required to issue a written contract of employment to every employee, specifying the terms and conditions of employment, before the commencement of employment.
- The contract should contain basic information about the employer and employee, including the name and address of the employer and employee, the nature of the work, the date of commencement of employment, the duration of employment, and the place of work.
- The contract should also specify the terms and conditions of employment, such as the wage rate, working hours, overtime pay, leave entitlements, termination of employment, and dispute resolution procedures.
- The contract should be signed by both the employer and employee, and a copy should be provided to each party.
- According to Bhutan’s labor code, in case of a dispute between the employer and employee, the Labour and Employment Dispute Settlement and Prevention Act, 2017 provides for establishing a Labour and Employment Dispute Settlement Committee to settle disputes amicably.
Key Provisions of the Act
The labor act in Bhutan contains fundamental principles governing employment, employee and employer rights, and other matters about employment.
The key provisions include the following:
Minimum wage
Bhutan has a nationwide minimum wage of 3,750 Bhutanese ngultrums per month (BTN 125 for each day of work) which must be paid to each employee. This wage rate applies to all employees except those in the Royal Civil Service (RCSC). However, the government of Bhutan has pledged to increase the minimum daily wage rate to Nu 460 from Nu 125.
Working hours and overtime
As per the Labor and Employment Act of Bhutan, 2007, employees in Bhutan are entitled to a minimum of 5 working days of sick leave per year. Additionally, employees who have completed six months of continuous service can use their accrued paid sick leave.
Employers are responsible for providing overtime pay as compensation for any extra hours worked by their employees beyond their regular working hours. The overtime pay for the number of hours worked is calculated as 1.5 times the standard rate of pay calculated on an hourly basis for work between 10:00 pm and 8:00 am the following morning.
Public holidays
According to the Labor Laws of Bhutan, all employees are entitled to public holidays. The public holidays in Bhutan consist of both national holidays and local festivals.
The list of public holidays (for 2023):
- Winter Solstice (Nyilo)
- Traditional Day of Offering
- Birth Anniversary of His Majesty the King
- Tue to Wed Losar New Year
- Shabdrung Kuchoe
- Birth Anniversary of Third Druk Gyalpo
- Lord Buddha’s Parinirvana
- Birth Anniversary of Guru Rinpoche
- First Sermon of Lord Buddha
- Thimphu Drupchen Dromchoe
- Blessed Rainy Day
- Thimphu Tshechu
- Dashain Festival
- Coronation of His Majesty the King
- Descending Day of Lord Buddha
- Birth Anniversary of Fourth Druk Gyalpo
- National Day
All employees in Bhutan are entitled to a minimum of nine paid holidays per year, including national holidays and religious festivals. However, it’s worth noting that the specific number of public holidays may vary depending on the employer and employment contract.
Annual leave
The Bhutan employment law provides for annual leave entitlement to employees. As per the Labour and Employment Act of Bhutan, 2007, employees are entitled to annual leave, which accrues at a minimum rate of 1.5 days per month or 18 days per year. Employees who continue working for the same employer for six months are awarded paid annual leave. Additionally, any leave of up to three months at a time (except EOL) is counted as part of active service for promotion, and maternity leave of six months is also counted as part of active service for promotion.
Sick leave
According to the Labor and Employment Act of Bhutan, 2007, sick leave entitlements in Bhutan accrue at a minimum rate of 5 working days per year. Employees who have been working for six months are entitled to utilizing paid sick leave.
After completing six months of continuous service with an employer, full-time employees are entitled to paid sick leave.
Additionally, the World Policy Center notes that Bhutan has policies related to reducing the spread of infectious diseases and granting leave for long-term health needs.
Maternity leave and paternity leave
The maternity leave structure in Bhutan is regulated by the Royal Civil Service Commission (RCSC). As of March 1, 2016, a revised maternity leave policy stipulates that female civil servants are entitled to six months of maternity leave, which begins from the date of the child’s delivery.
Female civil servants are entitled to extend their maternity leave until their infant reaches six months. In addition, they may opt to combine their maternity leave with other forms of leave, and the leave period encompasses government holidays and weekly off days.
Nursing mothers
As per the Bhutan employment law or policy, employers must allow female employees who have returned from maternity leave to take one-hour breaks every four hours to nurse their child for up to one month. During these breaks, the interruptions should be considered work time, and the employer should pay the employee accordingly.
Bereavement leave
According to the Bhutanese Civil Service Rules and Regulations, a civil servant is entitled to 21 days of bereavement leave in case of the death of a family member, including parents, siblings, and spouse’s parents.
Casual leave
In Bhutan, casual leave entitlements are governed by the Labor and Employment Act of Bhutan, 2007. Full-time employees are entitled to five days of casual leave per year, provided they have completed at least six months of service with their employer.
Civil servants are granted casual leave, and a separate casual leave account is maintained for each civil servant. Any unused casual leave is carried forward and added to earned leave at the end of the financial year.
Disciplinary measures
According to the Bhutan employment law, it is common for workplaces to follow a progressive discipline approach, which involves a series of steps to address employee misconduct or poor performance, ranging from counseling and verbal warnings to written warnings, suspension, and termination.
Termination
When firing an employee, an employer is obligated by Bhutan labor law to provide a reason and provide notice of the termination. The Labor and Employment Act in Bhutan provides a legal framework for the termination of employment that aims to protect the rights of both employers and employees:
- An employee employed for one year or more shall be on probation for six months, within which period either party may terminate the contract by giving the other party notice of 7 days.
- The Labor and Employment Act also provides for termination of employment on grounds such as incapacity, redundancy, and other justifiable reasons. It outlines the procedures that employers must follow when terminating employment on these grounds.
- The Act also provides for disciplinary measures for misconduct, including verbal warning, written warning, suspension, and dismissal.
- Due process must be followed in these situations per an employer’s regulations regarding gathering proof and inspection based on the seriousness of the offense committed by the employee. However, the employer must follow a fair and just procedure, and the employee must be given an opportunity to defend themselves.
- It’s important to note that under the specified Act, an employer must compensate an employee terminated due to redundancy or retrenchment. The compensation amount should be equal to one month’s wages for each completed year of continuous service that the employee has had with the employer.
Health and safety policy
According to the Ministry of Health, the government of Bhutan considers health as one of the highest priorities in its development plan, and affordable and accessible healthcare is central to the public policy of Bhutan. The construction sector is considered to be one of the hazardous industries in Bhutan, causing potential risks to employees’ health and safety daily.
Rapid economic expansion and development in Bhutan have increased the risks associated with occupational health and safety. The Labour and Employment Act of 2007 emphasizes occupational health and safety. Bhutan is committed to ensuring fair and just labor administration, including health and safety issues for employees in all sectors.
Retirement pension scheme
According to the National Pension and Provident Fund (NPPF), Bhutan has a multi-pillar retirement scheme. The NPPF provides retirement pension benefits to civil servants, corporate employees, and self-employed individuals who have registered with the NPPF. The monthly pension benefit amount depends on the basic salary upon retirement and the number of years of service. The pension payment is made to the member until their death and is adjusted annually based on the Consumer Price Index (CPI) up to a maximum of 5%. After the member’s death, surviving family members may be eligible to receive other pension benefits.
Penalties
In Bhutan, the Labour and Employment Act of 2007 governs the employment relationship between employers and employees. The Act sets out various penalties for violations of its provisions.
Failure of an employer to comply with the provisions of the Act may result in penalties such as fines, imprisonment, or both. The Act also provides for penalties if an employer discriminates against an employee, breaches their contract, or violates their rights under the Act.
In the same way, if an employer discriminates against an employee on the grounds of race, gender, religion, or disability, they may be subject to a penalty of a fine or imprisonment for up to one year or both.
Compliance Strategies for Employers
Here are some compliance strategies for employers according to Bhutan’s labor regulations:
- Employers in Bhutan must provide updated, correct, and valid information about the workplace and employees as and when required by the Ministry of Labour and Human Resources (MoLHR).
- Employers must provide and update information about the workplace and employees through the online system, surveys/census, or in-person.
- Employers must comply with the provisions of the Labour and Employment Act of Bhutan, 2007, which sets out the minimum standards for working conditions, terms of employment, and other employment-related matters in the country.
- It is the responsibility of the employers to ensure that their employees are correctly classified and receive adequate compensation in accordance with their job roles and responsibilities.
- Employers in Bhutan must comply with immigration regulations when hiring foreign employees, including obtaining the necessary work permits and visas.
- Employers must also comply with relevant laws and regulations, such as taxes, health and safety, and social security.
How Can Multiplier Help?
Multiplier offers businesses a complete employment contract solution, including automated contract generation and compliance with the latest employment codes for employers and employees. Moreover, Multiplier simplifies setting up multilingual contracts by incorporating compliant expansion systems.