Employer Guide to Laos Labor Law

The Laos People’s Democratic Republic is among the fastest-growing economies in East Asia. The Gross Domestic Product (GDP) contribution of the manufacturing and services sectors was close to 75% in 2021 and is only expected to grow further.

Laos is open for foreign direct investments in most industries in these sectors. The country records a median age population of 24.4 years and an 85% literacy rate, giving companies a strategic edge for global business expansion.

Laos labor laws uphold the statutory requirements while hiring and recruiting employees locally. A few noteworthy employer obligations in Laos include:

• Minimum wage at LAK1,200,000.00 per month.
• Maximum of 48 hours work time per week
• 15 days of annual vacation leave
• Up to 120 days of paid maternity leave in Laos for foreigners and citizens

As an employer in Laos, this page on employment law in Laos will guide you through the most important statutory requirements per labor law in Laos for maintaining minimum standards of recruitment, monitoring, labor protections, and governance at the workplace.

Applicability of the Act

Laos labor act rules apply to both local and foreign employees working in Laos. However, independent contractors and freelancers are usually outside the statutory protection offered under the labor law in Laos.

Certain provisions under Laos working hours law or overtime compensation rules may necessarily not extend to employees hired for managerial positions.

Employers are encouraged to frame internal labor regulations in Laos detailing employee rights and duties along the lines of the 2013 amended version of Laos labor law. This helps to incorporate workplace gender equality, professional development, and other progressive employment reforms and balance organizational goals.

Employment Contract

Employment contracts act as a legal document establishing employment relationships or terms and conditions of work, thereby setting out employer-employee obligations during employment.

Employers in Laos may conclude fixed-term contracts (for not more than three years) and indefinite-term contracts. Further, the labor code in Laos mandates all employment contracts to be concluded in writing unless the employer runs a single ownership.

Laos labor law recommends the employment contract establish:

• Attested identities of the contracting parties
• Start date, end date, and probation period, if applicable
• Scope of work, working hours, salary details, leave entitlements, and other conditions
• Job benefits post expiry of employment contract
• Procedures for settling an employment grievance

Employers may use the same contract template to hire employees for full-time remote work. Additionally, employers may clarify the following employment conditions:

• The definition of work to be performed
• The means of performing work and method of communication
• The mechanism of recording work time and monitoring work activities

The employment contract for independent contractors or freelancers in Laos may follow the same template, specifying the prescribed invoice rate on the payments.

Probation period

Laos employment law mentions rules for the probationary period depending on the skill level of the job position:

• For skilled type work: maximum 60 days with minimum five days of termination notice
• For unskilled type work: cannot be more than 30 days and three days of prior notice for termination

The labor code in Laos prescribes at least 90% of the remuneration for work be transferred to employees on probation, even if it does not yield permanent employment.

Key Provisions of the Act

The following constitutes the labor act rules in Laos or Laos employment law

• Labor law in Laos (2013 version) and ancillary legislation
• The employer’s internal labor regulations in Laos
• Negotiated terms and conditions in the employment contracts

Let’s look at its key provisions governing all employment relationships in Laos.

Working hours

• Employers may extend working hours per Laos labor law for a maximum of 48 hours a week or eight hours a day in a six-day workweek:

1. 1. Employers may have to limit working hours up to 36 hours a week or six hours a day for hazardous & dangerous work.
   2. The night time per Laos working hours law is between 10 pm and 6 am.
   3. Young employees (aged from 14 to 17 years) cannot be made to work overtime.

• Employers must also account for prescribed hours of rest per Laos labor law while setting working hours:

1. 1. Minimum of 60 minutes for full-time employees
   2. Minimum of 45 minutes for shift employees

Holiday entitlements

• Employers may note the following public holidays per the labor law in Laos:

1. 1. International New Year on January 1
   2. The Lao New Year festival (three days)
   3. International Labor Day on May 1
   4. National Day on December 2

• Encouraging inclusivity in the workplace, the labor act rules in Laos prescribe public holidays for a specific group of employees:

1. 1. International Women’s Day on March 8 for female employees
   2. National Teacher’s Day on October 7 (one day) for teachers and academic staff only
   3. The national day of foreign employees (based on their home country)

• Employers shall negotiate holidays for customary/traditional festivals in the contract.
• Employers have to provide an extra day off if the public holiday falls on a regular rest day per the labor code in Laos.

Leave schemes

Maternity leave

• Laos’ paid maternity leave period ranges from 90 days to 105 calendar days.

1. 1. Employers shall compulsorily grant 42 days after birth within the prescribed paid maternity leave.
   2. Employers shall extend the paid maternity leave per Laos labor law up to 120 days if they have multiple births.

• Employers shall seek a medical opinion to grant paid maternity leave per Laos labor law in case of miscarriage.

Paternity leave

• Employers must extend at least three days of paid paternity leave after the birth period.
• There is no specific provision for shared parental leave per Laos labor law.

Annual leave (vacation)

• Employers may offer 15 days of paid annual leave per Laos labor regulations.
• Employers in hazardous & dangerous sectors shall extend paid annual leaves by up to 18 days.

Other leaves

Sick leave

• Laos labor code mandates employers to extend paid sick leave benefits for 30 days per year.
• Employers shall limit sick leave benefits per labor law in Laos to employees under specific employment contracts who have worked for the same employer for less than 90 days.

Compassionate leave

• Laos labor law mandates employers to provide at least three days of paid leave for every personal event, including marriage, caregiving, death, etc.

Minimum wage

• Laos employment rules require employers to pay monthly salaries over and above the minimum wage set by the government in Laos.
• The current minimum wage in Laos is set at LAK 1,200,000.00 per month.

Overtime compensation

• Overtime working hours per Laos labor law are capped at 45 hours per month or three hours a day and restricted to four consecutive days.

1. 1. Employers may fix compensation for each hour of overtime at 150%-200% of the standard hourly rate during regular working days –
   2. During weekends, employers shall fix compensation for each hour of overtime at 250%-300% of the standard hourly rate.
   3. Employers shall pay compensation for each hour of overtime work on public holidays at 350% of the standard hourly rate.

Payroll tax & other obligations

• The labor law in Laos views employers as responsible for withholding and reporting income tax and deducting social security premiums on behalf of their employees.

1. 1. Income taxes are levied progressively between 0 to 25% for both resident and non-resident employees.
   2. Employers who engage independent contractors or freelancers must also withhold tax from total payments at the prescribed rate.
   3. The applicable premium per Laos employment law is 11.5% of the employee’s salary (employers contribute up to 6%, and employees contribute 5.5%).

• Employers must use an online platform called TaxRis system for reporting withheld taxes.
• Employers in Laos must register employees for benefits – health care subsidiaries, allowances for accidents, occupational diseases, maternity benefits, loss of labor benefits, pension benefits, death benefits, and subsidiary to family members – arising out of monthly contributions made to the National Social Security Fund (NSSF).
• Employers must make monthly contributions to the NSSF, which is capped at LAK 4,500,000 per employee (with a minimum threshold of LAK 1,100,000.)
• Employers shall compensate the medical claims of employees per Laos labor regulations who are not under the NSSF.

Dismissal rules

• The labor law in Laos mandates employers to provide at least 45 days prior notice to employees on indefinite-term employment contracts. However, employers can terminate the contract if no appropriate work is available.
• Employers may terminate fixed-term contracts without servicing a mandatory notice period or follow the statutory period per Laos labor act rules.
• Employers may terminate an employment contract unilaterally based on justified reasons per the labor code in Laos, like

1. 1. Neglecting duties for four consecutive days
   2. Violating internal regulations
   3.  An employee convicted of a crime
   4. Disciplinary issues at the workplace

• Laos employment law requires employers to oblige with severance pay at:

1. 1. 10% of the last drawn salary multiplied by the number of months worked for justified termination
   2. 15% for unjustified termination

Data protection and employee privacy

The new E-Data Protection Law upholds employee privacy rights in Laos. Therefore, employers are under legal obligations to protect and safeguard employee data such as personal history, financial data, health records, race, religion, political views, etc., collected during the employment period (for background checks and otherwise).

Leakage of employee data during the hiring process or background checks through third-party will still hold employers criminally liable and may be subject to fines or imprisonment.

Penalties

Laos labor law has not codified penalties or fine amounts for violations of employment rules or contracts. The labor act rules in Laos provide mediation for labor disputes and resolution through court only in the second instance.

Compliance Strategies for Employers

Employers can refer to the following employee hiring and management practices to stay compliant with labor act rules in Laos:

Hire by employment contract:

• Employers may hire local talent based on negotiated employment terms and conditions recorded using standard employment contracts for future reference.
• Employers may use standard templates for drafting employment documents like offer letters, employment records like working time, leave entitlements, payroll, termination notices, etc.

Manage through in-house HR team:

• In-house teams are recommended for regular employee training, supervising hiring, and securing employer obligations per Laos employment rules.
• An in-house HR manager may oversee appraisals, employee rewards, and grievance redressal.
• HR managers usually enjoy management’s confidence to deal with organizational changes and local industrial relations.

Switch to a hybrid SaaS-based HR solution

• A dedicated in-house team of HR experts is costly to maintain in the long run.
• Companies proactively adopt flexible HR solutions like Employer of Record (EOR) or Professional Employer Organization (PEO).
• Partnering with SaaS-based HR solutions helps employers to stay compliant with Laos labor law while hiring & managing local talents.
• Employers may automate contract drafting, extend mandatory benefits per Laos labor act rules, and disburse salaries by simply clicking a button.

How Can Multiplier Help?

Employers may simplify their hiring and managing employee obligations in Laos with the Multiplier PEO platform. We also help in hiring local talents without registering a local entity with the help of the Multiplier EOR platform.

As your first-choice EOR/PEO platform, you can avail of multiple SaaS-based services from Multiplier. You can swiftly automate employment contracts, draft multi-lingual contracts, manage payrolls, regularize salary payments, deduct taxes and social contributions, and more, per Laos employment rules.

Both ways, partnering with Multiplier ensures 100% compliance with Laos employment laws while hiring, managing, or dismissing employees. Our presence in 150+ countries and knowledge repository on multiple international laws make us the preferred HR partner for compliant business expansion, including liability-free expansion in Laos.