Laos, a landlocked country in the peninsula of Mainland Southeast Asia, is one of the fastest growing and resilient economies in the world. Its impressive annual growth of 8% during the last decade is expected to continue in the future. Foreign trade is critical to the economy of Laos as the combined value of imports and exports equals 79% of GDP. The process of economic liberalization of Laos that began in 1986 has enabled the country to bring in transparency to its trade regime, and integrate the economy with global trade and investment.
Currency: Laotian Cedi
Principal language: Lao, Hmong, Khmu
Government: One-party Communist Republic
Capital City: Vientiane
Major Cities: Kumasi, Sekondi-Takoradi
An employment contract in Laos between the employer and employee needs to be in writing. The contract can be for a fixed or unspecified (indefinite) period. A fixed term contract and its extensions longer than 3 years turn it into an indefinite employment contract.
If the parties need to prolong the term of a fixed term contract, they need to notify the other party 15 days before the contract’s expiry. In this case, the extension must commence within 60 days of the contract’s expiry. The employer may define a period of probation for employees. For manual labor, the maximum period of probation is 30 days, whereas for workers with specialized skills, the maximum period is 60 days. These durations for probation cannot be extended.
During probation, a notice of 3 days is needed for termination of manual labor; 5 days for workers in specialized fields. An employer must inform the concerned employee, whether confirmed or not 7 days before the expiry of the probationary period.
Regular work schedule in Laos comprises 6 days a week, 8 hours per day, and its equivalent 48 hours in a week. Workers get a day’s rest within a week or 4 days in a month. The weekly day off maybe Sunday or any other day decided mutually by employees and the employer.
An employer may request employees to do overtime. When overtime is needed in excess of 45 hours a month or 3 hours per day, the employer needs authorization from the Labor Administration Agency as well as a trade union, a majority of employees in the Labor unit, or worker’s representative. Employees cannot be made to do overtime for more than 4 successive days (except when there is a natural disaster).
Calculation of hourly overtime is as follows:
- On a usual work day: 150% of the regular rate
- Overtime during night on a usual work day: 200% of the normal hourly rate
- Overtime during a weekly off or holiday: 250% to 300% of the usual hourly rate
- Overtime during the night (10:00 pm to 6:00 am) on a weekly day off or holiday: 350% of regular rate.
Employees in Laos are entitled to 6 public holidays as stipulated by the Labor Law, with foreign workers being entitled to leave on the national day of their country.
- National Day: December 2 (1 day)
- International New Year: January 1 (1 day)
- International Women's Day: March 8 (1 day) for females
- The Lao New Year festival (3 days)
- International Labor Day: May 1 (1 day)
- National Teacher's Day: October 1 (1 day, only for teachers and people in education management)
- The national day of employees (foreigners) who are not Lao citizens (1 day on the national day of the applicable nation).
In cases where official holidays fall on weekly rest days in any given week, a rest day is given as a replacement. Other holidays are available if mutually agreed by the employer and the employees.
Workers with a definite or indefinite period employment contract of one or more years are entitled to 15 days of annual leave after completing a year at work. If employees are not able to take their annual leave due to their employer’s fault, the employees are entitled to full pay for those days.
Workers are entitled to fully paid sick leave for 30 days in a year.
Women employees can take at least 105 calendar days of fully paid maternity leave, at least 45 days of which must be after the birth. In the year after childbirth, a new mother is entitled to take rest for an hour for nursing her child.
If a woman employee undergoes a miscarriage, she is entitled to fully paid leave for the period advised by her doctor. Women workers are also entitled to a special allowance on childbirth as stipulated in the Social Security Law.
Employees can request a paid personal leave of 3 days or more in the event:
- A member of an employee’s family is injured and hospitalized and there is no one else to care for them
- Death of an employee’s family member
- An employee is getting married
- Childbirth or miscarriage of an employee’s wife
- On account of a natural disaster.
Organizations are obligated to contribute to the National Social Security System for their employees according to the new Social Security Law that regulates social security payments.
The system provides coverage to the private sector and state-owned companies with 10 or more employees, as well as pensioners. Funds that employees and employers need to pay are in the following proportions:
- Insured Employee: 4.5% of gross monthly earnings; and
- Employer: 5% of monthly payroll. The minimum monthly earnings for which contributions become mandatory are 348,000 kip, and the maximum monthly earnings up to which mandatory contributions apply are 1,500,000 kip.
The entitlement of old-age pension benefit at age 60 applies if the insured person has a minimum 5 years of coverage. Early pension at age 55 is also available if the person has a minimum 5 years of coverage. The pension can also be delayed until age 65.
An old-age lump-sum benefit payment is made if the insured is already at the pensionable age but with less than 5 years of coverage. The old-age pension is calculated by taking into account pension points, and average covered earnings during the 12 months prior to retirement. A beneficiary may earn, receive a credit and in some circumstances, buy pension points. Pension benefits are adjusted at least once every year based on the changes in the average insured earnings of all the insured persons.
Pension Plan Employees are eligible to receive the LAO pension plan benefits after being employed continuously for 12 months. LAO contributes 9.0% of all the employees’ salary to the pension fund. Employees are currently required to contribute 6.0% to 9.0% of their salary to their pensions. They will need to contribute 9.0% of their salaries to their pensions beginning in January 2019.
When employees who have not made contributions to the national social security fund or despite contributions are yet to qualify to receive benefits, employers are held responsible based on the relevant law and regulations.
Retirement age and qualification for retirement benefits of employees are based on the following:
- Male employees must be 60 years old, and female must be 55 years old with a minimum 15 working years
- For employees, who have been employed continuously for 5 years or working in the unsafe and hazardous conditions. The qualifying condition is 55 years for male employees whereas 50 years for women and with a minimum of 15 working years
After paying social security contributions in full for a period of 15 years or more, if an employee misses 3 years to reach his or her retirement age, will be eligible for the old-age pension.
How GPS can Help
With our Global PEO/Employer of Record services, companies can expand into Laos and hire their employees without having to establish a branch office or subsidiary in Laos.
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