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Employment in Laos

In Laos, employment law is regulated by the Labour Law of 2013. The area of this law is quite vast, and follows extensive discussions between the government and the private sector. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Laos.

Key points on employment in Laos

There are several key areas to be aware of within Laos’ employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

    In Laos, contracts can be made either verbally or in writing. They can be made for either fixed or indefinite periods of time. Fixed contracts can made for a maximum period of three years, inclusive of any extensions, otherwise they will considered indefinite term contracts. Any employment contract in Laos must contain details of the employee’s name, scope of rights and responsibilities, salary or wages, address, form of payment, duration of trial period, welfare, leave and benefits.

  2. Probationary Periods

    Employers have the right to impose a probationary period of up to 30 days for manual labour, or 60 days for specialized skills. Probationary periods may not be extended.

    Throughout the period of probation, either party may terminate the employment, with 3 days’ notice required for manual labour and 5 days for specialized skills. If the employment contract is terminated during probation, the employee is entitled to receive wages or salary under the law, calculated from the commencement to conclusion of work.

    The employee must inform the worker of whether or not their employment will be confirmed within 7 days before the end of the probationary period.

  3. Termination Procedures

    Employment contracts for a fixed term will terminate upon expiration of the contract, or can be termination via mutual agreement or by breach of one of the parties. For manual work, 30 days’ notice must be given, while for specialized skills, 45 days’ notice is required.

    An employee may dismiss an employee in certain situations, including:

    • Where the employee is lacking specialized skills
    • The employee is not in good health and therefore cannot continue work
    • The company requires a reduction in staff

    Unless prior approval is granted by the Labour Administration Authority, employers cannot terminate the employment for any of the following reasons:

    • The employee is sick
    • The employee is suffering a disaster such as fire or flooding
    • A female employee becomes pregnant or within a year of giving birth

    The employer is not required to notify the Labour Administration Authority in any of the following situations:

    • Deliberate causing of damage to the employer
    • Violation of internal regulations in spite of previous warning from the employer
    • Abandonment of work for 4 consecutive days without a valid reason
    • Being sentenced to prison by a court
    • Violation of the rights of other employees in spite of previous warning from the employer
  4. Statutory Leave

    There are laws that regulate leave periods based on years of service and the type of leave requested, including:

    1. Annual Leave: a minimum of five days of annual leave up to 15 days for long term employees

    2. Maternity Leave: Female employees are entitled to not less than 45 days of maternity leave, up to 105 days of maternity leave 

    3. Sick Leave: Workers paid on a monthly basis are entitled to sick leave with full pay for 30 days a year, conditional on presentation of a medical certificate.

  5. Pensions & Benefits

    The system of welfare and benefits is complex in Laos, as contributions are largely contingent on the living conditions of employees. In general, contributions are usually made by the employee. There are requirements for both employee and employer contribution rates for pensions based on a percentage of salary, although this can become unclear for other types of insurance, particularly because the schemes of insurance differ based on the type of work undertaken.

    The categories of Welfare Contributions include:

    • Pensions: Employer contributes 5% of salary and employee contributes 4.5%

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Laos. For companies which intend to employ their staff directly through their incorporated Laos entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Laos.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Laos.

The Shield GEO solution is an attractive alternative where:

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Laos

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Laos

– the company needs help with tax, employment, immigration and payroll compliance in Laos

Shield GEO can contract directly with the company to employ and payroll their staff in Laos. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

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