Overseas investors should heed labour law compliance in Laos

• Sep 05, 2018

The National Assembly of Laos amended the 2006 Labour Law in 2013, which came into effect on 29 October 2014. The 2013 Labour Law is applicable to Laotian employees as well as foreign employees working in Laos.

Employees in Laos enjoy a high degree of protection, and in certain aspects the protection of employees in Laos is better than that in China. Below is a brief introduction on foreign employee ratio, salary, overtime and other provisions that may be of interest to investors from outside of Laos.

According to the 2013 Labour Law, the foreign employee ratio has changed from 10% of the total number of employees of the employer for manual labour (15% for skilled employees) in 2006, to 15% of the total number of employees of the employer for manual labour (25% for skilled workers) in 2014. For large-scale projects that last more than five years, the employer is able to negotiate with the government on the foreign employee ratio. For foreign employees, the term of the employment agreement should not exceed 12 months. The agreement is renewable, but in total, the work time must not exceed five years.

The standard for lowest salary in 2017 was LAK900,000 (US$108) per month. The Labour Law provides that the lowest salary during the probation period should not be lower than 90% of the employment salary. This percentage is higher than the 80% in China, and is mandatary, so the employer should be alert to this. The Laotian Labour Law also has specific limits on the term of probation, which means that probation must be no more than 30 days for manual labour, or 60 days for skilled workers.

The Labour Law provides that work time should not exceed six days per week, eight hours per day, or 48 hours per week. In special circumstances where overtime is necessary, the employer has to first obtain the consent of the labour union, a representative of the employees, or the majority of employees, and such overtime must not exceed three hours per day, or 45 hours per month.

If the employer requires employees to work overtime of more than 45 hours per month, it must obtain authorization from the labour administration in advance. The employer must give notice to employees about overtime, and explain the necessity in advance, and must pay for the overtime in accordance with the following standards:

Chinese labour law provides that rest days can be deferred, meaning that instead of paying overtime to the employees, the employer can allow the employees to take other work days off as make-up for overtime on rest days. However, the Laotian Labour Law does not allow for such arrangements.

The Laotian employment agreement must specify work location, scope of work, salary, start day, probation period, work days and rest days, benefits, etc. If either party is a legal person or an organization, then the employment agreement must be entered in writing. There are two categories of the employment agreements based on the term, one is fixed-term and the other is infinite-term.

The fixed-term agreement must not exceed three years (including renewal). If the term is over three years, then the agreement may be considered an infinite-term agreement. Either party can terminate the infinite-term agreement, provided that a 30-day prior notice is given to the other party (45-days prior notice in the case of skilled workers). Termination for fixed-term agreements before the expiration date require the mutual consent of the parties, and if one party insists on termination, then it must bear corresponding liability for the breach.

The labour administration agency plays an important role in Laos. The Laotian Labour Law provides that the internal rules of the employer must not take effect until the labour administration agency approves them, and when the agency deems necessary, it is entitled to require the employer to revise its internal rules.

Overseas investment will inevitably touch upon employment issues such as employment agreement signing, foreign employment application, social insurance, labour protection and other items. The authors of this article would like to alert investors not to copy their domestic experience. Investors are urged to learn about the local employment law, abide by the local law, and assume the employer’s responsivity, so as to avoid any potential employment violation issues.

Source: https://www.vantageasia.com/overseas-investors-should-heed-labour-law-compliance-in-laos/