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Benefits & Compensation in Bhutan

What are Employee Benefits?

Employee benefits are additional compensation or perks offered to employees apart from their regular salaries. These benefits help increase employee morale, performance, and job satisfaction, as well as attract and retain top talent within the company. By providing these benefits, companies can create a more motivated and engaged workforce.

The employee benefits can be either monetary or non-monetary depending on the employees’ requirements and the company’s budget. They help organizations ensure employee satisfaction.

The employment contracts outline certain obligatory benefits all employees will get in Bhutan. These benefits cover statutory working hours, minimum wage, overtime pay, annual leave, sickness benefits, paid leaves, paternity leave, maternity leave, severance fund, benefits, disability pension, and more. 

Compensation Laws in Bhutan

Different compensation laws regulate compensation and benefits in Bhutan. Let’s go through the details of the laws related to the compensation and benefits policy in Bhutan: 

Bhutanese labor law

  • Bhutanese labor law covers aspects like mandatory workman’s compensation, wages, and working hours, including overtime. It also covers pensions, universal rules on leave (including nursing and maternity leave), and transportation and insurance costs incurred by the employer.
  • It also lays comprehensive provisions on employment contracts and corresponding rights and remedies.
  • It imposes the financial burden of guaranteeing occupational health and safety on the employer.

Labor and Employment Act of Bhutan 2007

  • An employer shall compensate their employees against death due to occupational diseases or work accidents, total permanent disablement, and temporary partial disablement.
  • Upon retirement from the services, the employees shall be entitled to benefits like gratuity, provident fund or pension.
  • An employee in Bhutan is entitled to various types of leaves. These include sick leave, annual leave, casual leave, public holidays, maternity leave, and paternity leave.
  • The act also focuses on compensation for risky work and night work, payment of wages on termination of employment contract, accident compensation, and compensation to ensure occupational health and safety.

How to Design an Employee Benefits Program for Employees in Bhutan?

When designing a compensation package in Bhutan, you can consider the following considerations to create an effective employee benefits program.

Step 1: Define business objectives for your benefits program and plan budget

Firstly, you must specify the business objectives you expect from the compensation structure in Bhutan. This approach helps you get the optimum profits from your compensation policy. Make sure to evaluate collective bargaining agreements or employment contracts to approve employment relationships and entitlements regarding compensation and benefits in Bhutan.

Before creating the employee compensation policy in Bhutan, you must consider the company’s proficiency, commercial environment, and the business segment in which it works. Study the employment contracts or collective bargaining agreements to authenticate employment relationships, and employee benefits entitlements. Also, you must assess your company’s budget to invest in employee benefits and create the compensation structure in Bhutan.

Step 2: Study employees’ requirements

With the help of opinion polls, interviews, or use cases, you can study the employees’ requirements and anticipations. Hence, this step in designing the compensation and benefits policy in Bhutan allows employees to confidently express their opinions.

Comprehensively research the defined industry standards and the benefits other companies in your business segment provide their employees. Based on the corresponding internal survey and research conclusions, you can design a comprehensive compensation and benefits policy in Bhutan that meets industry principles and market competition. Subsequently, you can prepare an effective compensation package in Bhutan that offers all the mandatory employee advantages.

Step 3: Prepare your benefits plan

After understanding the employees’ requirements and expectations, you should perform a gap analysis conforming to the employee compensation policy in Bhutan. This step helps you to recognize the prevailing situation of the benefits plan. Subsequently, you should create a profitable employee compensation policy in Bhutan that replicates the dynamic characteristics of the business. The corresponding flexible benefits and compensation structure in Bhutan facilitates the choice of mandatory benefits for employees. 

While designing a benefits plan for worker’s compensation in Bhutan, you must consider several crucial aspects, like employee contributions, outsourcing requirements, and the company’s budget.

Step 4: Share your benefits offered to the stakeholders

This step involves implementing a useful plan for the employees and the organization. You must convey the advantages of your designed compensation package in Bhutan to all the employees and stakeholders. They can provide feedback on your benefit plan’s draft. So, you can implement a feasible plan of worker’s compensation in Bhutan that profits the company and its employees.

Make sure to incorporate any worthy feedback into your compensation package in Bhutan. But, if the feedback recognizes any benefits as redundant, you can exclude them and accordingly update the employee benefits in Bhutan.

Step 5: Regularly examine the plan and update it

To stay ahead of the competitors, companies in Bhutan aim to offer the best employee benefits in Bhutan. So, you must regularly analyze the compensation structure in Bhutan and update it accordingly. Through this step, you can also recognize the benefits plan’s efficiency and sustainability.

Go ahead with implementing the employee compensation policy in Bhutan after confirming that it is accurate. You must carefully inspect all the benefit plan’s components and employ them. 

Types of Guaranteed Benefits in Bhutan

Employees are entitled to various kinds of employee benefits in Bhutan. The details of the mandatory benefits are here:

Minimum wage

  • Employees receive a minimum wage of  BTN 3,750 per month.

Working hours and overtime

  • The standard working week in Bhutan includes 8 hours daily or 40 hours weekly.
  • The employers provide overtime compensation for these employee benefits in Bhutan at a minimum of the standard salary rate.
  • The overtime compensation depends on the employer-employee contract.
  • The overtime compensation is an extra 50% of the employee’s standard salary rate if the employee works from 10:00 p. m. to 8:00 a. m.

Paid leaves

  • This workers’ compensation in Bhutan is entitled to employees who have served for at least six months under the same employer. They get 1.5 days of paid leave per month or 18 working days annually.
  • Employees can use the paid leave benefits in Bhutan only after completing a year of employment in the particular company.

Public holidays

  • Employees in Bhutan are entitled to 16 public holidays per year.

02 Jan

Winter Solstice

22 Jan

Traditional Day of Offering

21 Feb

Losar /Birth Anniversary Of His Majesty the King

22 Feb

Losar Holiday/Birth Anniversary Of His Majesty the King Holiday

  23 Feb 

Birth Anniversary Of His Majesty the King Holiday

30 Apr

Death Anniversary of Zhabdrung

02 May

Birth Anniversary of the 3rd Druk Gyalpo

04 Jun

Lord Buddha’s Parinirvana

28 Jun

Birth Anniversary of Guru Rinpoche

21 Jul

First Sermon of Lord Buddha       

23 Sep

Blessed Rainy Day

24 Oct

Dassain

01 Nov

Coronation day of His Majesty the King

04 Nov

Descending Day of Lord Buddha

11 Nov

Birth Anniversary of the 4th Druk Gyalpo

17 Dec

National Day

Sick leaves

  • Full-time employees who have served for at least six months under the same employer can get this workers’ compensation in Bhutan. Each year, they get at least five days of sick leave benefits in Bhutan.
  • The medical benefits for employees in Bhutan are applicable only after the employee has completed six months of employment in the particular company.

Maternity leaves

  • Employees receive six months of paid maternity benefits in Bhutan.

Paternity leaves

  • Employees receive paternity leave of ten working days.

Severance pay

  • The severance pay depends on the employment duration as stated below:

Duration of employment

Severance pay

<5 years

Provident fund contributions with interest but without the employer’s contribution

≥5 years

Provident fund contributions, including interest from employer and employee contribution

Employee Benefits for Expatriates

Foreign employees in Bhutan are entitled to similar compensation and benefits in Bhutan as local employees. Under the compensation package in Bhutan, expats are entitled to benefits like meal allowance, family allowance, travel allowance, health care insurance, dental care, child home care allowance, and unemployment benefits.

Expats may frequently travel to and from abroad to fulfill their short-term projects. Consequently, businesses implement a straightforward, cost-effective alternative to recruiting and compensating expats through local subsidiaries. The affordable cost of living and plethora of business opportunities entices many expats to Bhutan.

Foreign nationals aiming to work legally in Bhutan should acquire a work permit. If the government or other private organizations want to employ an expat, approval should be obtained from the Chief Labor Officer, Department of Labor, with the legal work permit. India, Maldives, and Bangladesh citizens don’t require a visa while working in Bhutan. Swiss and Thai citizens possessing diplomatic and official passports while arriving in Bhutan don’t require a visa.

How are Employee Benefits Taxed in Bhutan?

Employees in Bhutan should pay income tax ranging from 0% to 30% (as per their income). The social security contributions are 5% each for employers and employees. Tax residents should pay for their worldwide income, but the non-residents pay only for their income earned from Bhutan. Furthermore, self-employed individuals should pay contributions associated with general sickness, pension, and disability.

Restrictions for Bhutan Benefits and Compensation

Most benefits provided to Bhutan employees are taxable. Therefore, you should be familiar with the benefit’s monetary worth to accurately calculate the tax amount the employer owes. An employer should also ensure that all tax payments are released and sent to the appropriate authorities timely.

Ascertain that your business is established and legally operates in the country before creating employee benefits in Bhutan. According to the business sectors, companies should fund the minimum wages for employees. Besides, the benefits and compensation package in Bhutan should conform to all the labor laws regulated by the government.

The benefits, allowances, and pay for the local recruits must be maintained at the status quo until determined and reported by the government when required. Public servants’ Pension and Provident (PF) contribution must be 11% of the basic wage. The PF contribution by the government must be 15% of the basic wage. From both these contributions, 16% must be contributed to the Pension Account, whereas the residual 10% will be contributed to the public servants’ PF scheme.

In case of employment termination, the increment shall be provided and considered for gratuity and other benefits. This is valid if the employee has completed 12 months of employment after the prior increment.

The parties participating in an employment contract can sign a non-competition agreement. Per this agreement, the employee can approve not to conduct competitive activities during employment or for a specific duration after termination. If the employment contract of the compensation package in Bhutan doesn’t restrict them, an employee can sign another employment bond throughout their employment.

Supplemental Benefits for Employees in Bhutan

According to the compensation package in Bhutan, employees are entitled to additional benefits. Their details are here.

13th-month pay

It is mandatory to pay the 13th-month salary in Bhutan. A few other compensation and benefits in Bhutan are.

  • Mental health counseling: Several companies provide mental health counseling to enhance employees’ well-being by decreasing anxiety and stress.
  • Physical therapy: Some companies provide physical therapy programs to ensure the employees’ physical health.
  • Fitness or yoga classes: Many companies support fitness classes to address the mental, physical, and social well-being of employees.
  • Women’s health programs: Certain companies provide women-focused health programs like PCOS & fertility treatment.

How Multiplier Can Help with Benefits Management in Bhutan

The process of establishing a business abroad and hiring a skilled workforce is straightforward but laborious. The employer must obey the local laws and regulations before finalizing employment contracts and authenticating employee benefits. You can effectively systematize this process by contacting a worldwide PEO platform like Multiplier.

Multiplier simplifies compliance with Bhutan’s labor rules. Also, we assist you with recruiting talented employees. Our experienced staff can help you competently manage the workforce without forming a subsidiary in the country. Hence, you can regulate your employment expenses and study new markets.

Frequently Asked Questions

The standard VAT rate is 7% in Bhutan.

Employees’ key advantages while working in Bhutan are eighteen days of paid leave per year, five days per year of sick leave, social security benefits, and high average salaries.

The social security system entitles employers to the following benefits in the compensation package in Bhutan.

  • Temporary and permanent disability benefits
  • Workers’ medical benefits
  • Dependents’ medical benefits
  • Survivor benefits
  • Sickness benefits
  • Maternity benefits
  • Old-age benefit (provident fund)
  • Death benefit
  • Family allowances

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