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Starting a Business In Laos

Benefits and Compensation in Laos: Comprehensive Guide

What are Employee Benefits?

Employee benefits are the additional benefits employers grant employees on top of their salary. Such benefits can be either monetary or non-monetary, based on the employees’ requirements and the company’s budget.

There are various advantages that employee benefits offer to employees and employers. Companies can boost employee satisfaction and reduce employee turnover. Employers can also entice top talents to their companies.

Employees working in Laos obtain various employee benefits. One such benefit is the salary equivalent to the minimum wage specified by the Laos government. Besides, employees in Laos are allowed to take different types of leaves, including maternity leave. Apart from these obligatory perks, the employees in Laos also enjoy supplemental benefits like health insurance, paid leaves, etc. Before selecting employee benefits in Laos, employers must perform in-depth market research.

The following guide helps set up a compensation and benefits policy in Laos. It also keeps up your employees’ enthusiasm.

Compensation Laws in Laos

Different compensation laws in Laos manage employee benefits in the country. These include:

  • The existing minimum wage is 1,100,000 Lao Kip (LAK) per month. This rate is increased to LAK 1,200,000 on August 1, 2022, and will increase to LAK 1,300,000 on May 1, 2023 (as per Article 109, Labour Law).
  • The employees must get their paychecks at the month’s start or completion. The employers should create a record of every payment. To ascertain employees obtain their paychecks, they have to sign a receipt approving they earned their salaries (as per Article 109, Labour Law).
  • Employees’ standard working hours should not exceed eight hours per day and six days per week (48 hours per week), irrespective of the type of employment (as per Article 51, Labour Law). If the employees work in hazardous conditions, their working hours should be less than six hours per day and six days per week (36 hours per week).

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

The process of designing an employee benefits program is straightforward and comprehensive. Before designing a compensation package in Laos, you must focus on a few critical aspects like employee needs. They are mentioned below:

Step 1: Decide a budget and set the goals

You must frame the objectives you are expecting from the compensation structure in Laos before you draft the policy. You should review employment contracts to avoid contradicting their contractual terms.

Before setting up the benefits policy in Laos, you must consider the company’s size and the economic sector in which it functions. Moreover, you must consider your organization’s commercial environment before creating the policy.

The policy’s objectives must incorporate the maximum budget to handle all benefits effectively. Considering the following aspects can help you to set goals:

  • Motivating the existing workforce and enticing new talent
  • Adhering to the budget when creating a plan for employee benefits in Laos
  • Fulfilling all the applicable labor laws

Step 2: Understand the industry standards and the employee’s requirements

You should incorporate the best benefits into the employee benefits plan to ensure your employees’ satisfaction. However, you need to have a fixed budget you want to invest in the compensation policy. 

It is recommended to conduct exhaustive research to comprehend the existing industry standards and the benefits your competitors offer their employees. The corresponding findings will assist you in designing a comprehensive compensation and benefits policy in Lao.

You can also conduct an internal survey to learn what employees expect from the benefits plan. Moreover, it simplifies the task of finding the areas of improvement and making required changes to the compensation and benefits policy in Laos plan. Based on the survey findings, you can decrease certain costs and eliminate the benefits your employees are not using.

Step 3: Make a flexible compensation structure

Once you’ve analyzed the survey and research outcomes, the next step is to create a framework for worker’s compensation in Laos. 

Each employee has unique demands, so a single framework won’t be helpful to meet each of their demands. Employers in Laos should consider every employee’s requirements and prepare a flexible benefits package. The employees can choose appropriate benefits, and the company must guide and explain how to utilize the benefits to the fullest.

Step 4: Communicate the plan’s benefits to the stakeholders and get feedback

After creating a benefits plan, you can communicate its benefits to all the employees and stakeholders. You can share the plan’s draft with them and get their feedback. If you encounter any valuable feedback, you must implement them into the compensation policy.

If the feedback states that a specific benefit will stay unused, you can either make the required changes to make it worthwhile or completely discard that specific benefit.

Step 5: Analysis of the plan

The fast-paced and dynamic nature of the business environment can influence the employee’s benefit plan. Businesses are subject to various types of changes. Therefore, you must analyze the whole compensation structure in Laos at varying intervals and ensure feasibility and competence.

You should also check for any possible errors before you implement the employee compensation policy in Laos. So, you must evaluate all the components of the benefits plan and then implement the plan. Moreover, you must also use a few metrics to determine the benefit plan’s effectiveness for the employees, and you can take appropriate actions if required.

Types of Guaranteed Benefits in Laos

Employers provide various types of employee benefits in Laos to their employees. Many of these benefits are mandatory and are discussed below:

Working hours and overtime

According to Article 51, Labour Law, the employees’ standard working hours should not exceed 8 hours per day, six days per week (48 hours per week), irrespective of the type of job.

The overtime must be 45 hours/month and 3 hours daily. An employer in Laos can’t force an employee to work overtime for four successive days except in an emergency (for example, during a natural disaster or an accident creating substantial economic damage to the employer’s trade).

If an employer wants to lengthen overtime hours beyond 45 hours in any particular month. In that case, they should obtain authorization from

  • A trade union or the employees’ representative(s)
  • Ministry of Labour and Social Welfare (MLSW)

Overtime pay is calculated as a proportion of an employee’s standard hourly wage. Its rate depends on the hours for which the overtime work is done. It also depends on whether it is worked during a regular work day, public holiday, or rest day. Go through the below section to know more.

Overtime work

Rate of overtime work

In the daytime (5 PM – 10 PM) on a standard workday

150% of the employee’s standard hourly wages for every hour of overtime worked

In the nighttime (10 PM – 6 AM) on a standard workday

200% of the employee’s standard hourly wages for every hour of overtime worked

 

In the daytime  ( 6 AM – 4 PM) on a public holiday or a weekly rest day

250% of the employee’s standard hourly wages for every hour of overtime worked

 

In the daytime  (4 PM- 10 PM) on a public holiday or a weekly rest day

300% of the employee’s standard hourly wages for every hour of overtime worked

In the nighttime (10 PM -6 AM) on a public holiday or a weekly rest day

350% of the employee’s standard hourly wages for every hour of overtime worked

Apart from the overtime pay rates mentioned above, work done in night shift (between 10 pm and 6 am) is entitled to a bonus payment. It can be regular work or overtime work. The bonus payment offered is a minimum of 15% of the employee’s standard hourly wages for every hour of night shift work done. 

All employees can get 15 days of paid leave per year or 18 days if they work in a high-risk field. 

Public holidays

Laos follows a list of public holidays that applies to all employees, regardless of the industry and sector where they work. The employees in Laos get seven public holidays per year. They are listed below:

1 January

New Year’s Day

20 January  

Armed Forces Day

8 March

International Women’s Day

14–16 April

Lao New Year (The celebration continues for three days)

1 May

Labour Day

2 December

Lao National Day

Sick leaves

The sick leave entitlement’s duration depends on how long the employers have been working under their employer.

The employees in Laos are eligible for 30 days of paid sick leave per year upon presenting a medical certificate.

Employees working hourly or daily under a particular employment contract get 30 paid sick leaves if employed for over 90 days under the same employer.

Maternity leaves

Female employees in Laos are entitled to up to 105 days of paid maternity leave. They must take at least 45 days off from giving birth. After multiple births, mothers are entitled to 120 days’ leave. On the child’s birth, a female employee in Laos is entitled to an allowance as mentioned in the Social Security Law.

During the year after the child’s birth, the female employee gets an hour a day of rest for feeding and taking care of the child.

Parental leaves

According to Article 58, Labour Law, male employees in Laos are eligible for a minimum of three days’ paid leave if their wife delivers birth or miscarries.

Bereavement leaves

Employees in Laos can take up to 3 days of leave if the employee’s mother, father, spouse, or child is impaired and hospitalized, and there is nobody to look after them. 

Employee Benefits for Expatriates

Foreign employees in Laos are entitled to the same benefits as native employees. Ex-pats can benefit from travel allowances and health insurance when working in Laos. All employers in Laos mostly offer these benefits to ex-pats. Furthermore, ex-pats can obtain the following benefits in addition to the mandatory benefits:

  • Lodging expenses
  • Relocation and travel benefits

How are Employee Benefits Taxed in Laos?

In Laos, tax is levied on personal income, and the tax rate ranges from 0% to 24%. The corresponding rate is implemented to all income grossed in Lao PDR from salary, benefits in kind, and various other remunerations. It applies to Lao people and expatriates getting revenues from Lao PDR or abroad, irrespective of their employment duration and stays in Laos.

The following table shows the Lao personal income tax rate for each income bracket

Income

Lao personal income tax rate

LAK 0 – 1,000,000

0%

LAK 1,000,001 – 3,000,000

5%

LAK 3,000,001 – 6,000,000

10%

LAK 6,000,001 – 12,000,000

12%

LAK 12,000,001 – 24,000,000

15%

LAK 24,000,001 – 40,000,000

20%

Above LAK 40,000,001

24%

In addition to the Lao personal income, the employees should also contribute to social security. Particularly, the employer makes these deductions from the employee’s salary. It is directly funded by the institutions handling the social security accounts.

Restrictions for Laos Benefits and Compensation

Similar to other economies, most benefits in Laos are taxable. Consequently, you must know these benefits’ financial worth to calculate the tax the employee will be obliged to pay. An employer should also ascertain that all tax payments are made on time and delivered to the respective authorities.

Before creating a benefits plan for your employees, it is imperative to ascertain that your business is incorporated in Laos and that your business can legally function in the country. Moreover, companies must pay the minimum wages to the employees depending on their sectors.

Supplemental Benefits for Employees in Laos

The employees in Laos also attain various supplemental benefits. Such benefits might bear different names in different companies; however, it aims to enhance the employees’ lives. Here are some extra benefits employees in Laos get during their employment:

13th Month Pay

In Laos, a 13th-month salary is not compulsory. But, it is common for companies to provide bonuses to their employees.

Private health insurance

Many employers offer medical benefits for employees in Laos, allowing employees to obtain a quality healthcare facility. This includes health insurance that protects employees in Laos against unforeseen events like critical illness, accidents, etc. These supplemental benefits motivate employees to accomplish their job duties more efficiently.

Certain employers may also offer their employees vision and dental insurance if they have the necessary budget.

How Multiplier Can Help with Benefits Management in Laos 

It can be challenging to start a business and find employees abroad. Employers should adhere to local laws and regulations when preparing employment contracts and providing employee benefits. You can streamline this process by contacting a global PEO platform like Multiplier.

Multiplier assists you with compliance with Laos labor laws. We also assist you with accessing educated and competent workforces. Without setting up a subsidiary within Laos, our experts can help you to manage the workforce effectively. Consequently, you can reduce your employment expenses and discover new markets.

Frequently Asked Questions

The standard VAT rate is 10% in Laos.

The main taxes imposed by the Lao authorities are the corporate income tax, the personal income tax, and the value-added tax.

There is no distinction in the Labour Law between full-time and part-time employees. Both these types of employees obtain the same benefits.

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