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The Basic Rules Of Employment In Laos: Updates to the Lao Labour Law

In January 2014, the new Labour Law (2013) was formally approved, replacing the Labour Law (2006). The new law is the result of extensive discussions between the various Lao authorities, private sector entities and development organisations, and introduces a number of changes to the basic rules of employment in Laos, including the employment of foreign workers.

Because the area of employment law is quite vast, this is only a brief discussion of the main topics under the new Labour Law.


General principles and employer obligations The employer is obliged to:

  • provide training to develop employees’ skills and knowledge;
  • ensure working conditions are safe, and ensure there is appropriate lighting, supply of drinking water and washing water, showers, toilets etc., a storage room for the storage of toxic substances and other measures against electric shocks and fire.;
  • facilitate medical examinations of employees once a year and provide a first aid kit on site.
Internal employment conditions (Work Rules) The workplace must have its own Internal Regulations, and they must not conflict with the Labour Law. They must be approved by the Labour Administration Authority. The Labour Administration Authority has a template of the Internal Regulations that companies are encouraged to use.
Hours of work Normal hours of work are 6 days a week, no longer than 8 hours a day or 48 hours a week.
Overtime The employer may request the employee to work overtime. When overtime is necessary for more than 45 hours per month or 3 hours per day, the employer must request a particular authorization from the Labour Administration Agency and either the trade union, worker’s representative or the majority of employees in the labour unit. Overtime cannot be worked for more than 4 consecutive days (except in the case of natural disaster).
*Weekly rest and public holidays Workers have the right to at least one day’s rest a week. Lao employees must be given 6 public holiday days as listed in the Labour Law, with foreign workers additionally entitled to the national day of their country.
Sick leave Workers paid on a monthly basis have the right to sick leave with full pay for 30 days a year, on presentation of a medical certificate.
Annual leave Workers employed under an employment contract made for an indefinite period or for a definite period of one year or more, who have already worked for one full year shall be entitled to 15 days of annual leave, at full pay. If the employee is unable to take their annual leave days by fault of the employer, the employee shall receive full pay for such day/s.
*Personal leave In additional to Annual Leave, employees have the right to request (from the employer) paid Personal Leave of not less than 3 days in the event:

  • any members of the employee’s immediate family are injured and hospitalized and nobody else can care for them;
  • the employee’s immediate family pass away;
  • the employee gets married;
  • the employee’s wife gives birth or miscarries;
  • the employee is affected by a natural disaster.
*Employment of foreign workers
  • Employers have a duty to give priority to Lao nationals, -approval must be obtained from the Ministry of Labour and Social Welfare to employ foreign workers.
  • Foreigners undertaking manual labour can make up no more than 15% of the total number of Lao employees, and no more than 25% of the Lao workforce for professionals with specialised skills.
  • Foreign workers must hold a valid business visa and work permit.
  • Foreign workers can enter into employment agreements for a period of 12 months, renewable for another 12 months. The total working period for foreigner workers in Laos cannot exceed 5 years. Employers can however submit a request to the Labour Administration Authority for a foreign employee to continue working in Laos for an additional period (up to 5 years) based on the expertise of the employee and the requirements of the business/organisation of the employer.
*Employment of women An employer cannot require a pregnant woman or woman with a child under 1 year of age to carry heavy loads, stand for long periods, undertake dangerous work or work at night, work overtime or on a day of rest. If necessary, the employer shall temporarily assign the employee to more suitable work during this period, but pay her the normal salary.
*Employment of children
  • Children of the ages of 14-17 years may be employed provided they do not work overtime.
  • Children of ages 12 and 13 may be employed for “light work” provided they shall not be required to undertake work that is unsafe, interferes with their schooling or vocational training or is dangerous to their body, psychology or mind.
Employment contracts
  • An employment contract must be in writing between the employer and employee.
  • The contract can either be for a fixed term or an indefinite period. If a fixed term contract, including any extensions, is longer than 3 years, the contract will be deemed to be an indefinite employment contract.
  • If the parties wish to extend the term of a fixed term employment contract they must notify each other 15 days before its expiry, with the extension commencing within 60 days of the date of expiration of the contract.
  • The contract must stipulate the place of work, the work to be performed, the level of wages, the duration of the contract, commencement date, expiry date and any probationary period, workings days, rest days and holidays, any welfare entitlements of the worker, the benefits the employee will receive at the expiration of the employment contract and any other matters agreed between the parties.
Probationary period
  • The employer has the right to impose a probationary period on the employee. In the case of manual labour, the period will not exceed 30 days. In the case of specialized skills, the period will not exceed 60 days. The probationary period cannot be extended.
  • During the period of probation, each party has the right to terminate the employment. 3 days’ notice is required for manual labour and 5 days’ notice is required for specialized fields.
  • If the employment is terminated during probation, the employee is entitled to receive salary or wages and other entitlements under the law, calculated from when he began work to when he stopped.
  • 7 days before the end of the probationary period, the employer shall inform the worker in writing whether or not his or her employment will be confirmed.
Termination of an employment contract
  • An employment contract for a fixed term will terminate upon expiration or may be terminated by mutual agreement or for reasons of breach by one of the parties.
  • An employment contract made for an indefinite period may be terminated any time by either party, with 30 days’ notice for manual work and 45 days’ notice for specialized skills.
Termination of an employment contract by the employer
  • An employer can dismiss an employee where the employee lacks specialized skills, where the worker is not in good health and cannot continue work, or the business needs of the company require a reduction in staff.
  • The employer must notify the Labour Administration Authority in writing when an employee is dismissed for reasons of redundancy.
  • Where an employment contract is terminated by the employer, the employer shall pay a termination allowance according to their period of work.
Limits on employer’s right to terminate an employment contract An employer cannot, without prior approval from the Labour Administration Authority, terminate the employment of an employee if the employee is sick, suffering a disaster such as fire or flooding, is a female employee who is pregnant or within a year of giving birth, on annual leave or leave approved by the employer, still performing work at another workplace on assignment from the employer, filing a complaint or claim against the employer in relation to the Labour Law, or carrying out activities as a worker’s representative.
*Termination due to acts of the employee The employer may terminate an employee’s employment in the following circumstances with no payment of a termination allowance or notification to the Labour Administration Authority:

  • Deliberately causing damage to the employer (where there is evidence of same);
  • Violating Internal Regulations in spite of previous warnings from the employer;
  • Abandoning work for 4 consecutive days without a valid reason;
  • Being sentenced to prison by a court;
  • Violating the rights of other employees having already been warned by the employer.
Unlawful termination of employment contract Termination of an employment contract by the employer is unjustified if the employer:

  • Terminates the employment contract without a valid reason;
  • Abuses their power (i.e. directly or indirectly forces the employee to terminate the employment contract);
  • Violates the fundamental rights of the employee; or
  • Acts in breach of its contractual obligations.

In such cases, the employee then has the right to request reinstatement. If the employer does not reinstate the employee, the employer is required to pay a termination allowance.

Severance pay
  • If employment contracts are terminated unilaterally, either by the employee or by the employer (for justified reasons) the employee will be entitled to a severance payment of 10% of the monthly salary before termination for each month of work.
  • Where an employment contract is terminated by the employer for unjustified reasons, the employee is entitled to compensation of 15% of the employee’s monthly salary for the whole period of working.
Salary and payment of wages
  • The employer must pay at least the minimum wage set by the government. The minimum wage is currently 626,000 kip / month.
  • Wages are to be paid at the beginning or end of the month.
  • Deductions from an employee’s salary are permissible to compensate for damage to the property of the employer to the value of the item damaged. If the employee is not able to repay the amount owing, the compensation must be deducted from his salary or wage but not exceeding 20% of his salary or wage.
  • The employer has the duty to declare the income which is paid to the employee to the Tax Department in order to deduct personal income tax.
*Compulsory social security Every workplace shall make payments to the National Social Security System with respect to their employees in accordance with the new Social Security Law governs social security payments.
*Maternity leave and maternity allowance
  • A woman is entitled to at least 105 calendar days of fully paid maternity leave, at least 45 days of which must be after the birth.
  • During the year after birth, the woman is entitled to have one hour a day of rest in order to feed and take care of the child.
  • If a woman suffers a miscarriage, she is entitled to leave on full pay for a period as determined by a doctor. On the birth of a baby, a woman is entitled to an allowance as specified in the Social Security Law.
*Calculation of overtime Overtime is calculated as follows:

  • On a regular working day, 150% of the regular hourly rate for each hour;
  • Overtime at night on a regular working day, 200% of the regular hourly rate for each hour;
  • Overtime worked on a weekly rest day or holiday, 250% of the regular hourly rate for each hour;
  • Overtime worked from 4:00pm to 8:00pm on a weekly rest day or holiday, 300% of the hourly wage of a regular working day for each hour;
  • Overtime worked from 10:00pm to 6:00am on a weekly rest day or holiday, 350% of the hourly wage of a regular working day for each hour worked.

Specific payments for night work or shift work shall be paid at no less than 15% of the hourly wage of a regular working day for each hour worked.

*These provisions represent new or revised articles appearing in the Labour Law (2013).

If you have any questions on the specifics detailed below, or would like your employment contracts and Internal Regulations reviewed to ensure they are in compliance with the new Labour Law, please don’t hesitate to contact the Arion Legal team at enquiries@arionlegal.com.

Arion LaosThis article has been provided by Arion Legal, (incorporating McDonald Steed McGrath) an Australian law firm, with an office in Vientiane that has been offering international standard legal advice and documentation for foreign investors operating in, or looking to invest in, Laos since 2008.