Bhutan's labour laws establish a framework that governs workplace relationships throughout the kingdom. Based primarily on the Labour and Employment Act of 2007 and the Regulation on Working Conditions 2022, these laws aim to create fair and productive workplaces while protecting the rights and interests of both employers and employees. This guide provides a thorough overview of Bhutanese labour legislation in clear, accessible language, helping employers maintain compliance and employees understand their rights and responsibilities.
Employment Contracts
Employment contracts form the foundation of every working relationship in Bhutan. Unlike some neighboring countries where verbal agreements might suffice for certain positions, Bhutanese law mandates written contracts for all employment relationships regardless of job level or industry sector. This requirement serves to protect both parties by clearly defining expectations and obligations.
Every employment contract in Bhutan must include several essential elements: the names and addresses of both employer and employee, a detailed job description, workplace location, start date, contract duration (whether fixed-term or indefinite), compensation details, working hours, leave entitlements, notice periods for termination, and any additional benefits.
For example, if an employer is hiring a receptionist, the contract must specify not only the monthly salary but also working hours, overtime arrangements, and any service charge distributions. If the position includes variable compensation such as commissions or bonuses, the calculation method must be clearly documented.
Probationary periods are permitted under Bhutanese law, allowing employers to assess new employees' suitability for up to six months. During this period, either party can terminate the relationship with minimal notice.
For example, if an employer wishes to implement a probation period, they must explicitly state its duration in the contract. If the probation period is set at three months and the employer determines the employee is not suitable after two months, they can terminate the contract with just one week's notice.
Even when not explicitly stated in the contract, certain terms are automatically implied in all employment relationships. Employers must provide safe working environments, while employees must perform their duties with reasonable care and skill. Both parties must act in good faith and comply with applicable laws.
For example, if a contract does not specifically mention workplace safety, the employer still has a legal obligation to provide appropriate safety equipment and training. Similarly, if the contract does not explicitly state that employees must follow reasonable instructions, this duty is still implied by law.
When businesses change ownership, the law protects employees by ensuring their contracts remain valid. The new employer assumes all rights and obligations of the previous employer.
For example, if a business is sold, the new owner cannot simply dismiss existing staff or unilaterally change their employment terms. The employees retain their positions, seniority, and contractual terms unless specifically renegotiated.
Organizations with ten or more employees must develop Internal Service Rules that complement employment contracts. These rules must be approved by the Chief Labour Administrator, made available to all employees, and remain consistent with Bhutanese labour laws.
For example, if a company grows to employ ten people, it must establish written policies covering disciplinary procedures, grievance mechanisms, and other workplace practices beyond what's covered in individual employment contracts. These rules must be accessible to all employees, typically through an employee handbook or posted notices.
Wages and Compensation
Bhutan maintains a national minimum wage system that sets the lowest amount an employer can legally pay workers. The Ministry of Labour and Human Resources periodically reviews and adjusts this rate based on factors including cost of living, economic conditions, labour market dynamics, productivity levels, and employers' ability to pay. All employers must comply with the established minimum wage rates regardless of company size or industry.
Wages must be paid directly to employees in Bhutanese Ngultrum, at intervals not exceeding one month, during working hours, and at or near the workplace. While cash payments remain common, bank transfers are permitted with employee consent. Regardless of payment method, employers must provide detailed wage statements showing gross earnings, deductions, and net pay.
For example, if an employer pays wages monthly, each employee must receive a statement showing regular hours worked, any overtime hours, applicable deductions, and final payment amount. If an employee works 22 regular days plus 5 hours of overtime in a month, the wage statement must itemize both components separately.
Overtime compensation applies when employees work beyond standard hours. The overtime rate in Bhutan is at least 1.5 times the normal hourly wage. To calculate overtime pay, an employer would first determine the hourly rate by dividing the monthly wage by the standard monthly hours, then multiply by 1.5 for each overtime hour worked.
For example, if an employee has a monthly salary of Nu. 20,000 for a standard 40-hour week, the calculation would be:
Monthly hours: 40 hours/week × 4.33 weeks = 173.2 hours
Hourly rate: Nu. 20,000 ÷ 173.2 = Nu. 115.47
Overtime rate: Nu. 115.47 × 1.5 = Nu. 173.21
If the employee works 10 overtime hours, they should receive: 10 hours × Nu. 173.21 = Nu. 1,732.10 in addition to their regular salary
Night work (between 10:00 PM and 7:00 AM) entitles employees to additional compensation of at least 0.5 times the normal hourly rate. For example, if an employee's regular hourly rate is Nu. 100, their night work rate would be Nu. 150 (regular rate plus 50% premium). If they work 8 hours during night shift, they would earn Nu. 1,200 for that shift instead of the Nu. 800 they would earn for the same hours during daytime.
The law carefully regulates wage deductions to prevent exploitation. Lawful deductions include income tax, provident fund contributions, loan repayments, court-ordered deductions, and absences from work. However, employers cannot deduct wages as punishment, for damaged goods, or for training costs unless specifically permitted by law or agreed to by the employee in writing. Total non-statutory deductions cannot exceed 30% of wages in any pay period.
For example, if an employee has taken an advance of Nu. 5,000 from the company and earns Nu. 20,000 monthly, the repayment deduction cannot exceed Nu. 6,000 (30% of Nu. 20,000) when combined with other non-statutory deductions. If the employee has other deductions such as a voluntary savings scheme of Nu. 2,000, the maximum loan repayment in that month would be Nu. 4,000.
When employment ends, all outstanding wages must be paid within 15 days of the termination date, including payment for any accrued but unused annual leave and other entitlements. For example, if an employee resigns with 10 days of unused annual leave, the final payment calculation would include:
Regular salary for days worked in the final month
Payment for 10 days of unused leave (calculated as 10 × daily wage rate)
Any other entitlements such as gratuity if applicable This payment must be made within 15 days of the last working day.
Working Hours and Rest Periods
Bhutanese labour law establishes clear boundaries around working time to prevent exploitation while allowing for business needs. Standard working hours are capped at 8 hours daily and 48 hours weekly, typically spread across no more than six days per week. These limits apply to most workplaces, though there are some exceptions for certain industries or roles that require continuous operations.
Rest periods are mandated throughout the working schedule. After four consecutive hours of work, employees must receive at least one hour of break time, which is not counted as working time. Between workdays, a minimum rest period of 12 consecutive hours is required. Weekly, employees are entitled to at least one full day (24 consecutive hours) of rest.
For example, if a retail store operates seven days a week, the work schedule must be arranged so that each employee still receives one full day off each week. If an employee works Monday through Saturday, they must have Sunday off. If business needs require them to work on Sunday, they must receive a different day off within the same week.
Night work receives special consideration under the law. Beyond the additional compensation mentioned earlier, employers must provide regular health assessments for night workers. Pregnant women and nursing mothers are generally exempt from night work requirements, and employers must ensure adequate facilities and security measures for those working during these hours.
For example, if an employee is assigned to night shifts, the employer must provide:
- Regular health check-ups to monitor for any adverse effects
- Adequate security measures, especially for female employees
- Safe transportation options if public transport is unavailable
- Proper lighting and other safety measures in the workplace
Overtime should remain the exception rather than the rule. It should be voluntary except in emergencies and is limited to 2 hours daily and 10 hours weekly. Certain categories of employees—including managers, confidential employees, and field staff who regulate their own hours—may be exempt from overtime regulations.
For example, if a production facility faces an urgent order, they may request overtime from workers, but:
- The overtime cannot exceed 2 hours per day
- The total overtime in the week cannot exceed 10 hours
- The overtime must be compensated at 1.5 times the normal rate
- The overtime should not be regularly scheduled as standard practice
Employers must maintain accurate records of working hours for all employees, including regular hours, overtime, night work, and rest days. These records must be kept for at least 5 years and be available for inspection by labour officials.
For example, a proper time record for each employee should document:
- Daily start and end times
- Break periods taken
- Total regular hours worked
- Any overtime hours worked
- Any night hours worked
- Weekly rest days taken
Flexible working arrangements are permitted when agreed upon by both employer and employee, provided they comply with maximum working hour limits and minimum rest requirements. For example, if an office implements flextime, they might allow:
- Flexible starting times between 8:00 AM and 10:00 AM
- Corresponding ending times between 4:00 PM and 6:00 PM
- Core hours when all employees must be present (e.g., 10:00 AM to 4:00 PM)
- Total daily hours must still equal the standard workday (typically 8 hours)
Leave Entitlements
Bhutanese labour law establishes several categories of leave to ensure employees have time away from work for rest, illness, personal matters, and family responsibilities.
Annual leave (earned leave) accrues at a minimum rate of 1.5 days per completed month of service, resulting in 18 working days annually for full-time employees. This leave begins accumulating from the first day of employment, though employees typically become eligible to take it after completing three months of service.
For example, if an employee starts work on January 1:
By March 31, they will have accrued 4.5 days of annual leave (1.5 × 3 months)
They can apply to use this leave after completing three months of service
By December 31, they will have accrued 18 days total (1.5 × 12 months)
If they use 10 days during the year, they will have 8 days remaining
Unused annual leave can be carried forward to the next year or encashed upon termination.
For example, if an employee has 5 unused annual leave days at year-end:
The days may be carried forward to the following year (subject to company policy)
Some employers may allow encashment of some or all unused days
Upon termination, any accumulated unused leave must be paid out
Sick leave provisions allow for 10 working days of paid leave per calendar year for illness or injury. For absences exceeding two consecutive days, medical certification is typically required. Unlike annual leave, unused sick leave cannot be carried forward or encashed upon termination.
For example, if an employee falls ill:
- For one or two days, they can typically take sick leave without a medical certificate
- For three or more consecutive days, a medical certificate is required
- The employer must maintain records of sick leave used
- If the employee uses all 10 days and requires additional sick time, the employer may allow unpaid leave or use of annual leave
Casual leave, intended for unforeseen personal matters or emergencies, provides another 10 working days annually. While advance application is preferred when possible, the nature of emergencies is recognized, requiring only that employees inform employers as soon as feasible. Like sick leave, unused casual leave expires at year-end without compensation.
For example, if an employee needs to attend to an urgent family matter:
- They should inform their supervisor as soon as possible
- They can take up to 10 days of casual leave per year
- These days cannot be carried forward to the next year
- They cannot be encashed or paid out
Maternity protection is particularly robust in Bhutanese labour law. Mothers are entitled to six months (180 days) of paid maternity leave for their first two children, and three months (90 days) for subsequent children. Additional unpaid leave may be granted upon request. Pregnant employees are protected from night work, risky assignments, and termination due to pregnancy. Upon return, they must be reinstated to the same or an equivalent position without reduction in pay or benefits. For example, if an employee becomes pregnant with her first child:
She is entitled to 180 days (six months) of paid maternity leave
She may choose when to start this leave, typically before the expected delivery date
During pregnancy, she cannot be assigned to night shifts or hazardous work
Upon return, she must be given her original position or an equivalent one
Her salary and benefits must remain unchanged
Fathers are entitled to paternity leave of 10 working days for the first two children (5 days for subsequent children), to be taken within 30 days of the child's birth.
For example, if an employee's wife gives birth to their first child:
The employee is entitled to 10 working days of paid paternity leave
This leave must be taken within 30 days of the child's birth
For a third or subsequent child, the entitlement reduces to 5 days
Nursing mothers receive additional workplace accommodations, including two 30-minute paid breaks daily for nursing or expressing milk until the child reaches two years of age.
For example, if a new mother returns to work while still breastfeeding:
- She is entitled to two 30-minute breaks during the workday
- These breaks are counted as paid working time
- The employer must provide a private, clean space for breastfeeding or expressing milk
- This entitlement continues until the child is two years old
Public holidays declared by the Royal Government of Bhutan are paid time off for all employees. If business needs require work on these holidays, employees must receive either an alternative day off within 30 days or payment at twice the normal daily wage rate.
- For example, if an employee works during a public holiday:
- The employer must either provide an alternative day off within 30 days, or
- Pay the employee double the normal daily wage for that day
- This choice should be clearly communicated to the employee in advance
Workplace Safety and Health
Occupational health and safety receive significant attention in Bhutanese labour legislation. Employers bear primary responsibility for creating and maintaining safe working environments. This includes ensuring premises are free from hazards, providing safe equipment and materials, offering appropriate training, and preparing for emergencies.
The employer's duty extends beyond employees to include visitors, contractors, and even members of the public who might be affected by workplace operations. All costs related to safety measures must be borne by the employer—employees should never pay for personal protective equipment, safety training, or required medical examinations. For example, if safety helmets are required in a workplace:
- The employer must provide these helmets at no cost to employees
- The employer must ensure the helmets meet safety standards
- The employer must replace damaged or worn helmets
- The employer must train employees on proper helmet use
Organizations with ten or more employees must develop written health and safety policies that articulate their commitment to workplace safety, outline responsibilities at all organizational levels, and describe specific safety procedures. These policies must be regularly reviewed, updated, and communicated to all employees. For example, a workplace safety policy should include:
- A statement of commitment to maintaining a safe workplace
- Clear assignment of safety responsibilities for managers, supervisors, and workers
- Specific procedures for high-risk activities
- Emergency response protocols
- Accident reporting procedures
- Training requirements
When accidents occur, prompt reporting is required. Serious incidents must be reported to the Labour Inspector within 48 hours, followed by a written report within seven days. Employers must investigate accidents to identify causes and implement preventive measures. Detailed records of all workplace accidents must be maintained for at least five years. For example, if a workplace accident occurs:
- Immediate first aid or medical attention must be provided
- The incident must be reported to management immediately
- If serious, it must be reported to the Labour Inspector within 48 hours
- A written report must follow within seven days
- An investigation must determine causes and preventive measures
- Records must be kept for at least five years
Employees also bear responsibility for workplace safety. They must follow safety instructions, use provided protective equipment, report hazards and incidents, and avoid endangering themselves or others through careless actions. For example, if an employee notices a safety hazard:
- They should report it immediately to their supervisor
- They should not attempt to continue working in unsafe conditions
- They should suggest potential solutions if possible
- They should follow all safety instructions provided
Workers have important rights regarding safety matters: the right to know about workplace hazards, to participate in safety programs, to refuse dangerous work without penalty, to report concerns without fear of retaliation, and to be consulted on safety issues. In workplaces with ten or more employees, workers may elect safety representatives to advocate for their interests in safety discussions. For example, if an employee is asked to perform a task they reasonably believe is dangerous:
- They have the right to refuse without penalty
- They should explain the safety concern to their supervisor
- The issue should be investigated before work resumes
- No disciplinary action can be taken for a good faith refusal
It's worth noting that while Bhutanese law establishes comprehensive safety requirements, implementation varies across industries and regions. Larger companies and those in regulated sectors typically maintain higher safety standards than small businesses or informal operations. Nevertheless, the legal obligations apply to all employers regardless of size or sector.
Termination of Employment
Employment relationships in Bhutan can end through several mechanisms, each with specific legal requirements. Automatic termination occurs when fixed-term contracts reach their end date, specific projects are completed, employees pass away, or businesses permanently close. Mutual agreement between parties can also end employment relationships, with terms documented in writing.
When either party wishes to unilaterally terminate the relationship, notice periods apply based on length of service: one week for employment less than six months, two weeks for six months to less than one year, one month for one to three years, and two months for three years or more. Payment in lieu of notice is permitted, allowing immediate separation while compensating the other party for the notice period. For example, if an employer wishes to terminate an employee who has worked for two years:
- They must provide one month's written notice
- Alternatively, they can provide one month's salary in lieu of notice
- The notice period begins from the day the notice is given
- The employment officially ends when the notice period expires
Bhutanese law prohibits termination for certain reasons, including union membership, filing complaints against employers, discrimination based on personal characteristics, temporary illness or injury, pregnancy, or refusing dangerous work. Termination for these reasons constitutes wrongful dismissal and can lead to legal consequences.
For example, if an employee files a complaint about unpaid overtime:
- The employer cannot terminate them in retaliation for the complaint
- If termination occurs shortly after such a complaint, it may be presumed retaliatory
The employee can challenge such termination through dispute resolution mechanisms
In cases of serious misconduct, employers may dismiss employees immediately without notice. However, this option is limited to legitimate reasons such as theft, violence, deliberate property damage, serious safety violations, gross insubordination, intoxication at work, sexual harassment, or unauthorized disclosure of confidential information. Fair investigation and documentation are essential before proceeding with summary dismissal.
For example, if an employee is suspected of theft:
- The employer must conduct a thorough investigation
- The employee must be given an opportunity to explain
- If evidence clearly establishes theft, immediate dismissal may be justified
- The employer should document all evidence and the decision-making process
- The final payment must still be made within 15 days
Redundancy situations—where positions are eliminated due to reorganization, economic downturns, technological changes, or business closure—require special handling. Employers must consult with affected employees, consider alternatives, use fair selection criteria, provide proper notice, and pay any applicable benefits. For example, if a business needs to reduce staff due to economic difficulties:
- Employees must be consulted about the situation
- Alternatives to redundancy should be considered (reduced hours, redeployment, etc.)
- If redundancies are necessary, fair selection criteria must be used
- Proper notice periods must be observed
- All final payments must be made within 15 days
When employment ends for any reason, final payments must be made within 15 days, including outstanding wages, unused annual leave, applicable gratuity, and any other contractual entitlements. For example, a final payment calculation might include:
- Salary for days worked in the final month
- Payment for unused annual leave
- Gratuity if applicable (typically for longer-term employment)
- Any other contractual benefits due
- Less any lawful deductions
While these termination provisions exist in law, their implementation can vary. Some employers, particularly smaller businesses, might not follow all required procedures. Employees facing improper termination may find the dispute resolution process challenging, especially in remote areas with limited access to labour authorities.
Dispute Resolution
Despite best efforts to maintain harmonious workplace relationships, disputes inevitably arise. Bhutanese labour law establishes a multi-tiered approach to resolving these conflicts efficiently and fairly.
The process begins at the workplace level, where employers with ten or more employees must establish formal grievance procedures that are clear, accessible, and protective of confidentiality and non-retaliation. A typical grievance procedure begins with informal discussion between the employee and supervisor. If unresolved, a formal written complaint initiates investigation, meetings, and decision-making processes, with the possibility of appeal to higher management. For example, if an employee believes they have been underpaid for overtime:
- They should first discuss the issue with their immediate supervisor
- If not resolved, they submit a formal written complaint to the designated person
- The complaint is investigated, including review of time records and wage calculations
- A meeting is held to discuss findings
- A decision is issued in writing
- If the employee is not satisfied, they may appeal to higher management
When workplace resolution fails, external options become available. Either party may notify the Chief Labour Administrator of the dispute in writing. A Labour Relations Officer then investigates and attempts to facilitate resolution. If unsuccessful, a conciliator may be appointed to help parties find common ground. Successful conciliation results in a binding agreement certified by the Chief Labour Administrator. For example, if a workplace grievance about working conditions remains unresolved:
- Either party can notify the Chief Labour Administrator in writing
- A Labour Relations Officer will be assigned to investigate
- The officer will gather information from both parties
- The officer will attempt to facilitate a resolution
- If unsuccessful, a conciliator may be appointed
- The conciliator will work with both parties to find a mutually acceptable solution
- Any agreement reached becomes binding once certified
If conciliation fails, the dispute may proceed to arbitration or court proceedings. Arbitrators hear evidence from both sides and make binding decisions. Court proceedings represent the final recourse for unresolved disputes. Throughout this process, employees have the right to reasonable paid time off to participate in hearings and meetings related to their cases. For example, if a dispute reaches arbitration:
- An arbitrator is appointed to hear the case
- Both parties present evidence and arguments
- The arbitrator makes a binding decision
- The employee is entitled to paid time off to attend the arbitration
The arbitrator's decision can only be challenged in court on limited grounds
While this multi-tiered dispute resolution system exists in law, practical access can be challenging, particularly for workers in remote areas or those with limited education or resources. Resolution timeframes can be lengthy, and outcomes may vary based on numerous factors including documentation quality and representation.
Practical Implications for Employers and Employees
For employers operating in Bhutan, understanding and implementing labour laws offers several benefits beyond mere compliance. Properly documented employment relationships reduce misunderstandings and disputes. Fair compensation practices improve employee retention and motivation. Appropriate working hours and leave policies support productivity and wellbeing. Effective safety measures reduce accidents and associated costs. Proper termination procedures minimize legal risks and reputational damage. For example, to ensure compliance with wage regulations, employers should:
- Maintain accurate time records for all employees
- Calculate regular and overtime pay correctly
- Provide detailed wage statements with each payment
- Keep wage records for at least five years
- Ensure all deductions are lawful and properly documented
For employees, knowledge of labour rights enables informed decisions and appropriate actions when issues arise. Understanding contract requirements helps workers recognize when terms are being violated. Knowing wage calculation methods allows verification of correct payment. Familiarity with leave entitlements ensures access to these benefits. Awareness of safety rights supports appropriate action when dangerous conditions exist. Understanding termination procedures helps protect against wrongful dismissal. For example, to ensure they receive proper overtime compensation, employees should:
- Keep personal records of hours worked
- Understand how overtime should be calculated
- Review wage statements for accuracy
- Raise discrepancies promptly through proper channels
- Know the dispute resolution options if issues aren't resolved
Conclusion
Bhutan's labour laws establish a comprehensive framework designed to balance the interests of employers and employees. While implementation may vary across industries and regions, these laws provide important protections and guidelines for workplace relationships throughout the kingdom.
For both employers and employees, understanding these provisions is the first step toward ensuring fair, productive, and legally compliant working relationships. While this guide provides a thorough overview of key provisions, specific situations may require professional legal advice. The Department of Labour and its regional offices serve as valuable resources for questions and concerns regarding workplace practices and labour law implementation.
By working within this legal framework, employers and employees contribute to workplaces that support both economic development and human wellbeing.