Definitive Guide to Hiring in Laos

Hiring in Laos

Hiring employees compliantly in Laos means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Laos so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Laos; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Laos

Employee Probation Period

• Probationary period is as follows: -
  • Maximum 30 days (for unskilled workers)
  • Maximum 60 days (for skilled workers)

Annual Leave in Laos

• The Labor Law provides that employees who have worked consecutively for a period of one year are entitled to 18 days of annual leave.

Holidays in Laos

Maternity Leave Laos

• Before and after giving birth, women workers shall be entitled to at least 105 days of maternity leave; however, at least 42 days of such leave shall be taken after giving birth.
• In cases of giving birth to twins, maternity leave shall be at least 120 days.
• During such a period, the employee shall receive full payment at the normal salary or wages.

Paternity Leave Laos

• Fathers are not entitled to paternity leave

Sick Leave in Laos

• The law provides that, upon presentation of a medical certificate, employees are entitled to sick leave fully paid up to a maximum of 30 days each year.
• However, workers working on a daily or hourly basis under a specific employment contract are entitled to sick leave only if they have worked for more than 90 days for the same employer.

Working Hours in Laos

• The Labor Law limits working hours to 48 hours per week.
• Work that is performed beyond this limit will be considered as overtime.
• Likewise, the law provides that an employee cannot work more than six days per week and eight hours per day.

Overtime in Laos

• According to the Labor Law, overtime cannot exceed three hours per day or 45 hours per month.
• In addition, an employee cannot work overtime for more than four consecutive days, except in emergencies.
• Overtime wages differ according to the type of overtime, with the Labor Law providing different rates for different days and periods in which the overtime is performed (e.g. overtime on regular days, overtime at night, overtime on public holidays).

Termination of Employment in Laos

The employment will be terminated when one of the following conditions is met:

• • the expiration of the contract, or completion of tasks set out in the contract
  • the death of the employee or the employer
  • the termination of the company;
  • the employee has been sentenced to imprisonment; or
  • the employer and employee have provided mutual consent

• There is no defined notification period for a fixed-term contract, and such terms are generally agreed upon in the employment contract.
• With respect to an indefinite-term contract, each party may terminate the contract at any time provided notification is provided to the other party at least 30 days in advance for contracts involving physical labor employees, and at least 45 days in advance for contracts involving employees who use intellectual/special skills.
• Alternatively, the employer can choose to make payment in lieu of notice to the employee who will be terminated.
• The Labor Law provides for severance payments to be made for the following types of termination of employment:
  • In the case of general unilateral termination of the contract, the severance value is 10% of the employee’s last wage multiplied by the number of months worked.
  • In the case of unjustified unilateral termination of a contract, the severance value is 15% of the employee’s last wages, multiplied by the number of months worked, with no capped amount for severance payment.
  • In the case of the death of an employee, the employer must pay 50% of the compensation that would have been received by the employee for general unilateral termination of the contract.

Notice Period in Laos

• Either party to an indefinite-term employment contract can terminate it at any time by giving the following statutory notice period:
  • 30 days' advance notice for employees doing unskilled work.
  • 45 days' advance notice for employees doing skilled work.

Severance in Laos

• The Labor Law provides for severance payments to be made for the following types of termination of employment:
  • In the case of general unilateral termination of the contract, the severance value is 10% of the employee’s last wage multiplied by the number of months worked.
  • In the case of unjustified unilateral termination of a contract, the severance value is 15% of the employee’s last wages, multiplied by the number of months worked, with no capped amount for severance payment.
  • In the case of the death of an employee, the employer must pay 50% of the compensation that would have been received by the employee for general unilateral termination of the contract.

Laos Salary and Wages

13th / 14th Month Salary in Laos

• No
• There is no statutory requirement to pay the 13th or the 14th month salary.
• Employees may agree on bonuses with their employers.

• The government is encouraging all enterprises (including individuals) to register (including their employees) in the Social Security Scheme.
• Both the employer and employee must contribute to the social security fund. The social security contributions are as follows:
  • 6% of the gross remuneration must be contributed by the employer.
  • 5.5% of the gross remuneration must be contributed by the employee.
• Social security contributions are paid at the same time as the PIT based on gross remuneration and are deductible when calculating PIT.
• Although the rate of the social security contribution is 6% and 5.5%, respectively, the total base amount to be calculated is capped at LAK 4.5 million.
• Expatriates who work in Lao PDR for more than 12 months are required to be registered in the social security scheme in Lao PDR.

Immigration Laos

• The LA-B2 is the most common type of visa issued to foreigners living and working in Laos.
• It is a multiple entry visa and is available for a period of three-month, six-month, or one-year duration.
• Foreign applicants must ensure that they register for the visa before entering the country from a Lao consular post located in their country of residence or home country; the visa cannot be applied for while residing in Laos.
• To be eligible for the LA-B2 Visa, foreign applicants must first secure employment legally and obtain a sponsorship letter from a locally licensed and incorporated entity in Laos.
• The sponsoring entity is required to seek approval from the Lao Ministry of Foreign Affairs (MFA) in the capital Vientiane and present a financial guarantee for the prospective foreign employee.
• Once the approval is made, the Lao consular post issues the LA-B2 visa allowing the applicant to enter the country.
• A work permit is issued by the Ministry of Labor and Social Welfare, and a Stay Permit by the Immigration Department, Ministry of Public Security.
• The application for the Work Permit and SP must be registered by the employer, sponsoring the foreign applicant, within one month from the day of receiving authorization from the Lao MFA.

Value Added Tax (VAT) in Laos

• As of January 2022, the standard VAT rate applicable on most goods and services has been reduced from 10% to 7%.
• Exports of goods are zero-rated, except the export of natural resources that are not finished goods, which are subject to 10% VAT.

Mandatory Benefits in Laos

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
• Statutory benefits also include social security benefits

Payroll Accrual in Laos

Country Accruals Additional Information

Description

The government is encouraging all enterprises (including individuals) to register (including their employees) in the Social Security Scheme. Both the employer and employee must contribute to the social security fund. The social security contributions are as follows: 6% of the gross remuneration must be contributed by the employer. 5.5% of the gross remuneration must be contributed by the employee. Social security contributions are paid at the same time as the PIT based on gross remuneration and are deductible when calculating PIT. Although the rate of the social security capped at LAK 4.5 million. Expatriates who work in Lao PDR for more than 12 months are required to be registered in the social security scheme in Lao PDR.

Payroll Accruals Additional Information

Accrued Benefits in Laos

Why use Global Expansion to hire in Laos

Establishing a branch office or subsidiary in Laos can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Laos labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Laos law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Laos. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Laos Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.