Hire in Bhutan through our Employer of Record (EOR)

Bhutan's employment landscape is characterized by a youthful workforce, with a significant portion residing in rural areas. The country's unique focus on Gross National Happiness influences its work culture, emphasizing well-being and contentment over pure economic growth. While agriculture remains the largest employer, the industry and services sectors are gradually expanding, offering new opportunities for the workforce.

Overview of Labor Laws

Bhutan's labor laws aim to protect workers' rights and promote fair employment practices. The Labor and Employment Act of 2007 serves as the primary legislation governing employment relationships in the country. This act covers various aspects of employment, including:

• Minimum working age
• Working hours and overtime
• Leave entitlements
• Occupational health and safety
• Termination of employment

The act also prohibits discrimination in the workplace and ensures equal opportunities for all workers. Employers are required to provide written contracts to their employees, detailing the terms and conditions of employment.

Cultural Considerations When Hiring Remote Employees in Bhutan

When hiring in Bhutan, it's essential to be aware of the country's unique cultural norms:

1. Gross National Happiness: This philosophy influences work-life balance, with an emphasis on personal well-being and community involvement.

2. Buddhist principles: These shape the work approach, encouraging mindfulness and interconnectedness.

3. Communication styles: Bhutanese culture values indirect communication and politeness to maintain harmony.

4. Respect for hierarchy: Formal communication with superiors is common, especially in traditional workplaces.

5. Collective mindset: Teamwork and collaboration are highly valued, with success attributed to group efforts.

6. Family and community bonds: Flexibility may be expected for employees to attend important family or community events.

Challenges of Direct Hiring Without a Bhutan EOR

Direct hiring in Bhutan without an Employer of Record can present several challenges for foreign companies:

1. Skills mismatch: There's often a gap between the skills possessed by the workforce and those demanded by the labor market.

2. Limited talent pool: With a small population and developing education system, finding specialized skills can be difficult.

3. Cultural differences: Understanding and adapting to Bhutanese work culture can be challenging for foreign employers.

4. Language barriers: While English is widely used in business, proficiency levels may vary.

5. Legal complexities: Navigating Bhutan's labor laws and regulations can be complex for foreign companies unfamiliar with the local legal system.

6. Remote location: Bhutan's geographical location can make it challenging to manage hiring processes from abroad.

7. Limited infrastructure: In some areas, particularly rural regions, infrastructure limitations may affect recruitment and work processes.

By understanding these aspects of Bhutan's employment landscape, companies can better navigate the hiring process and establish successful operations in the country. Partnering with a global Employer of Record like Rivermate can help overcome many of these challenges, ensuring compliance with local laws and cultural sensitivity in employment practices.

Bhutan's payroll and tax system is designed to support the country's unique development philosophy of Gross National Happiness while ensuring financial stability for both employers and employees. The system incorporates various elements, including income tax, social security contributions, and provident fund payments. Understanding these components is crucial for businesses operating in Bhutan and individuals working in the country.

Employer Contributions

Employers in Bhutan have several financial obligations when it comes to payroll and taxes. These contributions are essential for maintaining the country's social welfare system and supporting economic growth.

Tax Deducted at Source (TDS)

One of the primary responsibilities of employers is the implementation of Tax Deducted at Source (TDS). This system requires employers to withhold income tax from their employees' salaries at the point of payment. The TDS rates vary depending on the nature of income and the employee's residency status. Employers must accurately calculate, deduct, and remit these taxes to the government on behalf of their employees.

Provident Fund Contributions

Bhutanese employers are required to contribute to the Provident Fund for their employees. This contribution typically amounts to 10% of an employee's basic salary. The Provident Fund serves as a retirement savings plan, providing financial security for workers in their later years.

Corporate Income Tax

Businesses operating in Bhutan are subject to Corporate Income Tax (CIT) on their taxable profits. The standard CIT rate is set at 30%. Employers must file CIT returns annually and make quarterly tax payments to stay compliant with Bhutanese tax regulations.

Additional Tax Obligations

Employers may also be responsible for collecting and remitting Sales Tax on goods and services. Furthermore, they might be required to pay a Skills Development Levy, which funds vocational training programs in the country. These additional obligations contribute to Bhutan's overall economic development and workforce enhancement.

Employee Contributions

Employees in Bhutan also have financial responsibilities within the payroll and tax system. These contributions ensure their participation in social welfare programs and retirement savings plans.

Personal Income Tax

Bhutan employs a progressive personal income tax system, where the tax rate increases as the taxable income rises. Employers are responsible for deducting personal income tax from their employees' salaries based on the prescribed tax brackets. This system, known as deduction at source, simplifies the tax collection process for both employees and the government.

Social Security Contributions

Employees in Bhutan are required to contribute to the country's social security system. The standard employee contribution rate is 5% of their basic monthly earnings. These contributions help fund various social welfare programs and provide a safety net for workers.

Provident Fund Deductions

If an employer participates in the Provident Fund scheme, employees may see a portion of their salary deducted as their contribution to this retirement savings plan. The exact contribution rates are typically determined through an agreement between the employee and employer.

Other Potential Deductions

Some employers in Bhutan offer additional benefits such as group insurance schemes. In these cases, employees may see premium deductions from their salaries. Additionally, if applicable, union dues may be deducted from an employee's paycheck.

Understanding these various contributions and deductions is crucial for both employers and employees in Bhutan. It ensures compliance with local regulations and helps individuals plan their finances effectively. As tax laws and regulations can change, it's always advisable to consult with a tax professional or refer to the official government sources for the most up-to-date information.

Bhutan offers a comprehensive set of employee benefits, ensuring the well-being and financial security of its workforce. These benefits, both mandatory and optional, play a crucial role in creating a positive work environment and attracting top talent. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local labor laws while allowing companies to focus on their core business operations. Let's explore the various benefits available to employees in Bhutan.

Mandatory Benefits

Bhutan's Labour Employment Act of 2007 outlines several mandatory benefits that all employers must provide:

• Paid Time Off:

  • 18 days of annual leave per year (accrued at 1.5 days per month)
  • 5 working days of paid sick leave annually
  • 16 paid public holidays

• Leave for Family Reasons:

  • 6 months of paid maternity leave
  • Paternity leave (specific details may vary)

• Compensation:

  • Mandated minimum wage (varies by industry and location)
  • Overtime pay at 1.5 times the standard rate

• End of Employment:

  • Notice period required for both employers and employees
  • Severance pay may be required depending on circumstances

• Social Security:

  • Provident fund system offering retirement, disability, and survivor benefits
  • Minimum 5% contribution from both employer and employee

Optional Benefits

To attract and retain top talent, many companies in Bhutan offer additional perks beyond the mandatory benefits:

• Health and Wellness Benefits:

  • Employer-subsidized health insurance plans

• Financial Security Benefits:

  • Performance-based bonuses
  • Profit-sharing schemes

• Work-Life Balance Benefits:

  • Flexible work arrangements (e.g., compressed workweeks, telecommuting)
  • Childcare subsidies or on-site childcare facilities

• Other Optional Benefits:

  • Meal allowances
  • Transportation allowances or shuttle services
  • Educational reimbursement programs

By offering a mix of mandatory and optional benefits, employers in Bhutan can create an attractive and competitive workplace environment. As an EOR, Rivermate ensures that companies comply with local regulations while also helping them implement optional benefits that align with their organizational goals and culture.

The process of termination and offboarding in Bhutan is governed by the Labor and Employment Act of 2007, which outlines the legal framework for ending employment relationships. This process involves several key steps and considerations to ensure compliance with Bhutanese labor laws.

Grounds for Termination

In Bhutan, employers can terminate an employee's contract based on three main grounds:

1. Misconduct: This includes serious breaches of contract, insubordination, negligence, theft, or fraud.
2. Incapacity: When an employee is unable to perform their duties due to prolonged illness or disability.
3. Redundancy: If an employee's position becomes unnecessary due to economic or structural changes.

Notice Period Requirements

The notice period for termination varies depending on the employee's status:

• Probationary employees: 7 days' notice
• Regular employees: 1 month's notice (3 months for lecturers and teachers)

Both employers and employees must adhere to these notice periods. Failure to provide proper notice results in the responsible party paying the equivalent of the basic pay for the notice period.

Severance Pay

Severance pay is not mandatory in all cases of termination in Bhutan. However, it may apply in certain situations:

• Redundancy: Employers may need to provide severance pay based on the employee's length of service.
• Payment in lieu of notice: If the required notice period is not served, compensation equivalent to the basic pay for that period must be paid.

Offboarding Process

The offboarding process in Bhutan typically involves the following steps:

1. Formal communication of termination
2. Serving the required notice period
3. Returning company property
4. Settling any outstanding payments or benefits
5. Providing necessary documentation (e.g., experience certificate)
6. Conducting an exit interview (optional but recommended)

By following these guidelines, employers in Bhutan can ensure a smooth and legally compliant termination and offboarding process. It's important to note that specific circumstances may require additional considerations, and consulting with local labor authorities or legal experts is advisable in complex cases.

Bhutan, a small Himalayan kingdom known for its unique approach to development through the concept of Gross National Happiness, has specific requirements for foreign workers seeking employment in the country. Here's a concise overview of the visa and work permit requirements for foreign workers in Bhutan:

Entry Visa

Foreign nationals require a visa to enter Bhutan. Most visitors, including those intending to work, must obtain a visa prior to arrival. The visa application process is typically handled through a licensed Bhutanese tour operator or international partner.

Work Permit

To work legally in Bhutan, foreign nationals must obtain a work permit. The process involves several steps:

1. Job Offer: Secure a job offer from a Bhutanese employer.

2. Employer Sponsorship: The Bhutanese employer must sponsor the work permit application.

3. Application Submission: The employer submits the work permit application to the Department of Immigration.

4. Documentation: Required documents typically include:

   • Passport copy
   • Educational certificates
   • Professional qualifications
   • Police clearance certificate
   • Medical fitness certificate

5. Approval: The Department of Labor and Human Resources reviews and approves the application.

6. Permit Issuance: Upon approval, the work permit is issued.

Duration and Renewal

Work permits are usually valid for one year and can be renewed annually, subject to approval. The renewal process should be initiated before the current permit expires.

Restrictions

Bhutan has strict policies on foreign employment to protect local job opportunities. Work permits are generally issued for positions where local expertise is unavailable or insufficient.

Special Economic Development Zone

Bhutan has established Special Economic Development Zones where the process for obtaining work permits may be more streamlined for certain industries or professions.

It's important to note that regulations can change, and the process can be complex. Employers and foreign workers should consult with the Department of Immigration and the Department of Labor and Human Resources for the most up-to-date information and guidance on visa and work permit requirements in Bhutan.