What Does the Labour and Employment Act 2007 Mandate for Employer Compliance in Bhutan?

The Labour and Employment Act of Bhutan 2007 establishes the basic legal framework governing employment relationships and working conditions in Bhutan. It sets minimum standards covering employment contracts, wages, working hours, leave, occupational health and safety, termination, employee protection, and other workplace matters. The Act applies generally to labour and employment in Bhutan, subject to the exclusions and specific rules provided in the legislation.

For employers, compliance means more than paying employees on time. Businesses need appropriate employment contracts, payroll and wage records, workplace-safety measures, leave administration, lawful termination procedures, and systems for meeting applicable reporting and inspection requirements.

1. Provide Written Employment Contracts

One of the fundamental employer obligations is to provide employees with a written employment contract and a copy of that contract to the employee.

The Act requires the contract to establish the relevant terms and conditions of employment. The statutory framework also addresses matters such as wages, working hours, leave, probation and termination notice.

A compliant employment contract should therefore clearly establish:

• Employee and employer details
• Position or nature of work
• Contract duration, where applicable
• Wages and payment arrangements
• Working hours
• Leave provisions
• Probation terms, where applicable
• Notice requirements
• Other applicable employment conditions

Employers should ensure that the terms offered to employees do not fall below the minimum standards established by the Act and applicable regulations.

2. Follow Minimum Employment Standards

The Act establishes minimum employment conditions that employers must observe. Where a contract contains terms that do not meet statutory minimum requirements, the legal minimum standards continue to apply.

The Act also gives the Chief Labour Administrator authority to add terms to employment contracts where necessary to ensure compliance with the Act and its regulations.

This makes it important for employers to review employment contracts periodically rather than treating the original contract as a permanent compliance document.

3. Pay Wages Within the Required Pay Period

Employers must establish a pay period of one month or less in the employment contract and pay employees the wages due at the end of that period.

Payroll processes should therefore ensure that:

• Salary is calculated accurately.
• Employees are paid within the agreed statutory pay period.
• Overtime is separately identified where applicable.
• Allowances and other payments are included correctly.
• Lawful deductions are properly recorded.
• Payroll records can be reconciled with actual payments.

Failure to pay wages in accordance with the statutory requirements can also affect the employment contract itself under the Act.

4. Manage Payroll Deductions Carefully

The Act specifies circumstances in which an employer may deduct amounts from an employee's wages. Section 131 expressly identifies income tax payable by the employee and deductions related to certain unauthorized absences as permitted deductions.

Employers should therefore avoid making arbitrary payroll deductions.

A payroll system should clearly distinguish between:

• Statutory deductions
• Authorized employee deductions
• Absence-related deductions
• Employer contributions
• Net salary

Each deduction should be supported by the applicable legal or contractual basis.

5. Provide Proper Payslip Information and Maintain Wage Records

Employer compliance also involves maintaining accurate wage information.

The Act requires employers to provide employees with written information when wages are paid, including information about the pay period, normal working time and rate, overtime, allowances, deductions and the amount payable after deductions. Employers must establish and maintain a register containing this information for five years.

A payroll record should therefore be capable of showing:

Payroll Information	What It Should Show
Pay period	Period covered by the payment
Normal work	Hours/days and normal rate
Overtime	Hours and applicable rate
Allowances	Applicable payments
Deductions	Amount and nature of deductions
Net pay	Amount payable after deductions

Maintaining these records electronically can make audits, employee queries and statutory inspections easier to manage.

6. Comply With Working-Hour and Leave Requirements

The Act contains a dedicated chapter covering hours of work and leave. Working hours are subject to the limits established under the Act and applicable rules.

Employers also need to administer statutory leave. The Act identifies categories including:

• Sick leave
• Annual leave
• Casual leave
• Maternity leave
• Paternity leave

The detailed entitlement and procedures are specified through the rules applicable to the Act.

Employers should therefore maintain an accurate leave register and ensure that approved leave is reflected correctly in payroll and attendance records.

7. Observe Public Holiday Requirements

Employees are entitled to a minimum of nine public holidays each year, including the King's birth anniversary and National Day, as paid leave at the employee's normal rate of pay.

If an employee is required to work on a public holiday, the Act requires an additional 50% of the employee's normal rate of pay.

Payroll systems should therefore be able to identify public-holiday work separately from ordinary working hours.

8. Protect Pregnant Employees and Nursing Mothers

The Act includes specific protections relating to pregnancy, maternity leave and nursing.

For example, employers must not require a pregnant employee to work during specified night hours during the relevant periods before and after childbirth. Where pregnancy or breastfeeding makes the employee's work a health or safety risk, the employer must consider adjusting working conditions or hours or transferring the employee to suitable alternative work where required.

After maternity leave, the employer must place the employee in the same or a materially similar position. The Act also provides nursing breaks following maternity leave, with those interruptions treated as working time for which the employee is paid.

9. Maintain a Safe Workplace

Occupational health and safety is a major employer responsibility under the Act.

Section 141 requires employers to provide and maintain a working environment that is safe and without risks to employees' health. The Act also requires accident compensation for employees and requires employers to identify workplace hazards, assess risks and eliminate or reduce significant risks.

The Regulation on Occupational Health, Safety and Welfare 2022 provides additional requirements for implementing workplace-safety obligations. The regulation covers areas such as hazard identification, risk assessment, safety training and protective equipment.

Employers should therefore maintain:

• Workplace risk assessments
• Safety procedures
• Employee safety training
• Appropriate protective equipment
• Incident records
• Health and safety records
• Emergency procedures

For hazardous work, additional requirements may apply.

10. Report Workplace Accidents and Incidents

Employers have obligations to report workplace accidents and incidents to the labour authorities.

The Department of Labour has stated that, under Sections 154–155 of the Act together with the 2022 occupational health and safety regulation, workplace accidents or incidents involving bodily injury, death, loss of production or working time must be reported within the prescribed period. A Department notification specifies different reporting requirements depending on the seriousness of the incident.

Employers should therefore have an internal accident-reporting procedure rather than waiting until the end of a payroll or reporting cycle.

11. Maintain Required Health and Safety Structures

The 2022 OHS regulation supplements the Act with more detailed workplace requirements.

For example, the Department of Labour has notified employers that enterprises with 20 or more employees are required to register their Occupational Health & Safety Committees through the Bhutan Labour Market Information System (BLIMS).

Employers operating hazardous workplaces may also have additional requirements concerning health monitoring and periodic medical examinations.

12. Follow Lawful Termination Procedures

The Act regulates how employment contracts may be terminated.

An employment contract must specify a notice period of not less than 30 days, and the notice period must be the same for employer and employee. A contract may contain a probationary period of up to 180 days for contracts of one year or more, subject to the Act's conditions, with a seven-day notice requirement during probation.

Employers should therefore document:

• Reason for termination
• Notice provided
• Applicable notice period
• Final wages
• Leave or other amounts due
• Supporting disciplinary documentation, where relevant

For serious misconduct, the Act provides specific requirements, including reasonable steps to establish whether serious misconduct occurred and giving the employee a reasonable opportunity to defend against the allegations.

13. Pay Final Wages Promptly

When an employment contract ends, the employer must pay all wages owed to the employee within seven calendar days after termination.

This makes final settlement an important part of payroll compliance.

The employer should calculate:

Outstanding salary + applicable overtime + eligible allowances − lawful deductions = final amount payable

The final settlement should be supported by payroll records and communicated clearly to the departing employee.

14. Prevent Discrimination, Forced Labour and Sexual Harassment

The Act contains prohibitions concerning forced or compulsory labour, the worst forms of child labour, discrimination against employees and job seekers, and sexual harassment.

Employers should therefore establish workplace policies and procedures addressing:

• Equal employment practices
• Anti-discrimination
• Prevention of sexual harassment
• Appropriate grievance handling
• Prohibition of forced labour
• Protection of young workers

These policies should be communicated to employees and supported by appropriate complaint and investigation procedures.

15. Comply With Foreign-Worker Requirements

The Act contains a separate chapter concerning the employment of foreigners, including restrictions on employing a foreigner without the required permit.

Employers hiring foreign workers should therefore verify the applicable immigration and labour authorization requirements before employment begins.

In addition to the Act, Bhutan has specific regulations governing foreign-worker management. The Department of Labour currently lists the Regulation on Foreign Workers Management, 2024 among its labour regulations.

16. Cooperate With Labour Inspections

The Act establishes labour administration and gives labour inspectors functions and powers relating to implementation and enforcement. Inspectors may provide guidance, investigate compliance and take action under the statutory framework.

Employers should therefore maintain organized employment and payroll records that can be produced when legally required.

Important records may include:

• Employment contracts
• Payroll registers
• Payslips
• Attendance records
• Leave records
• Overtime records
• Safety records
• Accident reports
• Employee termination records
• Foreign-worker permits, where applicable

17. Follow the Regulations Alongside the Act

The Labour and Employment Act 2007 is not the only document employers should consult.

The Department of Labour lists related regulations covering working conditions, occupational health and safety, construction safety and foreign-worker management.

The Regulation on Working Conditions 2022 was issued under the authority of Section 234 of the Act and provides detailed requirements for implementing employment conditions.

Consequently, employer compliance should be approached as a combination of:

Labour and Employment Act 2007 + applicable regulations + official notifications and current administrative requirements

Bhutan Employer Compliance Checklist

Compliance Area	Employer Action
Employment contracts	Provide written contracts and copies to employees
Wages	Pay within the required pay period
Payroll deductions	Make only permitted or properly authorized deductions
Payslips	Provide required wage and deduction information
Wage records	Maintain required records for five years
Working hours	Follow statutory and regulatory requirements
Leave	Administer statutory leave correctly
Public holidays	Apply paid-holiday and additional-pay requirements
Workplace safety	Identify hazards and control workplace risks
PPE	Provide required protective equipment
Accidents	Report workplace incidents within applicable deadlines
OHS committees	Meet applicable committee and registration requirements
Termination	Follow notice and termination rules
Final settlement	Pay outstanding wages within the required period
Equal treatment	Prevent discrimination and harassment
Foreign workers	Obtain and maintain applicable permits
Inspections	Cooperate with labour authorities and maintain records

Conclusion

The Labour and Employment Act of Bhutan 2007 places broad compliance responsibilities on employers. The requirements cover the entire employment lifecycle—from recruitment and written contracts to payroll, working hours, leave, workplace safety, termination and recordkeeping.

For practical compliance, employers should maintain a structured HR and payroll process that tracks employment contracts, attendance, leave, wages, deductions, overtime, safety incidents and employee exits. The Act should also be read together with the applicable regulations and current Department of Labour notifications, particularly the Regulation on Working Conditions 2022 and Regulation on Occupational Health, Safety and Welfare 2022.

Note: Labour requirements can be supplemented or changed by regulations, notifications and subsequent legislation. Employers should verify the latest requirements with Bhutan's Department of Labour before relying on specific rates, deadlines or procedures. The Department currently publishes its Acts, regulations and notifications through its official resources.