Public holidays are an important consideration for employers managing payroll and employee schedules in Bhutan. Employees are generally entitled to public holidays as paid leave, but employees who are required to work on a public holiday receive additional compensation.
Paid leave is an important part of employee payroll and workforce management in Bhutan. Employers need to track annual leave, sick leave and other statutory leave entitlements accurately, while also handling unused annual leave and leave payments when required.
Managing overtime is an important part of labour-law and payroll compliance in Bhutan. Employers need to monitor not only the employee's total working hours but also the number of additional hours worked beyond the standard schedule.
Under Section 163 of Bhutan's Regulation on Working Conditions 2022, overtime hours must not exceed 12 hours per week. The same regulation establishes standard working hours of up to 8 hours per day and 48 hours per week.
Overtime calculation is an important part of payroll compliance in Bhutan. Employers need to distinguish normal working hours from overtime, calculate the employee's normal hourly rate correctly, and apply any additional payment required for night work or public-holiday work.
Working-hour limits are an important part of payroll and workforce compliance in Bhutan. Employers need to understand the difference between standard working hours, overtime hours, night work and work performed on public holidays when preparing employee schedules and payroll.
Employee allowances are an important part of payroll in Bhutan. They can include housing support, travel allowances, subsistence payments, bonuses, reimbursements and other employment-related benefits. However, not every allowance is automatically tax-free.
For payroll teams, the key is to determine whether an allowance or benefit must be included in the employee's taxable employment income under the applicable income-tax rules.
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.
Managing Provident Fund (PF) and pension contributions is an important part of payroll compliance in Bhutan. Employers need to identify the applicable retirement scheme, calculate employee and employer contributions correctly, maintain individual contribution records, and remit the required amounts to the National Pension and Provident Fund (NPPF) within the prescribed time.
Managing payroll in Bhutan requires employers to correctly identify the deductions that must be made from an employee’s salary and the amounts that must be remitted to the relevant authorities or funds. For 2026, the Department of Revenue and Customs (DRC) administers personal income tax and employer withholding requirements under the Income Tax Act of Bhutan 2025, which came into effect on 1 January 2026.
Bhutan’s Personal Income Tax (PIT) system applies tax progressively to an individual’s taxable income. From 1 January 2026, the Income Tax Act of Bhutan 2025 replaced the earlier income-tax framework. Individuals should therefore calculate and report PIT using the rules applicable to the 2026 income year and later periods.