Employment Law in Laos

Contracts

In Laos, employment contracts can be fixed-term or indefinite, governed by the Labor Law. Indefinite contracts must include benefits such as social security, paid annual leave, and severance pay. Fixed-term employees are entitled to equal benefits from the first day of work.

Termination and notice periods

In Laos, labor laws require employers to provide written notice of termination or pay in lieu of notice, with a minimum of 30 days for employees who have completed at least one year of continuous employment. Just cause for dismissal include theft, insubordination, habitual negligence of duty, lack of capability, prolonged illness, redundancy, and serious misconduct.

Employees with at least 12 consecutive months of continuous employment are entitled to severance pay equivalent to 10% of the total monthly salary prior to termination multiplied by the number of months worked for the employer. There is no statutory gratuity payment in Laos; however, additional compensation may be provided based on employment contracts or collective agreements. As your employer of record (EOR) in Laos, we can assist you in managing employee terminations by providing legal guidance and a personalized process to ensure compliance with national labor standards and minimize legal risks. 

Probation periods

In Laos, probation periods are explicitly addressed in local law, generally set at 30 days for unskilled positions and up to 60 days for skilled roles, with similar durations applicable across sectors, as specified in employment contracts.

Working hours and overtime

In Laos, the standard workweek is typically Monday through Saturday, with eight hours per day, totaling 48 hours per week. Employees are prohibited from working for more than eight hours a day without appropriate compensation.

Any work beyond eight hours a day is considered overtime, and employees are entitled to an additional compensation of at least 150% over their regular hourly rate. For work performed on rest days or public holidays, the overtime pay rate is higher, as specified by the Labor Law. 

Taxes

In Laos, withholding tax is known as Personal Income Tax (PIT) and is deducted by employers before paying salaries to employees. Employers must deduct PIT from employee salaries based on applicable income tax slabs and submit it to the Tax Department.

Employer payroll contributions

Laos’s social security system requires employer contributions that are dependent on the total number of employees, and these contributions cover pensions, medical care, disability insurance, and gratuity payments. In addition, workers’ compensation is financed by contributions from state governments, employers, and employees.