Workers at a garment factory in Laos.

Labour ministry orders all foreign entities to pay wages in kip

Starting next month, all foreign-owned organisations and companies in Laos that normally pay their staff in foreign currency must instead pay the equivalent sum in kip, the Ministry of Labour and Social Welfare has ordered.
The instruction follows on from a Prime Minister’s Order on foreign currency management that was issued on January 24 this year after a meeting of the National Labour Committee, and aligns with the Labour Law on the payment of salaries.
The National Labour Committee, the Committee Secretariat, provincial Labour Committees, District Labour and Social Welfare Offices, and the Labour Inspection Office will publicise the order and instruct businesses to comply with it.
The order states that any labour unit that has heretofore paid its employees in foreign currency must pay their wages in kip in the future.
The equivalent amount in kip should be calculated without making any discount and align with the exchange rate issued by any commercial bank on any day within three business days before the salary is calculated. The exchange rate will have been determined by the Bank of the Lao PDR.
In today’s times of economic instability, employers can pay wages in kip without the need for prior government approval.
However, some companies may fail to comply with this ruling on the grounds that they will suffer serious financial difficulties because of frequent changes in currency exchange rates, the Lao Federation of Trade Unions said.
The Ministry of Labour and Social Welfare earlier observed that high inflation and living costs in Laos have led many workers to seek employment in other countries, where they are paid in foreign currency.
A senior official from the ministry said businesses will have to amend their employment contracts and operating rules so that they are in compliance with the order.
Any employer that pays wages calculated using an exchange rate that is less than the bank rate will be given a written warned and instructed to comply with the regulations, which come into force on October 1.
The official said there were concerns about the effectiveness of the order, adding that employers are likely to exploit every loophole to avoid compliance because of the difficulties it will cause. 

By Phetphoxay Sengpaseuth  
 (Latest Update September 3, 2024)