A small Himalayan country sandwiched between Tibet and India, Bhutan is home to about 786,380 people. It is known for its remote location and natural beauty, which has helped the nation build a thriving tourism sector. Its dramatic landscape, ranging from scenic mountain ranges to subtropical plains, is dotted with monasteries, fortresses, and other historic sites that travelers from around the world trek to Bhutan to discover. There are also several popular climbing peaks in Bhutan, which attract more adventurous visitors.

Bhutan’s government is a democratic constitutional monarchy. Its king serves mainly as a ceremonial head of state (similar to the royal family of the United Kingdom), and the country is primarily governed by its prime minister and parliament. Additionally, Bhutanese culture emphasizes an environmentally friendly lifestyle. Bhutan is the world’s only true carbon-negative nation, as its carbon emissions are more than offset by its forested landscape, which is heavily protected by the government. In addition to measuring success based on its GDP, Bhutan employs Gross National Happiness, GNH, as a primary metric of success. The four pillars of Bhutan’s GNH measure are good governance, sustainable socio-economic development, cultural preservation, and environmental conservation.

Today, we are going to dive deeper into the specifics of doing business in Bhutan, specifically as relates to hiring Bhutanese employees for your workforce.

Why Expand Your Business to Bhutan

Strategic Advantages of the Bhutanese Market

Although Bhutan has less than 1 million residents, this mountain kingdom is rich in resources and has a healthy labor market. The vast majority of the country’s residents work in the agriculture sector, which contributes about 12% of the country’s GDP of about $2.9 billion. Other main contributors to the country’s riches include a high-end tourism industry and major potential in hydroelectric power, most of which Bhutan sells to India. Neighboring India is Bhutan’s largest trading partner by far, although the nation also conducts significant trade with Hong Kong, Bangladesh, Japan, and Sweden. 

There are plenty of benefits to doing business in Bhutan. These include the country’s renewable energy opportunities, political stability, rich cultural heritage, consistent economic growth, and, perhaps most importantly, affordability. Bhutan’s currency is called the ngultrum (BTN) and is tied to the value of the Indian rupee. One Bhutanese ngultrum is equal to about 0.012 US dollars. The minimum wage in Bhutan is 3,750 BTN per month, which is equal to about $44. Overall, Bhutan is an attractive place to hire employees.

For more detailed information on expanding into this region, explore our comprehensive guide to Doing Business in Bhutan.

Importance of Being Aware of Bhutanese Labor Laws

The primary law to be aware of when it comes to hiring employees in Bhutan is the 2007 Labor and Employment Act of the Kingdom of Bhutan. This act provides a legal framework for Bhutan to maintain fair labor practices and protect the rights of its workers. It delineates standards for workplace safety, dispute resolution, and fair wages, and it is enforced by the country’s Ministry of Labor and Human Resources, or MoLHR. Bhutan’s labor code creates clear regulations for both local and foreign employment in the country.

Being aware of these legal requirements is essential for anyone hoping to avoid potential legal problems and build a positive reputation as an employer in Bhutan. Vetting your company’s current employment practices against the regulations specific to Bhutan is a good place to start. 

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Step 1: Define Your Hiring Needs

To kick off your hiring journey in Bhutan on the right foot, begin by thinking about your overarching, long-term goals for expanding your business into South Asia. Are you hoping to establish a small team tasked with managing local operations, or are you looking to initiate a larger-scale hiring process? Understanding the scope of your Bhutanese hiring efforts will help guide your recruitment strategy in the country.

Next, you need to clearly delineate the roles you need to fill. What skills do these roles require? How many employees will you need? What specific qualifications and experience are relevant or necessary for each distinct position? When you determine these criteria in advance, you’ll be better equipped to find the right candidates and ensure that the roles you are hiring for correspond with your organization’s overall goals in Bhutan.

Step 2: Familiarize Yourself with Compliance Requirements

Understanding the labor laws, tax obligations, and mandatory benefits offered in Bhutan is essential when you are doing business in the country. Familiarizing yourself with Bhutan’s Labor and Employment Act of 2007 is the first step in this process. It’s also important to understand the country’s social security system, which is a mandatory benefit offered to all Bhutanese residents. Unlike some other countries, Bhutan does not have a comprehensive social security scheme. However, the nation is working toward building a social insurance structure that is currently governed under Bhutan’s Provident Fund. Employees contribute 5% of their salaries to the provident fund, and employers match that number, adding up to a 10% contribution. 

Taxes in Bhutan are managed by the country’s Ministry of Finance. Depending on how they are registered, businesses in Bhutan pay either Business Income Tax (BIT) or Corporate Income Tax (CIT). Both BIT and CIT amount to 30% of a company’s net profit. Personal income tax in Bhutan is assessed on a progressive scale, ranging from 0% to 30% of a person’s salary. Employers in Bhutan are responsible for ensuring that their employees possess a taxpayer number, and the employer must withhold and remit taxes from the person’s salary to the appropriate government agency. 

Step 3: Choose Your Hiring Method

The next step in hiring employees in Bhutan involves deciding on the best hiring method for your needs. Will you establish a legal entity in Bhutan, use an Employer of Record (EOR), or hire independent contractors? Each option comes with pros and cons.

Establishing a Legal Entity

If you want to establish a legal entity in Bhutan, you can choose between establishing a branch or a subsidiary. Both options involve government registration and at least some of the following steps: 

  • Reserve a name for your business after conducting a name search 
  • Obtain a security clearance certificate from the police
  • Submit a project proposal to the Industrial Department Division (IDD) of the Ministry of Economic Affairs that describes the purpose and intentions of your business 
  • Register articles of incorporation that describe the structure of your business 
  • Obtain a business license corresponding to your industry, if applicable
  • Obtain a Business Identifier Code (BIC) to identify your company for tax purposes
  • Make a company seal that will be reflected on official company documents and registered with the government of Bhutan
  • Open a company bank account, which must be held in the country of Bhutan

While establishing a legal entity in Bhutan can offer you more freedom, it also has a number of drawbacks. As you can see, there are a significant number of steps involved, and it is easy to get bogged down in paperwork when establishing a legal entity in Bhutan. Compliance with all of these regulations can be challenging, especially if you are not familiar with local laws. These administrative tasks can also be costly. 

Using an Employer of Record (EOR)

Often, it makes more sense in terms of both time and cost efficiency to use an Employer of Record in Bhutan. An employer of record, often abbreviated as simply an EOR, serves as the legal employer for your Bhutanese employees. An EOR in Bhutan is already familiar with the country’s labor laws and regulations and will ensure that you are compliant with all of the rules regarding taxes, employment, mandatory contributions, and more. The EOR handles all HR functions, helping you save time, money, and effort. They will also lead the charge in handling administrative burdens like payroll, taxes, benefits administration, contracts, dismissals and terminations, compliance, and even recruitment in Bhutan.

Instead of worrying about compliance, you can hand off the administrative burden of hiring to an EOR. This will lead to a smoother hiring process – plus, you do not have to worry about establishing a legal entity or jumping through numerous government hoops to get your operations started in Bhutan. Instead, you will be ready to roll in no time. 

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Hiring Independent Contractors

If you do not want to set up a company in Bhutan, you can hire independent contractors, also called freelancers. Your freelance employees come with a reduced administrative burden, because you do not need to provide provident fund contributions for them. Normally, independent contractors work on flexible schedules and may also work for other employers. However, this means you can typically exert less control over what they do.

Freelance employees may also charge higher hourly fees than permanent employees. Further, if you do try to treat them like a regular employee, you run the risk of penalties for misclassification, which can include back pay of taxes and provident fund contributions, as well as fines imposed by the government of Bhutan. 

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Step 4: Develop a Recruitment Strategy

The next question to ask yourself is, how am I going to find the right talent for this job? To begin with, you need to write an effective job description that is aligned with local market expectations. Typically, you will want to write this job description in both English and Dzongkha, Bhutan’s national language. It is also crucial to make sure the job description aligns with local anti-discrimination codes and reflects Bhutan’s cultural values, as described in the country’s Gross National Happiness metric.

Once you have a strong job description written down, you need to think about how to get it seen by the right talent. Bhutanese job seekers use some international job boards, such as Indeed and LinkedIn. However, prospective employers often find it helpful to post on local job sites as well, including Job-a-Job-a, FlexJobs, and DziSeldra.com.

Want to learn more about effective recruitment methods? Check out our research on strategies for successful hiring, which provides tips for drawing in top-tier candidates.

Our best tip? Work with a Bhutanese recruitment agency or partner with an EOR experienced in Bhutan. These organizations have the local expertise you need to find candidates who are perfect for your unique roles. An experienced EOR can also help you navigate expectations on standard salaries, employment trends, and benefits that will attract potential employees in Bhutan.

Step 5: Conduct Interviews and Assessments

Once you have identified some potential candidates for your position, you’ll want to conduct interviews that adhere to cultural norms. Bhutanese culture is deeply rooted in the values of Buddhism, including compassion, simplicity, mindfulness, and respect for nature. The Gross National Happiness metric comes into play again here, emphasizing Bhutan’s commitment to good governance, environmental protection, and cultural preservation alongside economic prosperity. Bhutanese individuals typically prefer formality and polite interactions. Aggressive interview or negotiation tactics are likely to be seen as disrespectful and should be avoided.

You will want to make sure that you structure interviews appropriately and assess candidates fairly. Additionally, including written or practical assessments can help you better evaluate a candidate’s readiness to hit the ground running in their new position.

Step 6: Know the Legal Limitations of Background Checks

If you are considering hiring an employee, it is generally seen as good practice to conduct a background check. This allows you to ensure that all of the information they have provided to you on their resumé is accurate and complete, meaning that you have a clear picture of their educational and career backgrounds.

In Bhutan, it is not only permissible but also expected and routine to conduct more in-depth background checks, such as a criminal history search, for business purposes. For public service jobs, a criminal and civil background check is required.

Step 7: Draft Employment Contracts

One of the stipulations of Bhutan’s Labor and Employment Act is that every company must provide written employment contracts to all Bhutanese employees. These contracts must be written in both English and Dzongkha, the country’s national language. Here is a list of the information that must be included:

  • Names of both parties and their contact information
  • Nature of the job, including the duties to be performed, working hours, and type of employment
  • Compensation, or the fee/salary to be paid, and the payment schedule 
  • Other terms of employment, such as leave entitlements, notice periods, employee benefits, and any other information that could be deemed relevant

For employment contracts to be valid in Bhutan, they must be signed by both the employee and the employer, each complete with the date of signing. 

Step 8: Register with Authorities and Set Up Payroll

Before any of your employees begin work, it’s important to complete a few registration steps with the Bhutanese authorities. Whether you are handling your legal status yourself or working with an EOR, it is essential to comply with Bhutan’s requirements.

  • Establish a legal presence by registering with the Ministry of Industry, Commerce, and Employment, or MoICE. To do so, you must submit documentation regarding your company’s structure, ownership, and intended business activities.
  • Register employees for the SSF, or Social Security Fund, and prepare to keep records of both employee and employer contributions.
  • Obtain work permits if you are hiring any foreign nationals in Bhutan. Bhutanese nationals do not require work permits.
  • Register with the tax authorities to ensure you can properly remit both corporate and individual tax payments. The Department of Revenue and Customs is governed under the country’s Ministry of Finance.
  • Adhere to Gross National Happiness requirements, which can include providing specialized training for Bhutanese employees. Companies in Bhutan are expected to comply with GNH values and incorporate these values into their operations.
  • Set up payroll and ensure you are ready to make payments every month at a minimum. In Bhutan, it is more common to pay employees every two weeks.

Once you have completed these steps, you are ready to kickstart your journey to hiring new employees in Bhutan. You are almost ready to get the ball rolling! 

Step 9: Onboard Your New Employees

Onboarding your new employees effectively will help them smoothly integrate into your company’s unique culture. Harvard Business Review discovered that a strong onboarding strategy is shown to increase both employee engagement and retention. This can, in turn, boost customer satisfaction.

Here are some tips to help you design a comprehensive onboarding journey for new employees in Bhutan:  

  • Provide the necessary training and resources
  • Introduce the new team member to peers and key stakeholders
  • Explain company policies, procedures, and expectations
  • Immerse the new hire in the company culture and discuss company values
  • Set clear objectives and goals for the new hire’s role

Key Employment Laws and Regulations

Labor and Employment Act of Bhutan 2007

Bhutan’s labor laws are largely contained within the Labor and Employment Act of Bhutan 2007, which provides guidance on mandatory benefits as well as issues like workplace discrimination, severance and termination, notice periods, leave entitlements, and more. It was also the first act to set a national minimum wage, which has since been updated as of the beginning of 2025.

The Ministry of Labor and Human Resources also passed an additional “Regulations on Working Conditions” legislative brief, which is legally enforceable, in 2022. This document adds information about workplace safety and health requirements. 

Social Insurance

Bhutan does not have a comprehensive social security scheme, like many other countries. Instead, contributions to the country’s provident fund go toward providing health care, disability payouts, pensions, and other types of social insurance. Spending on social protections in Bhutan is better than that of its surrounding countries, but still amounts to a relatively small percentage of the country’s GDP. 

Types of Employment Contracts

Understanding the different types of employment contracts in Bhutan is important when hiring in the country. While there are some other types of contracts (part-time, casual, and freelance agreements), indefinite-term and fixed-term contracts are by far the most common.

Indefinite-Term Employment Contracts

By far the most common type of employment contract in Bhutan, indefinite-term employment contracts are essentially permanent. They are intended to proceed for the foreseeable future and do not have fixed end dates.

This type of contact offers long-term job security and benefits coverage for Bhutanese employees.

Fixed-Term Employment Contracts

For employment opportunities with a specific end date, a fixed-term employment contract may be used. In Bhutan, this type of contract can last up to five years, after which there is an option to extend the contract for another five years.

At the end of the ten years, the contract must either be terminated or converted to an indefinite-term contract. This type of employment contract is often used for short-term needs, seasonal work, or certain projects.

Working Hours and Overtime

Standard Working Hours

The standard work week in Bhutan is 8 hours per day, 6 days per week, amounting to a total of 48 hours per week. This six-day structure became commonplace due to the country’s traditional reliance on the agricultural industry. However, in urban centers or global industries like banking or finance, five-day work weeks are often used. 

Overtime Regulations

Daily hours, including overtime, are capped at 12 hours per day. When an employee works more than 8 hours in a day and/or more than 48 hours in a week, they are entitled to overtime pay, which is compensated at 200% of their normal salary. 

Leave Entitlements

Employees in Bhutan are granted certain types of leave throughout their service in the Bhutanese workforce. In addition to the country’s nine public holidays, employees are given annual vacation time, casual leave, sick leave, and parental leave. 

Annual Leave

After one year working with the same company, employees in Bhutan are eligible for 30 days of paid annual leave each year. This leave can be accrued and saved for the future, up to 90 days. In addition to annual leave, employees get 10 days of casual leave each year, which does not have to be planned in advance and can be taken for emergencies or unexpected personal matters that arise.

Sick Leave

After six months working for the same company, Bhutanese workers receive 5 paid sick days each year. If a Bhutanese employee is absent for more than three consecutive days for health reasons, they must submit a medical certificate to verify the validity of their illness. Sick days can be rolled over for up to five years.

Maternity and Parental Leave

Maternity leave regulations in Bhutan depend on the sector of employment. Public sector jobs offer 6 months of paid maternity leave, while private sector positions typically give 3 months of paid maternity leave. However, extended maternity leave periods are a common optional benefit for Bhutanese employers, as they can make contracts more attractive. As for paternity leave, fathers receive 10 days of paid paternity leave that starts when their child is born.

Termination and Severance

Notice Periods

In Bhutan, severing an employment contract requires one month’s notice from either the employer or employee. If the employer is the one severing the contract, one month’s pay can be offered in lieu of notice. These rules apply regardless of how long an employee has been working with the company.

Severance Pay

Bhutan’s severance pay system is made to protect employees who have been fired without “just cause.” The calculation for severance pay is easy to complete: multiply the number of years a person has worked at the company by their monthly salary. For example, if someone makes 5,000 BTN per month and has worked with the company for 6 years, their severance pay would be equal to 30,000 BTN.

Mandatory Contributions

Provident Fund Contributions

The main mandatory contribution in Bhutan is payment toward the country’s provident fund. Each person’s contribution amounts to a total of 10%, split 5% each way from the employee and the employer. The provident fund supports state-sponsored social insurance, which includes healthcare, maternity leave, disability payouts, and more. It is the closest thing that Bhutan has to a true social security scheme.

Gratuity Payments

The other mandatory payment for employers to consider in Bhutan is called a gratuity payment, and it is given at the end of a person’s service with a company, usually upon retirement. The gratuity payment is not legally required, but it is very commonplace in Bhutan. It is normally equivalent to one month’s pay for each year of satisfactory service, priced similarly to the country’s severance pay.

Optional Benefits

In addition to the mandatory contributions described above – which include benefits like leave and severance pay – many employers in Bhutan add other benefits to their employment contracts to attract top talent to a job. Common optional benefits in Bhutan include:

  • Privatized health insurance for employees and their families
  • Housing and transportation allowances
  • Meal stipends
  • Relocation assistance 
  • Extended maternity or paternity leave
  • Additional days of annual paid vacation or sick time
  • Remote or flexible working arrangements

How to Hire Employees in Bhutan – Our Take

When you are hiring employees in Bhutan – or any foreign country, for that matter – you will have to navigate a complex set of legal requirements, including Bhutanese labor laws, mandatory contributions, and employee protections set in stone by civic codes. Being familiar with these regulations and ensuring you are complying with the country’s legal considerations is crucial for avoiding lawsuits and building a positive reputation in Bhutan.

But don’t worry! You are not in this alone. Juggling the complex labor requirements in Bhutan can be challenging, but we are here to help. Should you choose to work with an Employer of Record in Bhutan, you can simplify the hiring and onboarding process, saving your company time, money, and effort.