Bhutan is a small Himalayan country with immense potential. This country became a constitutional monarchy in 2008, and since that time, the size of its economy has more than doubled. Bhutan’s GDP has reached $3.42 billion, and an impressive 7.0% growth is predicted for 2025.

The country’s population has also been growing, reaching 795,000 people. This gives Bhutan a per capita income of $4,300 per year and places it in the top range of low-middle-income country status. Growth has been powered by Bhutan’s increasing hydroelectric energy production, but also by increases in both services and industry.

While agriculture employs around 44% of the country’s more than 406,000 workers, services like tourism, hydropower, and business process outsourcing are a close second with 40% of workers. Mining and manufacturing are also on the increase, and Bhutan’s main exports, aside from electricity, are now ferroalloys, iron, dolomite, and cement. With an average monthly salary of around $400 to $500, Bhutanese workers are affordable for many employers. 

Employing local people in Bhutan can, however, be complicated, with one of its most challenging aspects being managing payroll. Rather than learning how to manage this function in the local language and according to Bhutanese tax and labor laws, many businesses are instead choosing to outsource it.

This review will explain how Bhutan payroll outsourcing services work and how they can contribute to the success of your business in this country.

What is Payroll Outsourcing in Bhutan?

Payroll management means taking care of your employees’ pay by calculating their earnings, deducting taxes and benefits contributions, paying their net salaries, and keeping payroll records. If you don’t want to perform this function yourself in Bhutan, you have the option of hiring a third party to provide this service for you.

Payroll outsourcing service providers manage this function through a combination of expert staff and extensive platforms that automate many aspects of payroll processing. This leads to increased accuracy and speed, letting your employees get paid on time and correctly.

Payroll providers work at scale, processing payroll for multiple businesses at once, and this gives them the ability to offer these services at a low cost. They can run payroll for your employees in Bhutan only, or in multiple countries as part of a global payroll solution.

One of the most valuable aspects of payroll outsourcing is how it keeps your business compliant with Bhutan’s extensive tax and labor laws. A provider’s experts set up processes according to local regulations and also monitor changes in Bhutanese law, making adjustments as needed to keep you compliant. They also interact with the Bhutanese authorities for you, remitting tax and social security payments regularly and reporting to them frequently.

How Payroll Outsourcing in Bhutan Works?

With Bhutan’s impressive growth, an increasing number of payroll outsourcing service providers are working in this market. While what they provide varies, most offer the following core payroll services:

Needs Assessment

When you start working with a payroll provider, the first thing it will want to do is confer with you to find out the extent of your needs. It will want to discover the size of the team you want to manage payroll for, what their salaries and benefits are, and the types of contracts they’re on.

This will allow it to suggest a set of services to meet your needs and provide you with a quote. If the terms are acceptable, you can enter into a service agreement with the provider, and it will get started on managing your payroll.

Data Collection

The provider you select will need you to share your data with it, including your employees’ personal and banking details as well as their pay information. You may also be asked to provide historical payroll data that the provider may need for reporting reasons. This information is needed to set up your payroll, arrange employee calculations, and register your workers with the authorities.

Payroll Processing

Because you manage your employees’ schedules and working hours, it’s still up to you to record their time and attendance data for each pay period. You’ll need to share this data with your payroll provider so it can run its calculations. It will determine how much each employee needs to be paid, how much they owe in taxes, and how much to deduct for social security.

Tax and Social Security Management

In Bhutan, employers must withhold personal income taxes from their employees’ salaries. Your provider will make these calculations and remit the payments to the tax authority. It will also take care of the social security contributions that are mandatory for both employees and their employers.

Making Payments and Reporting

When payroll processing is complete, the provider will normally ask you to approve its work before running your payroll. With your green light, it will pay your employees their net salaries, normally by direct deposit or by other methods that they might prefer. It will also provide them with detailed pay stubs for their records.

Bhutan Labor Law and Payroll Compliance

Previously, Bhutan was an absolute monarchy, but it now has a legal system based on a constitution. The Labor and Employment Act of Bhutan 2007 and Regulation on Working Conditions 2022 are also relevant legal instruments. Your provider will help you work within these regulations, which include rules like:

Minimum Wage and Overtime

Starting on 1 January 2025, Bhutan increased its minimum wage to 3,750 BTN (Bhutanese ngultrum) per month (around 44 USD). Employees in Bhutan work eight hours a day and six days a week, for a 48-hour workweek.

If they work overtime, they must be paid at least their normal wages, though most contracts stipulate 150% of their normal wages. All overtime hours must be agreed upon by employers and employees and cannot exceed 12 hours a week.

Taxes

Employers must calculate and withhold pay-as-you-earn (PAYE) income taxes from their employees’ salaries. Income taxes are assessed on a progressive scale from 0-30%. Payroll providers typically calculate these amounts and remit the funds to the Department of Revenue and Customs (DRC).

Social Security

New employees in Bhutan must be registered by their employers with the National Pension and Provident Fund (NPPF), which provides illness, maternity, disability, and retirement coverage. Employers are required to deduct 5.0% of their employees’ wages for the NPPF and to add 5.0% contributions of their own.

What are the Benefits of Payroll Outsourcing in Bhutan?

Rather than learning all the rules and regulations governing payroll in Bhutan and managing this function themselves, more and more businesses are outsourcing it to professional providers. In doing so, they can gain advantages like:

  • Increased Efficiency: Outsourcing your payroll function reduces your business’s administrative burden. It generally allows you to focus on other areas of your business while having your payroll managed accurately and efficiently. 
  • Reduced Costs: Because payroll providers work with multiple clients and use efficient, automated systems, they can almost always provide payroll services more affordably than companies can internally.
  • Legal Compliance: Payroll providers employ tax and legal experts who know all about Bhutanese regulations and are constantly on the watch for changes. They also report to the authorities and make tax and social security payments for you, helping you stay compliant at all times.

What are the Downsides of Payroll Outsourcing in Bhutan?

As with any business decision, there are also negative aspects of payroll outsourcing that you’ll need to consider before choosing this option. They can include:

  • Data Security Concerns: When you share your data with a payroll provider, you risk it being intercepted or misused by malicious actors. If your provider has weak or out-of-date security protocols, you can risk breaches that can result in fines and damage to your reputation.
  • Reduced Control and Capacity: Payroll providers do things their own way, and when you use their services, you have less control over how and when your payroll is processed. You also lose out on the opportunity to learn to perform this function effectively in-house. 
  • Service Quality: While some providers offer excellent service, choosing a poor performer can have disastrous consequences. Your employees could be paid incorrectly or late, making them dissatisfied. Mistakes with the authorities could also cause you to risk penalties for non-compliance.

How to Choose a Payroll Outsourcing Provider in Bhutan

Bhutan’s growth has attracted an increasing number of payroll outsourcing service providers, and choosing a partner from among them can be difficult and time-consuming. Try to focus on the following criteria to help you make your choice more efficiently:

Experience

The more experience a provider has with Bhutan’s regulations and authorities, the more effective it can be at maintaining compliance with local laws. It should also be better at providing quality services that local workers can depend on.

Security

The security of your employees’ data is of paramount importance. Not only can leaks expose their personal information, but they can also damage your business.

To keep data safe, read providers’ security policies carefully and check out their security infrastructure. If they have certifications, especially with standards like ISO27001 and SOC 1, 2, and 3, they can be much more reliable than those that don’t.

Reputation

A service provider won’t normally tell you what its weaknesses are, but its past clients certainly will. To find out the strengths and weaknesses of the providers you’re considering, check out their ratings and reviews on websites you trust.

Price

Most providers offer a price per employee per month, so set your budget for payroll and focus on providers who can meet this budget. Just be sure that they still offer you all the services you require for the price offered.

How Much Does Payroll Outsourcing Cost in Bhutan?

It can cost anywhere from $5 to $50 per employee per month to outsource payroll to a provider in Bhutan. Be aware that some providers don’t include tax services in these basic fees, however, so their prices may not be complete.

Payroll Outsourcing Alternative: Employer of Record

Businesses that are already set up in Bhutan can hire workers on their own, but if they want to streamline their operations, they can engage service providers to help them with their payroll. Some employers may want to hire Bhutanese workers without registering entities in Bhutan, and while this is possible, they’ll need to work with a different kind of service provider to do so. An Employer of Record, or EOR in Bhutan, can use its entity in the country to hire employees on behalf of its clients, becoming their legal employer.

These providers also manage compliance and HR functions, including payroll, benefits administration, and paid leave, while their clients simply manage their employees’ schedules and daily work tasks. This provides them with a viable alternative when they want to hire employees in the Bhutanese market.

Payroll Outsourcing for Success in Bhutan

When you set up an entity in Bhutan, working with a payroll outsourcing service provider can help you reduce costs and streamline your operations. These providers also handle compliance for you, and their professional services can ensure that your employees are always paid correctly and on time.

If you want to learn more about how a professional payroll provider can support your business, contact Remote People today.