Timor‑Leste (East Timor) is a young island nation at the eastern end of the Indonesian archipelago. It achieved independence from Indonesia in 2002 and has since been rebuilding its institutions and economy. The country’s population is around 1.40 million people, and the labour force numbers about 616 000 people.

Much work occurs in subsistence agriculture or informal trading, and formal wage employment is limited. Gross domestic product (GDP) per capita remains low at roughly US$1 343 (2024). 

Here’s What to Know About the Minimum Wage in Timor-Leste

Timor‑Leste introduced its national minimum wage in 2012 when the National Working Committee on Wages set the private‑sector wage floor at US$115 per month. 

The minimum wage applies to all workers aged 18 and older, regardless of sector or nationality, and must be paid in United States dollars (the official currency). Employers are free to offer higher wages but cannot pay below the statutory floor.

Working Hours and Overtime

The Labour Code of Timor‑Leste sets the normal working day at 8 hours and the normal workweek at 44 hours. Employees cannot be required to work more than 44 hours per week except in exceptional circumstances authorised by the Labour Inspectorate. 

A break of at least 30 minutes must be provided if the working period exceeds five hours. Night work (typically between 8 p.m. and 7 a.m.) is limited to seven hours and must receive special compensation.

Overtime Premiums and Limits

Under the Labour Code and supporting guidance, overtime attracts a 50% premium above the normal hourly wage (i.e., employees receive 150% of their basic wage). Work performed on weekly rest days or public holidays attracts a 100% premium (double pay). 

Night work is subject to a 25% surcharge when it exceeds normal hours. Combined normal and overtime hours may not exceed 12 hours in a day. Employers must obtain prior authorisation from the Labour Inspectorate and keep records of overtime. Employees have the right to refuse overtime that threatens their health or safety.

Rest Periods and Probation

Workers are entitled to at least one rest day per week. Employees also receive three days of paid leave for marriage, bereavement or participation in community events. 

The probation period in Timor-Leste varies by contract type: from 8–15 days for fixed‑term contracts to one to three months for indefinite contracts. During probation, either party can terminate the contract with shorter notice.

In addition to breaks during the workday, employees are entitled to a weekly rest period of at least 24 consecutive hours and a minimum daily rest period of 12 consecutive hours between the end of one workday and the beginning of the next.

Leave and Notice

Employees earn 12 working days of paid annual leave for each year of service. Sick leave is generous: employees receive six days of fully paid leave per year; if illness continues, they are entitled to an additional six days at half pay. Workers may also be absent for three days with pay for marriage, the death of a spouse or close relative, or important community events.

Pregnant employees are entitled to 12 weeks of maternity leave, six weeks of which must be taken after childbirth. Maternity leave is fully paid by the employer; however, to benefit, the employee must have at least six months of service and provide medical certification. Fathers are entitled to five working days of paid paternity leave to be taken within one month of the child’s birth.

Notice Periods, Severance Pay and Bonuses

Timor‑Leste’s notice requirements depend on length of service:

  • For employees working less than six months, either party must give at least 10 days’ notice
  • If the employee has been employed six months to one year, the notice period increases to 15 days
  •  For service exceeding one year it rises to 30 days

Failure to provide notice entitles the other party to pay in lieu. The Labour Code also provides severance pay when employers terminate without just cause: 

  • Employees with three months to one year of service receive 30 days of wages
  • Those with one to two years receive 60 days
  • Two to three years receive 90 days, and employees with three years or more receive 120 days of wages

Severance is not payable when termination is due to serious misconduct or the expiry of a fixed‑term contract.

Wages must be paid at least once per month and in United States dollars. The Labour Code does not mandate a statutory 13th‑month salary, but employers must provide an annual bonus of at least one month’s salary to be paid by 20 December. Foreign workers are entitled to the same payments as local employees.

Social Security Contributions and Taxes

Timor‑Leste’s social security system covers pensions, sickness, maternity, unemployment and occupational accidents. Employers must contribute 6% of each employee’s salary to social security, while employees contribute 4%. All workers, including foreigners with valid work visas, are subject to social‑security contributions. 

The income  tax structure differs for residents and non-residents:

Employee Type Tax-Free Threshold Tax Rate Notes
Resident Employees USD 500/month 10% on income above threshold Earnings up to USD 500 are exempt from tax
Non-Resident Employees None 10% flat on entire salary No exemption or tax-free allowance

Living Costs

The majority of Timorese workers operate in the informal economy, where labour laws are difficult to enforce. Even in the formal sector, wages often lag behind the living wage. 

The Global Living Wage Coalition estimates that a living wage for rural East Timor in 2024 is about US$199 per month, almost 75% higher than the current statutory minimum. With inflation and currency fluctuations affecting purchasing power, the gap between the minimum wage and living wage continues to widen.

Wage Reform Prospects

President Ramos Horta and labour unions support an increase to at least US$150 per month, arguing that this would help families meet basic needs and stimulate the domestic economy. However, employers’ organisations caution that a steep increase could discourage hiring in a fragile economy heavily reliant on oil revenues and foreign aid. 

The Council of Ministers is expected to examine economic analyses from the Central Bank before deciding on a new wage floor. Employers should anticipate a phased increase and consider budgeting for higher labour costs in 2026 and beyond. Any adjustment will likely be accompanied by revisions to the Labour Code to strengthen enforcement and update overtime, leave and severance provisions.

Employer of Record in Timor-Leste

Acting as the legal employer on your behalf, Remote People’s Employer of Record Service in Timor‑Leste, draft compliant employment contracts, calculate and pay salaries in US dollars, and ensure that employees receive at least the current minimum wage and any required annual bonuses. 

The platform automatically calculates overtime premiums, manages statutory leave, provides notice and severance calculations, and remits social‑security contributions to the National Social Security Institute. Remote People also monitors possible increases to the minimum wage or changes to overtime rules and adjusts payroll accordingly. 

By leveraging Remote People’s local expertise, companies can expand into Timor‑Leste without establishing a local entity while remaining compliant and providing fair pay to their employees.