Minimum Wage in Bhutan Revealed
The revision of the minimum wage in Bhutan has made it difficult for some workers to survive on Nu. 125 per day. This article looks at the revision’s effects on vulnerable working groups, legal settlement, and employment. For more information, read our full article. The following is a summary of the most important aspects of the revised wage in Bhutan. We hope it will provide some insight into how minimum wage in Bhutan is determined. Then, you can decide if the new wage is a worthwhile investment.
Nu. 125 a day
The Nu. 125 a day minimum wage in Bhutan was raised on October 29. Currently, around half of all workers in Bhutan earn less than this minimum wage. Workdays are eight hours long, including a one-hour lunch break, and employers must allow regular days off. If a worker works more than eight hours per day, they are entitled to 1.5 times the normal rate of pay. The minimum wage is far less than the official national poverty level of Nu 1,705 ($28) per month.
In 2014, the minimum wage was raised to Nu. 125 a day. Since then, the rate has not increased beyond that. In July, the inflation rate in Bhutan was 8.24 percent, whereas it was just 2.73 percent in January. The minimum wage rate must be revised by December 2021 to keep up with inflation. Moreover, employers with five employees or more must establish proper work rules for their employees.
Impact of revision on vulnerable working groups
A major upward revision of the minimum wage rate in Bhutan will significantly impact the employment conditions of the country. Small businesses will be affected by this increase as they will be unable to sustain the new higher wage rate in the face of inflation. In addition, the Pandemic of Covid-19 is already a serious concern for many of the small CSIs, and this raise is likely to exacerbate these issues.
The proposed Nu 450 per day wage is expected to raise the cost of construction and will result in exorbitant house rents, which will impact a larger population. The construction industry is already in a mess, so the increase will only compound the existing problems. But a much higher minimum wage could help to address some of the problems in the construction sector. In addition, the government will have to invest in regenerating the infrastructure of the country and its economy.
Impact on legal settlement
The Ministry of Labour and Human Resources (MoLHR) has decided to engage a World Bank consultant to evaluate the impact of minimum wage on legal settlement in Bhutan. In the interim, the MoLHR has already written to the finance ministry for technical assistance. Deputy Minister of Labour Lyonpo Karma Dorji says several meetings have been held to review wage rates and how these changes would impact legal settlement.
The Labour and Human Resources Ministry has said it will revise the national minimum wage rate by December 2021. According to the Labour and Employment Act 2007 (LEA), the ministry is mandated to fix a minimum wage rate in consultation with employees and employers. There has been no World Bank recommendation for revising the minimum wage rate in Bhutan, but the government has stated it will do so soon. But the government still needs to ensure that the new rate is fair to all.
Impact on employment
The impact of a major increase in the national minimum wage rate will be felt most in small firms and micro-enterprises. However, if wages are set too high, it will also adversely affect the price of goods produced in Bhutan. This study, however, recommends that the government not hurry to raise the minimum wage rate. This study identifies some of the most significant challenges and opportunities that the country is facing.
The national minimum wage rate is closely tied to the legal system in Bhutan. Any upward revision to the national wage rate would have a negative impact on the legal system. Fines and penalties are currently based on the Nu 125 minimum wage rate, but with a major increase, they will be more than tripled. The impact of a minimum wage hike on the employment market in Bhutan is likely to increase inequality in wages and employment.