You've been interviewing for weeks. Finally found the right person in Laos. Now you need to actually hire them legally. This is where most companies hit a wall.
Laos requires 13-month salaries (including a mandatory bonus), specific social security registrations, and employment contracts in Lao language. Miss any of these and you're facing back payments plus penalties when employees find out. The labor law strongly favors workers, so getting it wrong from day one creates expensive problems later.
Here's the reality: you've got three ways to hire in Laos, each with different costs and timelines.
Option 1: Set up your own entity
- Cost: $12,000-35,000 upfront, $8,000-15,000 annual maintenance
- Timeline: 4-6 months minimum
- Complexity: Business registration, tax setup, social security enrollment, payroll infrastructure
- Makes sense when: Hiring 15+ people long-term, permanent market commitment
Option 2: Hire contractors
- Cost: None upfront, but limited control
- Timeline: Immediate
- Risks: Misclassification fines, back taxes, employment disputes
- Makes sense when: Short projects (under 6 months), specialized consulting
- Note: Hire with Columbus also handles contractor agreements and payments
Option 3: Use an employer of record (Recommended for most)
- Cost: $179/month per employee
- Timeline: 2-3 days to hire
- Complexity: None - we handle everything
- Makes sense when: 1-20 employees, testing the market, multi-country teams
If you're hiring 1-5 people, entity setup costs more than 4+ years of EOR fees ($179/month = $2,148/year per employee). An EOR like Hire with Columbus handles employment contracts, 13th-month bonuses, social security contributions, tax withholding, and compliance updates. Example: Hiring 2 people costs $358/month vs $20,000+ entity setup plus ongoing maintenance.
Ready to hire in Laos without the legal headaches? Get started with Hire with Columbus.
What employment types can you use?
You've got three ways to bring someone onboard in Laos. Here's how the costs and risks compare.
How can you hire in Laos?
Most companies jumping into the Laos market face the same choice: spend months setting up an entity, risk contractor misclassification, or use an employer of record. The math usually makes the decision pretty clear.
| Hiring Approach | Upfront Cost | Timeline | Best For | Key Risks |
|---|---|---|---|---|
| Set up entity | $15,000-25,000 | 4-6 months | 20+ employees, permanent presence | High setup costs, ongoing compliance |
| Hire contractors | $0 | Immediate | Short projects, specialized skills | Misclassification fines, limited control |
| Use EOR (Hire with Columbus) | $179/month per employee | 2-3 days | 1-50 employees, market testing | None - we handle compliance |
Setting up your own entity means registering with the Ministry of Industry and Commerce, opening local bank accounts, and building HR infrastructure from scratch. You'll need a registered office, local accounting, and someone who understands Laos labor law inside and out.
The process takes 4-6 months if everything goes smoothly. Spoiler: it rarely goes smoothly. You're looking at $15,000-25,000 in setup costs, plus ongoing legal and accounting fees that easily hit $3,000-5,000 monthly.
Hiring contractors feels tempting because you can start tomorrow. But Laos labor authorities don't mess around with misclassification. If your "contractor" works set hours, uses your equipment, or takes direction like an employee, you'll face back taxes, penalties, and potentially converting them to full employee status anyway.
Using an employer of record lets you hire actual employees in 2-3 days instead of months. Hire with Columbus becomes the legal employer, handling contracts, payroll, taxes, and compliance. You manage the day-to-day work and performance.
The ROI math is straightforward: hiring 5 employees through us costs $895/month versus $25,000+ to set up an entity, plus ongoing overhead. You break even in about 3 years, but that assumes your entity setup goes perfectly and you never need legal help.
Employment contract types in Laos
Once you've decided how to hire, you need to pick the right contract type. Laos recognizes three main employment contracts, each with specific rules you can't ignore.
Permanent contracts (indefinite duration) work for your core team members. No end date, full benefits, and the strongest job protection under Laos labor law. Most international companies use these for roles they expect to last more than two years.
Termination requires proper cause and notice periods based on tenure. You can't just decide to end the relationship - you need documented performance issues, redundancy, or mutual agreement.
Fixed-term contracts max out at 3 years total, including renewals. After that, they automatically convert to permanent contracts whether you want it or not. Use these for project work, maternity cover, or when you're genuinely unsure about long-term needs.
The catch: if you renew a fixed-term contract twice, it becomes permanent regardless of duration. Laos assumes that if you keep renewing, the role is actually permanent.
Part-time contracts give employees the same hourly rights as full-timers, just proportionally. Someone working 20 hours gets half the annual leave of a 40-hour employee, but the same overtime rates and job protections.
| Contract Type | Max Duration | Renewal Rules | Best For |
|---|---|---|---|
| Permanent | Indefinite | N/A | Core team, long-term roles |
| Fixed-term | 3 years total | Max 2 renewals | Projects, temporary needs |
| Part-time | Any | Follows base contract type | Flexible arrangements |
Probation periods can last up to 6 months for any contract type. During probation, either side can terminate with just 7 days' notice instead of the standard 30-90 days. Use this time to actually evaluate performance - you won't get another chance for easy termination.
When you work with Hire with Columbus, we draft compliant contracts for any type you need. We've seen too many companies get burned by using generic templates that miss Laos-specific requirements like mandatory overtime calculations or proper termination clauses.
The most common mistake? Companies hire someone as a "contractor" planning to convert them later, then discover the conversion process requires treating their start date as the original hire date for all benefit calculations. Just hire them properly from day one - it's easier and cheaper than fixing it later.
How does payroll and taxation work?
Your €60,000 employee actually costs €81,600 per year in Laos. Here's the breakdown.
The math hits different when you're looking at total employment costs. That base salary is just the starting point. Employer contributions add another 36% on top.
Income tax brackets
Laos uses a progressive tax system that kicks in after the first €2,400 annually. The rates climb quickly once you hit middle-income territory.
| Annual Income (EUR) | Tax Rate |
|---|---|
| €0 - €2,400 | 0% |
| €2,401 - €4,800 | 5% |
| €4,801 - €9,600 | 10% |
| €9,601 - €19,200 | 15% |
| €19,201 - €48,000 | 20% |
| €48,001+ | 25% |
Your €60k employee pays €9,600 in income tax annually. That's deducted from their gross salary, so they take home €50,400 before social contributions.
Social security contributions
This is where employer costs really add up. You're looking at multiple contribution categories that total 21.5% of gross salary.
| Contribution Type | Employer Rate | Employee Rate | Total |
|---|---|---|---|
| Social Security Fund | 6% | 4.5% | 10.5% |
| Health Insurance | 4.5% | 1.5% | 6% |
| Employment Injury | 1% | 0% | 1% |
| Maternity Fund | 1% | 0% | 1% |
| Housing Fund | 3% | 0% | 3% |
| Total | 15.5% | 6% | 21.5% |
The employee's 6% gets deducted from their net pay. Your 15.5% comes straight out of your budget on top of their gross salary.
Total employment cost breakdown
What that €60,000 salary actually costs you:
- Base salary: €60,000
- Employer social contributions (15.5%): €9,300
- 13th month bonus: €5,000
- Annual leave allowance: €2,000
- Public holiday premium pay: €1,200
- Training levy (1%): €600
- Total annual cost: €78,100
That's a 30% markup on the base salary. Plan your budget with this in mind.
Payment schedule and timing
Laos follows a monthly pay cycle with some specific requirements that'll catch you off guard if you're not ready.
Salaries must be paid by the 15th of each month for the previous month's work. Miss this deadline and you're looking at penalty interest of 1.5% per month on the unpaid amount.
The 13th month bonus is mandatory and gets paid in December. It's calculated as one month's base salary divided by 12 months of service. New employees get a prorated amount.
Annual leave allowance is paid at the start of each calendar year. This covers vacation expenses and is separate from regular leave pay. Usually runs €2,000-€3,000 depending on seniority.
Tax filing deadlines
Your payroll tax obligations run on a tight monthly schedule:
- Personal income tax withholding: Due by the 15th of the following month
- Social security contributions: Due by the 20th of the following month
- Annual reconciliation: Due by March 31st for the previous tax year
- Quarterly VAT returns: Due by the 20th of the month following each quarter
Late filing penalties start at €500 and escalate to 2% of the tax due per month. The tax authority takes deadlines seriously.
Common payroll mistakes
Most companies stumble on the same issues when running Laos payroll themselves.
Miscalculating the 13th month bonus is the big one. It's not just an extra month's pay. It's prorated based on actual months worked and includes overtime calculations. Get it wrong and employees will definitely notice.
Missing social fund payments creates bigger problems than just penalties. Employees lose access to healthcare benefits. You'll face angry staff plus government fines.
Incorrect leave allowance timing trips up a lot of employers. You can't just add it to December pay. It has to be a separate January payment with proper documentation.
Using the wrong tax brackets happens when companies apply their home country assumptions. Laos tax rates change at different income levels than most Western countries.
Setting up payroll in Laos yourself:
- Local accounting firm: €800-€1,200/month
- Payroll software: €300-€500/month
- Compliance risk: Fines up to €5,000 for errors
- HR expertise needed: €45k+ salary
With Hire with Columbus: $179/month per employee, fully compliant, zero risk.
We handle all the tax calculations, filing deadlines, and social contributions automatically. Your employees get paid on time every month. You never have to worry about penalty calculations or angry tax officials.
Okay, that's a lot of legal jargon.
Here's the thing: you don't actually need to remember any of this. That's literally what we're here for. We'll handle the compliance while you focus on building your team in Laos.
No lawyers required. Promise.
What benefits and leave are required?
Laos employees get 15 days minimum annual leave, and it's use-it-or-lose-it unless you pay it out at termination. Beyond salary, benefits in Laos add roughly 10-15% to your employment costs when you factor in social security contributions and mandatory leave payments.
What you're legally required to provide and what happens if you don't.
Annual vacation leave
Every employee gets 15 days of paid annual leave after completing one year of service. New employees don't earn vacation days during their first year, which is pretty unusual compared to most countries.
Vacation days don't carry over to the next year. Employees lose them if they don't use them. However, you must pay out unused vacation days when someone leaves the company at their daily wage rate.
You can't deny vacation requests without reasonable business justification, and employees need to give at least 15 days' notice for vacation time.
Sick leave
Employees get unlimited sick leave, but there's a catch. You only pay the first three days. After that, social security takes over and pays 60% of their salary for up to 26 weeks.
No doctor's note is required for the first three days, but employees need medical certification for anything longer. If someone's faking it repeatedly, you can request a medical examination by a doctor of your choice.
Social security covers work-related injuries at 100% of salary, but you'll still need to file the paperwork and coordinate with the Social Security Organization.
Parental leave
Maternity leave is 105 days (15 weeks) at 100% pay. That's 45 days before birth and 60 days after. This is fully paid by social security, not you directly, but you handle the administrative process.
Fathers get 5 days of paternity leave at full pay, which comes out of your pocket. There's no shared parental leave system. It's pretty traditional in structure.
Pregnant employees also get time off for prenatal medical appointments, and you can't terminate someone during pregnancy or maternity leave without serious misconduct.
Public holidays 2025
Laos has 10 official public holidays. If employees work on these days, you pay double their normal wage rate.
| Date | Holiday Name | Type |
|---|---|---|
| January 1 | New Year's Day | Fixed |
| February 12 | Chinese New Year | Variable |
| March 8 | International Women's Day | Fixed |
| April 14-16 | Pi Mai (Lao New Year) | Fixed |
| May 1 | International Labor Day | Fixed |
| May 12 | Buddha's Birthday | Variable |
| July 20 | Lao Women's Union Day | Fixed |
| October 7 | Teacher's Day | Fixed |
| December 2 | National Day | Fixed |
| December 13 | Lao People's Party Day | Fixed |
The dates for Chinese New Year and Buddha's Birthday shift each year based on the lunar calendar. Pi Mai is the big one. The entire country shuts down for three days.
Mandatory benefits
You're required to contribute to social security for all employees. The breakdown:
| Contribution Type | Employer Rate | Employee Rate | Total |
|---|---|---|---|
| Social Security | 6% | 5.5% | 11.5% |
| Health Insurance | Included in social security | Included in social security | - |
| Work Injury Insurance | 1% | 0% | 1% |
Social security covers healthcare, pensions, maternity benefits, and unemployment. The maximum contribution base is 3 million LAK per month (about $150 USD), so high earners don't pay social security on their entire salary.
You must register employees with the Social Security Organization within 30 days of hiring. Miss this deadline and you face fines of 500,000 LAK ($25 USD) per employee.
Optional competitive benefits
Most international companies offer additional benefits to attract talent:
- Private health insurance (public healthcare quality varies significantly)
- Life insurance coverage
- Transportation allowances (traffic in Vientiane is getting worse)
- Meal allowances or cafeteria services
- Mobile phone and internet allowances
- Annual bonuses (typically one month's salary during Pi Mai)
Housing allowances are common for expat employees but less typical for local hires. Professional development budgets help with retention since career advancement opportunities can be limited locally.
Common benefit mistakes
The biggest mistake is not registering employees for social security on time. The Social Security Organization has been cracking down, and penalties compound monthly.
Many companies mess up vacation day calculations by giving new employees immediate vacation time. Remember, they don't earn it until after one year of service.
Another common error is not paying the work injury insurance contribution separately from general social security. It's a distinct 1% employer contribution that's easy to miss.
Don't forget that pregnant employees get additional protections beyond maternity leave. You can't assign them to night shifts or hazardous work, and they get time off for medical appointments.
Administering these benefits correctly requires local HR expertise (typically $18,000+ annual salary for someone qualified), benefits software integration, and constant legal updates. Miss mandatory contributions and penalties start at $25 per employee per month, plus back payments with interest.
Hire with Columbus handles all benefit administration, social security registration, and compliance monitoring for $179/month per employee. We make sure contributions are paid on time, vacation days are calculated correctly, and you never miss registration deadlines that trigger penalties.
What are the compliance requirements?
Written contracts aren't optional in Laos. Verbal agreements mean nothing legally and leave you wide open to claims for unpaid wages, benefits, and wrongful termination.
Employment contract requirements
Every employment contract in Laos must be written in Lao language and signed within 30 days of the employee's start date. Miss this deadline and you're looking at fines of 500,000-2,000,000 LAK (roughly $25-100 USD) per violation.
Your contracts must include these mandatory clauses:
- Job title and detailed responsibilities
- Work location and any travel requirements
- Salary amount and payment schedule
- Working hours and overtime rates
- Probation period (if applicable)
- Termination notice periods
- Annual leave entitlement
Skip any of these and your contract becomes legally invalid. That means the employee can claim they're working under indefinite terms, and you'll owe back payments for any benefits they should have received.
You don't need to register contracts with the government, but you must keep copies for labor inspections. Hire with Columbus handles all contract drafting and makes sure every clause meets Lao requirements exactly.
Probation periods
Standard probation in Laos is 60 days for most positions. You can extend this to 119 days maximum for technical roles, but anything longer is illegal and voids the probation entirely.
During probation, either party can terminate with just 3 days' written notice. After probation ends, full employment protections kick in and you'll need much longer notice periods plus potential severance.
The catch: if you don't clearly state the probation period in the written contract, it doesn't exist. You can't add it later or claim verbal agreement.
Working time regulations
Maximum working hours are 48 per week, typically spread over 6 days. Overtime kicks in after 8 hours per day or 48 hours per week, whichever comes first.
Overtime rates are:
- Weekdays: 150% of regular hourly rate
- Weekends: 200% of regular hourly rate
- Public holidays: 300% of regular hourly rate
You must provide at least 24 consecutive hours of rest per week, usually Sunday. Employees also get a 1-hour lunch break for shifts over 5 hours.
Keep detailed records of all working hours. Labor inspectors can request these anytime, and missing records result in fines of 1,000,000-5,000,000 LAK ($50-250 USD) per employee.
Notice periods
Notice periods depend on how long someone's worked for you:
| Years of Service | Employee Notice | Employer Notice |
|---|---|---|
| Under 1 year | 30 days | 30 days |
| 1-5 years | 45 days | 45 days |
| 5-10 years | 60 days | 60 days |
| Over 10 years | 90 days | 90 days |
These are minimum periods. You can't negotiate shorter notice, but you can pay in lieu of notice. During the notice period, employees keep all benefits and can use work time for job searching.
Termination process
You can't just fire someone in Laos without following proper procedures. For termination with cause, you need documented evidence of serious misconduct like theft, violence, or repeated policy violations.
For redundancy or performance issues, the process is:
- Written warning with 30-day improvement period
- Final written warning if no improvement
- Consultation meeting with employee
- Termination letter with full reasoning
Skip any step and the termination becomes wrongful dismissal. The employee can claim reinstatement plus back pay for the entire notice period.
For positions above management level, you may need approval from the Ministry of Labour. This adds 2-4 weeks to the process and requires detailed justification.
Severance pay
Severance is required for most terminations except gross misconduct:
| Years of Service | Severance Payment |
|---|---|
| 1-3 years | 30 days' salary |
| 3-6 years | 90 days' salary |
| 6-9 years | 180 days' salary |
| 9+ years | 300 days' salary |
This is based on the employee's average monthly salary over their last 12 months, including bonuses and allowances. You pay this on top of any notice period compensation.
Redundancy cases may require additional compensation depending on circumstances. Mass layoffs (10+ employees) need government approval and often higher severance rates.
Data protection
Laos doesn't have extensive data protection laws like GDPR, but you still have obligations around employee privacy. You can only collect personal data that's directly relevant to employment.
Employee files must be kept confidential and stored securely. You can't share salary information, performance reviews, or personal details with unauthorized people, including other employees.
When employees leave, you must return their personal documents and delete any personal data that's no longer needed for legal compliance. Keep employment records for 5 years minimum for potential labor disputes.
Common compliance mistakes
The expensive errors we see companies make in Laos:
Invalid employment contracts: Missing mandatory clauses or using English-only contracts. This voids the entire agreement and employees can claim they're working under indefinite terms with maximum benefits.
Wrong termination process: Firing someone without proper warnings or consultation. The employee can demand reinstatement plus full back pay for the notice period.
Incorrect overtime calculations: Using wrong rates or not tracking hours properly. You'll owe back payments plus penalties, often doubling the actual cost.
Missing probation clauses: Not clearly stating probation terms in writing. You lose the right to easy termination and face full notice period requirements from day one.
Penalties for violations
Labor law violations in Laos carry specific fines:
Invalid contracts: 500,000-2,000,000 LAK ($25-100) per contract plus requirement to pay all benefits the employee should have received
Wrongful termination: 2,000,000-10,000,000 LAK ($100-500) plus potential reinstatement order and back pay for entire notice period
Overtime violations: 1,000,000-5,000,000 LAK ($50-250) per employee plus back payment of all unpaid overtime at correct rates
Working time breaches: 500,000-3,000,000 LAK ($25-150) per violation plus compensation to affected employees
Record-keeping failures: 1,000,000-5,000,000 LAK ($50-250) per employee with missing or incomplete records
These might seem small, but they add up fast with multiple employees. Plus you'll face legal fees, potential work stoppages, and reputation damage that costs far more than the fines.
Common compliance failures in Laos:
- Invalid employment contract: $25-100 fine + contract void + back benefit payments
- Wrong termination process: $100-500 fine + potential reinstatement + full notice period back pay
- Missing mandatory clauses: Contract deemed invalid, maximum benefit entitlements owed
- Improper dismissal: $100-500 compensation + legal fees + possible reinstatement order
Hire with Columbus makes sure every contract and termination follows Lao law exactly. We handle all documentation, track compliance deadlines, and manage the termination process when needed. At $179/month per employee, it's far cheaper than fixing compliance mistakes after the fact.
What has changed recently?
Laos rolled out its new Labor Law amendments in January 2025, and honestly, it's been a mixed bag for employers. The changes mostly favor workers, which is great for talent retention but means you'll need to adjust your budgets and policies.
The biggest shift? Minimum wage jumped to 1,800,000 LAK per month (about $85 USD) from the previous 1,600,000 LAK. That's a 12.5% increase that caught some companies off guard, especially those hiring entry-level positions.
New leave entitlements
Annual leave got more generous. Employees now earn 18 days per year instead of 15, and here's the kicker - they can carry over up to 6 unused days into the next year. Previously, it was use-it-or-lose-it after December 31st.
Sick leave also expanded from 30 to 45 days annually, with the first 15 days at full pay instead of 10. Your payroll costs just went up if you have employees who frequently use sick time.
Digital work permits and visas
The government finally launched their online work permit system in March 2025. Processing times dropped from 45-60 days to about 20-25 days, which is huge if you're trying to get foreign employees started quickly.
You can now submit applications and track status online instead of making multiple trips to government offices. The fees stayed the same at 500,000 LAK ($24 USD) for the permit plus 200,000 LAK ($9.50 USD) for processing.
Social security changes
Social Security Fund contributions increased slightly. Employers now pay 6% of gross salary (up from 5.5%) while employee contributions stayed at 4.5%. The maximum monthly contribution base also rose to 8,000,000 LAK ($380 USD).
The fund expanded coverage to include work-related mental health support and extended maternity benefits from 105 to 120 days. Fathers also get 7 days of paternity leave now, up from 3 days.
Tax compliance updates
Personal income tax brackets got adjusted for inflation. The tax-free threshold increased to 1,500,000 LAK monthly ($71 USD) from 1,300,000 LAK. The top rate of 25% now kicks in at income over 30,000,000 LAK annually instead of 25,000,000 LAK.
Monthly tax filing deadlines moved from the 15th to the 20th of each month, giving payroll teams a bit more breathing room.
An EOR like Hire with Columbus handles all these regulatory updates automatically. We adjusted our Laos payroll systems in real-time when these changes took effect, so your employees got the right leave balances and tax calculations without you having to track every amendment.