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December 12, 2018

Myanmar Minimum Wage and Employment Contracts: Steps Towards HR Management Modernization

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Bangkok Post

As Myanmar steadily develops after rejoining the global economic community, foreign investors are becoming more and more interested in doing business here, thanks, in part, to the low cost of labour and high potential for growth. Any investor interested in doing so however should be aware of the speed of legal change here, and be careful to keep up-to-date.

Myanmar’s employment law is based on a bedrock of old (sometimes colonial) legislation that is progressively being superseded by modern laws and regulations. It can also, at times, be heavily affected by the internal policies and practices of the Department of Labour of the Ministry of Labour, Immigration and Population (commonly referred to as the Ministry of Labour). Therefore, it is very important for companies to be aware not only of the latest legislation as it modernizes, but also of the workings of the Ministry of Labour. More importantly, it is vital to keep abreast of new legislation, or Ministry of Labour policy, in order to remain compliant in this rapidly developing environment.

This article provides two recent examples of legislative change—the first showing how rapidly the economy can affect legislation, and the second showing the sometimes idiosyncratic nature of rapidly developing law.

Myanmar’s Minimum Wage

A minimum wage was first introduced in Myanmar in September 2015, at a rate of MMK 450 (approximately USD 0.28) per hour and MMK 3,600 (approximately USD 2.25) per eight-hour workday. These rates were reassessed this year, after three years of rapid economic growth, in an attempt to catch up with and continue the fast-paced development of the country.

A proposal to increase the minimum wage was released in January 2018, leading to debates between employers, workers, and government representatives. Following those discussions, the National Committee for the Minimum Wage issued Notification 2/2018 on May 14, 2018, which entered into force on the same date.

The notification sets new minimum wage rates of MMK 600 (approximately USD 0.37) per hour and MMK 4,800 (approximately USD 3.00) per eight-hour workday. The definition of the minimum wage does not include overtime, bonuses, incentives, or any other allowances, which must therefore be considered separately. Additionally, under the definition of “minimum wage”, part-time workers qualify and must be paid on a prorated basis. Finally, a new minimum wage rate must be enacted every two years.

The notification—and therefore the minimum wage—applies to all businesses in Myanmar with 10 or more employees, irrespective of the location or type of work.

The notification provides a 33 percent increase from the previous minimum wage, and is the first revision of minimum wage since its introduction in Myanmar in 2015. Even with the considerable increase it remains one of the lowest minimum wages in the region, but is written in such a manner as to push further rapid reforms in future.  

Employment Contracts—Registration and Templates

Pursuant to Section 5(a) of the Employment and Skills Development Law (Law No. 29 of 2013), an enterprise must enter into written employment contracts with its employees within 30 days of employment. Unusually, the employment contract must then be submitted to the relevant Township Labour Office for registration, and any employment contracts that are not registered may be declared void. Companies are not required to register an employment contract during an employee’s probationary period (which must not exceed three months), but wages for work performed during the probationary period must be paid at a rate of at least 75 percent of the employee’s basic salary.  

Employment contracts must include the fundamental terms and conditions of the employment and specific contractual terms laid out in the employment law. Some of the necessary contractual terms include, among other things: type of employment, salary, employment location, working hours, overtime hours, days off, holidays, leave, medical treatment, resignation or termination, term (i.e. length) of employment, and the responsibilities of each party.

Further to these requirements, in August 2015, the Ministry of Labour issued a notification stating that all employees must use an employment contract template drafted by the government, to ensure that minimum employment standards are met. All companies with more than five employees, including private entities and foreign companies in Myanmar, are expected to oblige by this notification and adopt the contract template. Any addition or deviation from the template must be reflected in a separate annex which must be approved by the relevant Township Labour Office. Any employer that fails to sign an employment contract may be punished with imprisonment up to six months or, a fine, or both. Doubling down on this unusual requirement, a revised version of the Standard Employment Contract Template was announced on August 28, 2017.

Ministry of Labour policy requires these contracts to be in Myanmar language or bilingual (in both Myanmar language and English) when they are registered. In addition, at least three originals are to be executed: one for the employee, one for the employer, and one to be submitted to the Township Labour Office.

Moving forward

Over the past few years, Myanmar has experienced rapid political and economic changes, which have, in turn, strengthened and improved the country’s legal framework. These changes are a mark of strong development, but also mark a need for caution by investors. The law changes as quickly as the steadily improving economy, and sometimes with surprising results.

This story was originally published in the Bangkok Post and is reproduced here with permission and thanks. The original story can be viewed here on the Bangkok Post website.

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