National minimum wage rate to be revised by beginning next year

The last minimum wage rate was revised in 2014, which is to Nu 125 per day

The national minimum wage rate, which the government has pledged to increase to Nu 450 from Nu 125, will be revised from the beginning of next year. 

During the winter parliament session in January 2020, Prime Minister Dr Lotay Tshering said that the World Bank is doing an independent research on the national minimum daily wage rate. The government has already done a study on it. Once both the findings are on the table, the government will implement it.

The World Bank has submitted its report to the Ministry of Labour and Human Resources (MoLHR) and recommended doing studies on more scientific and accurate analysis to revise the wage rate. The scientific studies require a detailed survey, getting details and talking with employers and employees. 

Labour and Human Resources Minister Karma Dorji said that as per the annual agreement performance, the ministry is supposed to revise the minimum wage rate by December 2021.

The last minimum wage rate was revised in 2014, which is to Nu 125 per day.

The wage rate is revised as per the Labour and Employment Act 2007.

 According to section 138, chapter VII of the Labour and Employment Act 2007, the ministry is mandated to fix a minimum wage in consultation with the employers and employees.

However, Lyonpo Karma Dorji said that the World Bank has not come out with any recommendation on how much it should be revised. 

In September this year, the MoLHR had written to the finance ministry to engage a World Bank consultant/technical assistant to follow the recommendation that the World Bank has given. The ministry is waiting for technical assistance from the World Bank.

Lyonpo Karma Dorji said that within the ministry they have also done several meetings on revising the wage rate.

He added that in the informal sector like the construction sector, the wage rate is higher than Nu 450 and nobody is willing to work at Nu 125.

“But the implication of revising the minimum wage rate would also affect the legal settlement which is dependent on the minimum wage rate,” Lyonpo said.

According to the minister, the projects that the government undertakes are also based on the national minimum wage rate, which is as per the Bhutan Schedule Rate (BSR). However, the BSR is revised and the rate is increased to Nu 460 as of now. This means that the BSR that determines the cost of the project is paying above the national minimum wage rate.

Further, the minister mentioned that in some of the service sectors, employees are paid Nu 7,000 to Nu 8,000, which is above Nu 125 and below Nu 450.

The minister added, “On the other hand if the wage rate is increased to Nu 450 the minimum salary in a month should be Nu 13,500, but the employees working in the service sector with Nu 7,000 to Nu 8,000 would be affected when the economy in the country is not doing good.”

Lyonpo said that it is taking time because the ministry is studying on the implication after revising the wage rate for the service sector – who may not be able to pay the revised wage rate, they may terminate their employees if the MoLHR may imposed the penalty  on them for not implementing the minimum wage rate.

“We just cannot increase the wage rate for the benefit of the same employees, but ultimately not benefiting and then making them unemployed,” Lyonpo said.  

“If we increase the wage rate considering the inflation in the country and where some employers may not be able to give the salary, it will have more impact. This is something we need to consider,” he added.

Lyonpo said that the national minimum wage rate is only supposed to be the safeguard and not supposed to be the wage rate. The wage rate should be decided by the market force with demand and supply.

However, the ministry is not sure by how much the wage rate would be revised.  

The revised wage rate, meanwhile, will come into effect after 90 days of the government’s decision.

Dechen Dolkar from Thimphu