Summary
- The Employment Act 2025 (Law No. 3 of 2025) governs contracts of service in the Gelephu Mindfulness City (GMC). It is deemed to have come into operation on 26 December 2024 and repeals the Employment Act 1968 previously applied in GMC (s. 1).
- Any contract term less favourable to the employee than the Act is "illegal and void to the extent that it is so less favourable" (s. 8).
- Minimum notice runs from one day (under 26 weeks' service) to four weeks (five years or more), must be the same for both sides, and may be replaced by payment in lieu (ss. 10, 11(1)).
- Salary is due within 7 days after the salary period (s. 21(1)); on dismissal, on the day or within 3 days (s. 22). Total deductions in a period are capped at 50% (s. 32(1)).
- No termination payment may be released without tax clearance, and the employer must notify the tax officer immediately (s. 24).
- The Act lists a s. 21A "national minimum wage" in its arrangement of sections, but the published text contains no operative provision and no amount. All "$" figures are United States dollars (s. 2AA).
Who the Act covers
The Act applies to any "employee", meaning a person who works under a "contract of service", which may be "written or oral, express or implied" (s. 2(1)). Domestic workers are excluded unless the designated officer applies the Act to them by Gazette notification (ss. 2(1), 67). The "designated officer" is appointed by the Druk Gyalpo; the day-to-day administrator is the Commissioner for Labour (s. 3(1)). "Employer" includes an employer's agent or manager and whoever is "for the time being responsible for the management" of the business (s. 2(1)). A "workman" is broadly a manual worker, commercial driver or person listed in the First Schedule. "Salary" is all remuneration including allowances, but excludes accommodation, pension contributions, expense reimbursements, gratuities and retrenchment benefit (s. 2(1)).
The statutory floor
Section 8 is the provision every GMC offer letter must be drafted around: a term less favourable than the Act "is illegal and void to the extent that it is so less favourable". The contract survives; the term is cut down to the statutory level. Employers may give more than the Act requires, never less. All "$" references are read as United States dollars (s. 2AA).
The offer letter and first 14 days
No written contract is required, but the employer must give each employee a written record of the prescribed "key employment terms" within 14 days of the start date (s. 95A(2)); an accessible electronic record suffices (s. 95A(3)). An inaccurate record is a civil contravention (s. 126A(a)) attracting an administrative penalty that regulations may set at up to $1,000 per occasion and $2,000 for a repeat (s. 139(2)(h)).
Salary and the missing minimum wage
A salary period may not exceed one month (s. 20), and an incomplete month is pro-rated by the formula in s. 20A. Salary must be paid "before the expiry of the 7th day after the last day of the salary period" (s. 21(1)); overtime within 14 days (s. 21(2)). Payment into an account at "a bank licensed in GMC" in the employee's name is expressly permitted (ss. 25(2), 63(1)).
On the national minimum wage, the Act's arrangement of sections lists "21A. Workers to be paid at least the national minimum wage". The published text, however, contains no operative section 21A between ss. 21 and 22 and no figure. The Act does allow minimum rates to be prescribed for children and young persons (s. 71) and wage adjustment recommendations to be gazetted for negotiation (s. 49). Confirm whether any minimum wage order has been gazetted before fixing pay.
Deductions from salary
No deduction may be made unless the Act authorises it or a court or tax officer requires it (s. 26). The authorised deductions (s. 27(1)) are:
| Deduction | Condition | Cap |
|---|---|---|
| Absence from work | Proportionate to time absent (s. 28(2)) | Excluded from the 50% total |
| Damage to or loss of goods or money entrusted to the employee | Directly attributable to the employee's neglect; opportunity to show cause; register kept (s. 29) | Actual loss, and not more than one-quarter of one month's wages without the Commissioner's permission |
| Accommodation, amenities and services supplied by the employer | Written consent; Commissioner's authorisation for amenities (s. 27(1)(d), (e)) | Together not more than one-quarter of salary for the period (s. 30(2)) |
| Advances, loans, unearned benefits, overpayments | Advances recovered over at most 12 months; no recovery of travel advances (s. 31) | Each instalment not more than one-quarter of salary (s. 31(3), (5)) |
| Other deductions with written consent; cooperative dues; prescribed deductions | Consent may be withdrawn before deduction, without penalty (s. 27(1A), (1B)) | Within the 50% total |
Total deductions in a salary period, other than for absence, advances and loans, and cooperative dues, must not exceed 50% of salary (s. 32(1)); the cap does not apply to the final salary on termination (s. 32(2)). For workmen, Part 5 adds the "truck system" rules: salary in legal tender or in a manner agreed in writing (ss. 54, 56), no terms dictating where salary is spent (s. 55), and no interest on advances (s. 58).
Hours, rest days and overtime
Part 4 applies to workmen, and to other employees, whose salary does not exceed $500 a month (excluding overtime, bonus and allowances), or such other amount as the designated officer prescribes (s. 35). Above that threshold, hours are a matter of contract. Within Part 4:
- One whole rest day per week, with a roster prepared before the month begins where the employer fixes it (s. 36).
- No more than 6 consecutive hours without a break, 8 hours a day or 44 hours a week (s. 38(1)); by agreement, up to 9 hours a day on a five-day week and 48 hours in alternate weeks (s. 38(1)(d)–(f)).
- Overtime at not less than 1.5 times the hourly basic rate (s. 38(4)), calculated for monthly-rated staff as 12 × monthly basic rate ÷ (52 × 44) (Fourth Schedule); capped at 72 hours a month (s. 38(5)); never more than 12 hours a day outside emergencies (s. 38(8)).
- Rest-day work at the employer's request is paid at two days' basic rate for a full day (s. 37(3)); shift workers may average 44 hours over three weeks with informed written consent (s. 40).
Leave
Every employee is entitled to paid public holidays (s. 88); after three months' service, to 7 days' annual leave rising by one day a year to 14 (s. 88A(1)); and after six months, to 14 days' sick leave or 60 where hospitalised (s. 89(1)). Part 9 provides maternity leave (by default 4 weeks before and 8 after confinement, at the gross rate of pay) (s. 76(1)), 10 days' paternity leave (s. 76A(1)) and 2 days' childcare leave (s. 87A).
Notice and payment in lieu
A fixed-term or fixed-task contract ends on expiry or completion (s. 9(1)); an open-ended contract runs until terminated under Part 2 (s. 9(2)). Notice must be identical for employer and employee and is whatever the contract provides; if silent, the statutory minimum applies (s. 10(2), (3)):
| Length of service | Minimum notice |
|---|---|
| Less than 26 weeks | 1 day |
| 26 weeks to under 2 years | 1 week |
| 2 years to under 5 years | 2 weeks |
| 5 years or more | 4 weeks |
Notice must be written, and the day it is given counts (s. 10(5)). Either party may terminate at once by paying "a sum equal to the amount of salary at the gross rate of pay which would have accrued" during the notice period (s. 11(1)), or without notice for the other's "wilful breach" of a condition (s. 11(2)). A party who breaks the contract owes the other the same sum (s. 16). An employer is deemed to have broken the contract by failing to pay salary under Part 3 (s. 13(1)); an employee by more than two consecutive days' unexcused absence without leave (s. 13(2)).
Dismissal for misconduct
An employer may, "after due inquiry", dismiss without notice for misconduct, or instead instantly down-grade or suspend without pay for up to one week (s. 14(1)). During the inquiry the employee may be suspended for up to one week on at least half salary (s. 14(8)), restored if no misconduct is found (s. 14(9)). "Dismiss" includes a resignation the employee shows was forced by the employer's conduct (s. 2(1)), so constructive dismissal is within the Act.
Paying out a leaver: the tax clearance step
On dismissal, all sums due must be paid on the day or within 3 days, excluding rest days and holidays (s. 22). On resignation with notice, on the day the contract ends; without notice, within 7 days, less the sum owed in lieu (s. 23). Untaken annual leave is paid out unless the dismissal is for misconduct (s. 88A(8)).
Section 24 overrides those deadlines. No payment due on termination may be made "without the permission of the relevant officer" under the income tax legislation (s. 24(1)); the employer must "immediately give notice of the termination" and payment must not be delayed more than 30 days after the notice is received (s. 24(2)). The Income Tax Act 2025 supplies the counterpart: at least one month's notice before a non-citizen employee ceases employment (s. 68(5)), and no payment of moneys held for a departing employee, without the Comptroller's permission, until 30 days after the Comptroller receives that notice (s. 68(7)). Non-citizen individuals are taxed at 0% on chargeable income derived up to 31 December 2030 (s. 43(1)(ba)), but the clearance procedure applies regardless.
Retrenchment, retirement and variable pay
No employee with less than 2 years' continuous service is entitled to retrenchment benefit on redundancy or reorganisation (s. 45); none with less than 5 years' service to retirement benefit (s. 46). The Act does not fix the quantum for longer-serving staff. A contractual annual wage supplement, bonus or increase "continue[s] to be payable" until varied by agreement (s. 48(1)), though after "exceptionally poor business results" the employer may invite negotiation of a lower or nil supplement (s. 48(5)).
Business transfers
When an undertaking or part of one is transferred, including by "sale, amalgamation, merger, reconstruction or operation of law" (s. 18A(13)), contracts of service continue as if made with the transferee, with continuity of service and unchanged terms, and the transferor's liabilities pass (s. 18A(1)–(3)). The transferor must first notify affected employees of the fact, date, reasons, implications and envisaged measures (s. 18A(5)); disputes go to the Commissioner, who may delay or condition an individual's transfer (s. 18A(10)).
Contractors and part-timers
Where a principal contracts for labour or work, the principal, contractor and any subcontractor are "jointly and severally liable with the employer" for a workman's salary (s. 65(1)), capped at one month for anyone other than the employer (s. 65(1A)). Section 65(2) requires a prior mediation request within 60 days by reference to the "Employment Claims Act 2016", which is not among the applied enactments in Schedule A to the Application of Laws Act 2024; confirm how that step operates before relying on it. A part-time employee works fewer than 35 hours a week (s. 66A(1)) and may be subject to modified rules by regulation (s. 66B).
Records, offences and personal liability
Employers must keep employee records (s. 95) and give pay slips for every payment (s. 96). Inspecting officers may enter any place of employment without notice to audit employment terms (s. 103). Failing to pay salary under ss. 21–23 carries a fine of $3,000 to $15,000 or up to 6 months' imprisonment, doubling for repeat offenders (s. 34(2)). Breaches of the hours, truck system and leave Parts carry fines up to $5,000, and $10,000 or 12 months on a subsequent offence (ss. 53, 61, 90). Where a body corporate offends with an officer's consent or connivance or through the officer's neglect, the officer is guilty too (s. 113A(1)), and neglect is presumed against the officer primarily responsible who failed to exercise reasonable supervision (s. 113A(5)).
Disputes
Either party may bring a dispute to the Commissioner, who may order payment "without limitation of the amount" (s. 115(1)), capped at $20,000 for managerial or executive employees (s. 115(3A)). Termination claims must be lodged within 6 months (s. 115(2)); no advocate or solicitor may appear (s. 120). Appeal lies within 14 days to "a court that is not the lowest level of court" (s. 117(1)), and civil suits are preserved (s. 132). "Court" means "such judicial body that the Druk Gyalpo may designate" (s. 2(1)) (see our guide to dispute resolution in GMC).
Practical checklist for GMC employers
- Draft every contract term against s. 8: meet or exceed the Act.
- Issue the written record of key employment terms within 14 days (s. 95A(2)).
- Pay within 7 days after each salary period (s. 21) and keep deductions within the one-quarter and 50% caps (ss. 27–32).
- For staff within Part 4, build rosters and overtime around ss. 36–40.
- Set equal notice periods not shorter than s. 10(3), and hold a "due inquiry" before any misconduct dismissal (s. 14).
- On termination, notify the tax officer immediately and hold final pay until clearance (s. 24; Income Tax Act s. 68).
Frequently asked questions
Is there a minimum wage in GMC?
The Act's arrangement of sections lists a s. 21A "national minimum wage", but the published text contains no operative provision and no amount. Minimum rates may be prescribed for children and young persons (s. 71). Confirm the current position before fixing pay.
Is retrenchment benefit mandatory?
The Act denies it to employees with under 2 years' service (s. 45) but sets no amount for longer-serving employees; the quantum comes from the contract or negotiation.
Key takeaways
- The Act is a floor: terms below it are void (s. 8), and every "$" is a US dollar (s. 2AA).
- Salary timing, deduction caps and termination deadlines are precise and criminally enforced (ss. 21–24, 26–32, 34).
- Notice must be equal both ways and at least the s. 10(3) scale; payment in lieu is always available.
- Tax clearance (s. 24; Income Tax Act s. 68) sits between a leaver and the final payment.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Employment Act 2025 (Law No. 3 of 2025), ss. 1, 2, 2AA, 3, 8, 9, 10, 11, 13, 14, 16, 18A, 20, 20A, 21, 21A (heading only), 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 34, 35, 36, 37, 38, 40, 45, 46, 48, 49, 53, 54, 55, 56, 58, 61, 63, 65, 66A, 66B, 67, 71, 76, 76A, 87A, 88, 88A, 89, 90, 95, 95A, 96, 103, 113A, 115, 117, 120, 126A, 132, 139; First and Fourth Schedules
- Income Tax Act 2025 (Law No. 6 of 2025), ss. 43(1)(ba), 68(5), 68(7)
- Application of Laws Act 2024 (Law No. 1 of 2024), Schedule A
