FAQs: Termination of Employment in Laos


Before investing into a new region, it is important that businesses understand a country’s local employment laws. Employment laws are so important in fact, that the World Bank compiles data on it from each country to come up with its annual ease of doing business rankings.

Taking these ideals into consideration, Laos, under its amended Labour Law No. 43/NA dated 24 December 2013 (“Amended Labour Law”), allows either party to an indefinite employment contract to terminate the contract at any time provided that a prior written notice is given to the other party at least 30 days in advance for unskilled labour and at least 45 days in advance for skilled labour.

Typically, if employers wish to immediately terminate the employment contract, such immediate termination will be supplemented with a severance pay in lieu of notice. However, employers have the right to immediately terminate indefinite employment contracts without paying severance pay and without giving notification to the Labour Administration Authority in cases where the employee has:

  • caused deliberate damage to the employer;
  • repeatedly violated the internal regulations of the labour unit or the employment contract after receiving a warning from the employer;
  • neglected his or her duties for 4 consecutive days without reasonable excuse;
  • been sentenced to imprisonment by a court for an offence deliberately committed against the labour unit; or
  • violated the rights of other employees and has already received a warning.

The following is a list of frequently asked questions associated with the termination of employment in Laos.

Frequently Asked Questions

Q: How is severance pay calculated?

A:  If either the employer or employee unilaterally terminates an employment contract for justified reasons under the Amended Labour Law, the employee will be entitled to a severance payment of 10% of the last salary or wage multiplied by the total number of months worked by the employee.

However, if the employer terminates the employment contract for unjustified reasons, the employee will be entitled to a payment of compensation of 15% of the last salary or wage multiplied by the total number of months worked by the employee.

Q: Are employees entitled to terminate the employment and receive severance pay?

A: Yes, employees have the right to terminate the employment contract and receive severance pay in the following situations:

  • where the employee has secured a medical certificate to prove that they are not in good health and the employer has already moved the employee to a new position but the employee remains unable to work;
  • where the employee has raised contractual issues to the employer multiple times and the issue remains unresolved;
  • where the employee has received written certification from the trade union or employee’s representative as well as from the village authority to prove that they are unable to undertake their duties as a result of being relocated to a different workplace; or
  • where the employee is subject to molestation, harassment or sexual harassment by the employer or at the workplace and the employer has ignored the occurrence of such actions.

Q: Is the immediate termination of employment by way of the payment in lieu of the advance notice allowed?

A: Yes, employers may opt to pay out the notice period.

Q: Can an employer unilaterally terminate a fixed term of employment before its expiration date?

A:  Yes, the fixed term employment contract can be terminated before its expiration date upon the mutual agreement of the parties or in cases of contractual breach by either one of the parties. Prior notice is required.

Q: Are employers required to pay compensation when an employee dies?

A: Yes, employers are required to pay 50% of the termination compensation that the employee would have received for general termination of employment in cases of the employee’s death.

 If you have any questions or require any additional information, please contact Aparat Sanpibul or the ZICO Law partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice.