A Global Employer's Guide on How to Hire in Bhutan

Imagine a small kingdom tucked in the Himalayas where the government measures success not by GDP but by Gross National Happiness. This isn't a fairy tale, it's Bhutan.

This emerging market has been systematically building digital literacy across its population, with 49% of citizens now digitally literate and 96% of program participants reporting positive impacts on their professional capabilities. The country launched an ambitious ICT education initiative called iSherig-2, embedding digital skills and coding curricula into schools and training over 5,000 teachers in ICT competencies. English proficiency runs deep here, too. Lessons are taught in English throughout the education system, creating a workforce that can communicate seamlessly with global teams without the friction of language barriers.

Here's what makes Bhutan even more interesting right now. About 9% of the population has recently emigrated, driven by economic pressures and the pull of higher wages abroad. These are skilled, English-speaking professionals seeking opportunity. For distributed companies building remote teams, this creates a unique window to access talent that combines technical skills, strong English communication, and a work culture shaped by principles that prioritize sustainable growth and collective well-being. The opportunity exists right now to tap into this market before it becomes crowded.

The labor market in Bhutan

Bhutan's overall employment rate hit 96.5% in 2024, which sounds remarkable until you examine these figures. Youth unemployment sits at 17.8% as of the third quarter of 2025, down from highs above 20%, but still reflecting a tension familiar to many small economies: young, educated workers entering a market that struggles to absorb them at the pace at which they arrive.

About 20,000 young people enter the job market annually in a country with a total labor force of roughly 417,000. Urban unemployment clocks in at 5.7%, more than double the rural rate, with the capital, Thimphu, at 5.9%. The gap reflects what happens when opportunity concentrates geographically. Young graduates gravitate toward cities in search of professional roles, but those jobs remain scarce.

The tech sector is in what one government official called "a nascent stage," dominated by government contracts and still finding its footing in the global market. But there are early signals worth paying attention to. A few IT companies have started serving international clients, offering everything from application development to managed services. The government has backed this with substantial investment through its Digital Drukyul Flagship program, allocating over 3 billion ngultrum (US$33.9 million) to build out digital infrastructure and citizen services.

Deepika Rai, Head of Bhutan's Tech Industry Development Division, told The Bhutanese, "We believe it is only a matter of time when the majority of services will be exported, and we believe our industry has the capability. There is a wide range of services that the industry provides from developing applications, providing enterprise solutions to offering managed services. The shift has been impressive, but the challenge is to sustain and move towards offering services globally."

What this means for employers who are hiring globally is straightforward. You have access to a workforce with solid digital literacy and English fluency, shaped by systematic ICT education, but it's underutilized domestically. The mismatch between education and local job availability creates an opening. These are professionals who want to work and who possess skills that translate well to remote collaboration, but the domestic market cannot onboard them fast enough. That gap is your hiring opportunity.

Primary ways to hire in Bhutan

Foreign companies have two main routes to hire employees in Bhutan, each with distinct tradeoffs around control, speed, and complexity.

Establishing a legal entity in Bhutan

Setting up your own legal entity means you get full operational control and a permanent establishment in the country. But the process involves multiple government agencies and substantial upfront effort.

You need to reserve a company name through the Corporate Regulatory Authority, obtain an FDI Registration Certificate from Invest Bhutan (with specific requirements of at least 20% foreign equity ownership, or 10% for institutional investors), and secure security clearances for all directors with the Royal Bhutan Police. Then, you can formally incorporate a legal entity in Bhutan. The timeline stretches across weeks or months, and you take on full responsibility for ongoing payroll, tax withholdings, and employment law compliance.

Partnering with an Employer of Record (EOR) in Bhutan

An employer of record lets you hire employees in Bhutan without establishing your own legal entity. The EOR becomes the legal employer on paper, handling payroll, tax compliance, benefits administration, and employment contracts under Bhutanese law. You maintain day-to-day management of the employee and their work. This approach compresses what would take months into weeks or even days.

EOR services work particularly well for companies testing the Bhutanese market, hiring a small number of remote employees, or those who want to bypass the administrative complexities of entity setup and ongoing compliance management. The tradeoff is less direct control over the employment processes and ongoing service fees, but you gain speed and reduce legal exposure.

Employment Contracts in Bhutan

Bhutanese law requires written employment contracts for all employees, regardless of position or industry. This protects both parties and eliminates the ambiguity that can come with verbal agreements. The contract must include specific elements like the names and addresses of both parties, a detailed job description, workplace location, start date, contract duration (fixed-term or indefinite), salary details, working hours, leave entitlements, notice periods, and any additional benefits. If you hire five or more employees, you also need to develop Internal Service Rules approved by the Chief Labour Administrator.

Probationary periods are permitted for up to six months, giving you time to assess whether a new hire is the right fit. During probation, either party can terminate the relationship with just one week's notice, rather than the standard notice period. Contracts must be maintained for at least three years after employment ends, and they're typically drafted in Bhutan's official languages (Dzongkha, Nepali, or Tshangla) with English translations.

Bhutanese working hours, holidays, and leave

Standard working hours in Bhutan vary widely by industry and contract. Bhutanese employees work an average of 54.4 hours per week, which far exceeds the standard 40-hour workweek in other markets. Bhutan observes numerous public holidays throughout the year (sixteen of which are recognized by the government), reflecting the country's Buddhist culture and national celebrations.

Leave entitlements are generous compared to many markets. Employees earn paid annual leave, with the amount depending on tenure and contract terms. Sick leave, maternity leave, and other statutory leave types are also mandated, giving employees protection during life events that require time away from work. These provisions apply equally to both permanent and fixed-term employees during their contract period.

Employee benefits and social contributions

Social security contributions form the backbone of employee benefits in Bhutan. Both employers and employees must contribute to the National Pension and Provident Fund, which provides retirement benefits and financial security. Permanent employees must also receive occupational injury coverage and severance pay provisions. The system functions similarly to social insurance programs in other countries, pooling contributions to provide a safety net.

Beyond statutory requirements, employers often provide additional supplemental benefits to attract and retain talent:

• Health insurance or medical coverage
• Transportation allowances
• Housing support in areas with high living costs
• Performance bonuses tied to individual or company goals
• Professional development and training opportunities

Employees who complete five years of service with a single employer become eligible for gratuity benefits upon leaving. This long-service benefit rewards loyalty and is calculated based on tenure and final salary.

Payroll and taxation in Bhutan

Payroll processing in Bhutan requires careful attention to tax withholding and social contribution requirements. Employers must register with the Department of Revenue and Customs to obtain a Taxpayer Identification Number before processing their first payroll. You withhold personal income tax from employee salaries based on Bhutan's income tax brackets and remit these amounts to the tax authority. The employer also handles social security contributions, splitting the cost between the employer and employee portions.

Tax compliance extends beyond simple withholding. Employers must file regular reports documenting all payments, deductions, and contributions for each employee. Payroll records must be maintained for at least three years and made available for inspection by labor and tax authorities. Getting this wrong carries penalties, so many foreign companies that work without a local entity choose to partner with an EOR instead, which can manage these compliance obligations as part of its service.

Employee vs. contractor classification

The distinction between employees and contractors in Bhutan hinges on control and the permanence of the employment relationship. Employees perform work under your control and direction and work during your assigned hours. They will use your devices and usually work exclusively for you. In contrast, contractors retain control over how they complete assignments, work for multiple clients at the same time, and use their own tools and workspaces.

It's important to understand these differences for your practice, as calling someone a contractor when they're working as an employee will result in back payments for the missed social security, benefits, and statutory entitlements they should have received from day one. Most employment relationships in Bhutan are governed by the Labour and Employment Act, except for most domestic workers and royal civil servants.

This means the rules on the classification of employees and contractors will be very broad. When determining the true nature of the working relationship, focus on practice rather than the terms of the contract. If you are controlling their timetable, providing the laptop, and are expecting them to work for your company exclusively, they are most likely an employee, regardless of labels.

Termination and severance in Bhutan

The primary obligation of employers in Bhutan is to follow prescribed processes for terminating employment relationships. You are allowed to terminate employment for just cause (this means serious misconduct or repeated breaches of the same policy) or for no cause at all, so long as you provide adequate notice.

Fully established employees get a one-month notice period, but probationary employees get only 7 days' notice. Documentation for formal termination and its explanation are necessary. Someone cannot be fired for unionizing, complaining about the employer, being temporarily ill, being pregnant, and/or refusing to work in unsafe situations.

The length of service and the reason for termination determine the amount of severance. Unless the contract states otherwise, employees do not receive severance for voluntarily resigning. If you terminate someone without any reason or documentation, it leaves your organization open to wrongful termination claims and litigation.

Bhutanese immigration and work authorization

The process of obtaining a work visa in Bhutan requires the employer to sponsor the employee and demonstrate that no qualified Bhutanese candidate can fill the role. The Ministry of Industry, Commerce and Employment (MoICE) processes applications, which bundle together employment contracts, educational credentials, security clearances, and medical documentation. Expect this process to take several weeks from submission to approval.

Work permits typically grant one year of legal employment with options for renewal based on continued sponsorship. Foreign workers cannot switch employers without securing a new permit under a different sponsorship, which effectively ties them to the company that brought them into the country. Status must remain valid throughout their employment period. Companies using an EOR can minimize much of this administrative work, since the EOR serves as the visa sponsor and handles compliance requirements.

FAQs

Questions about hiring in Bhutan tend to follow predictable patterns. Here are answers to the ones we hear most often.

What is the work culture in Bhutan?

Bhutan's workplace culture blends Buddhist principles with a strong sense of community and hierarchy. Workers average well over 50 hours per week, making it one of the hardest-working countries globally, though this varies significantly between urban professional roles and sectors like agriculture, tourism, and hospitality, where longer hours are common. The Gross National Happiness philosophy influences employment practices by emphasizing sustainable growth and collective well-being, but in practice, many workers face demanding schedules driven by economic necessity.

What is a good salary in Bhutan?

The average monthly salary in Bhutan sits around BTN 39,000 (Bhutanese Ngultrums), which converts to roughly US$440. However, what constitutes a "good" salary depends on lifestyle and location. Skilled professionals command significantly higher wages. For instance, developers and programmers typically earn around 50,000 BTN (about US$565) per month. Senior roles push well beyond these baselines, with general managers averaging BTN 64,700 (US$786), lawyers reaching BTN 72,100 (US$876), and CEOs averaging BTN 88,500 (US$1,000).

Can I hire in Bhutan without a local business entity?

Yes, partnering with an employer of record allows you to hire Bhutanese talent without establishing your own legal entity. The EOR becomes the legal employer, managing payroll, tax compliance, benefits, and employment contracts while you retain control over the employee's functions. This approach eliminates the months-long entity registration process and ongoing administrative burden.

Why hire in Bhutan with Pebl

So you're sold on Bhutan? Great. Now to figure out the next step. You could start the long, expensive process of entity establishment…or you could partner with Pebl and let us handle the headaches.

With our employer of record service in Bhutan, we handle everything from payroll to compliance, so you can keep your focus on your team. With local experts in 185+ countries worldwide, we've built the infrastructure to help you hire anywhere without the hassle of establishing a local entity. Whether you need one employee in Thimphu or a distributed team across Asia, Pebl gets you operational in weeks, not months. Get in touch to learn more.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.

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