Guide To Restructuring A Cross-Border Workforce 2026 – Laos

Reduction in workforce

01. Is there a concept of redundancy - based on a shortage of work or other economic reasons as a justified reason to dismiss employees in your jurisdiction? If so, how is it defined?

Yes. Under Lao law, it is possible to dismiss employees for economic reasons. The concept of redundancy is regulated by the Law on Labour No. 43/NA, dated 24 December 2013 (the Labour Law), which defines the term as a reduction of the number of workers for business reasons.

Article 82 of the Labour Law provides for a reduction in the workforce when "the employer/company considers it necessary to reduce the number of workers in order to improve the work within the labour unit after consulting the trade union or employee representative or the majority of employees and has reported to the Labour Administration Agency (LAA)". A dismissal for this reason constitutes a termination of the employment contract by the employer or company for economic reasons.

02. In brief, what is the required process for making someone redundant?

Under Article 82 of the Labour Law, if the employer or company wishes to terminate an employment contract for business reasons, including making an employee redundant, the employer or company must provide an appropriate reason, i.e. that it is necessary for the employer or company to reduce employee numbers to improve work within the labour unit. There is no guidance as to what constitutes "an improvement" within the labour unit, so there is leeway for an employer to invoke Article 82 to terminate employees for economic reasons.

The employer must consult with the labour unit, trade union, and/or employee representatives, and provide explanation related to business or economic issues affecting the company. The termination of the employment contract must also be notified to the LAA before termination of the contract. The employer is also obliged to give employees who undertake physical labour 30 days' advance notice, and employees who undertake mental labour 45 days' notice, along with reasons for the termination.

03. Does this process change where there is a "collective redundancy"? If so, what is the employee number threshold that triggers a collective redundancy?

There are no specific provisions for collective redundancies. Accordingly, whether one or multiple employees are made redundant, the process set out in question 2 above must be followed.

04. Do employers need to consult with unions or employee representatives at any stage of the redundancy process? If there is a requirement to consult, does agreement need to be reached with the union/employee representatives at the end of the consultation?

As stated above, employers must consult with the trade union and/or employee representatives during the redundancy process, and notify the LAA in writing. According to Article 82 of the Labour Law, there is no requirement to reach an agreement with the union or employee representatives by the end of the consultation.

05. If agreement is not reached, can the restructure be delayed or prevented? If so, by whom?

Under Lao law, even if the parties have not yet reached or cannot reach agreement, the company may proceed with the restructuring. Employers are not required to wait for the finalisation of any dispute between the employer and employee.

06. What does any required consultation process involve (i.e. when should it commence, how long should it last, what needs to be covered)? If an employer fails to comply with its consultation obligations, what remedies are available?

As stated in question 2, before terminating an employment contract, the employer must:

• give the employee 30 or 45 days' notice, depending on the nature of the work, along with reasons for the termination;
• consult with the labour unit, trade union, and/or employee representatives;
• provide evidence of business or economic issues affecting the company; and
• report the business reasons for termination to the LAA.

The Labour Law is silent about sanctions for failing to comply with the consultation obligation. Under the Decree on Labour Conflict Resolution No. 76, dated 28 February 2018, employees, individually or collectively, are entitled to seek administrative remedy by filing a complaint with the relevant agency under the Ministry of Industry and Commerce for disputes in relation to their employer's breach of the law or internal regulations. We understand that failing to complete the consultations may also be subject to an administrative remedy.

07. Do employers need to present an economic business rationale as part of the consultation with unions/employee representatives? If so, can this be challenged and how would such a challenge normally be made?

According to Article 82 of the Labour Law, employers are required to present an economic business rationale as part of the consultation with unions or employee representatives. If an employer wishes to terminate an employment contract for business reasons, the employer must have an appropriate reason, i.e. that it is necessary for employers to reduce employee numbers to improve work within the labour unit. During consultations with the labour unit, trade union, and/or employee representatives, the employer must produce evidence related to business or economic issues affecting the company. The business reasons for termination of the employment contract must also be reported to the LAA before termination of the contract.

Lao law is silent on the possibility of challenging an economic business rationale. In the same vein, the Labour Law does not suggest that the union or employees have the right to oppose redundancy. In theory, if employees, employees' representatives, or trade unions are not satisfied with the business rationale provided by the employer, they may file an administrative action as mentioned in question 6.

08. Is there a requirement or is it best practice to consult employees individually (whether or not the employer is also legally required to collectively consult employees)?

Under Lao law, there is no requirement to consult with employees individually, nor is it general practice or prohibited. Accordingly, if an employer chooses to consult with an employee individually, in addition to its other consultation obligations, the requirements set out in question 2 must still be met.

09. Are there rules on the selection of individual employees for redundancy?

In Laos, employers are entitled to exercise their discretion in selecting individual employees for redundancy, as there are no specific regulations governing this aspect of employment law. However, employers' discretion must still be exercised reasonably and in accordance with the principles of good faith and fair dealing. Employers must ensure that the selection criteria used to determine which employees are made redundant are objective, transparent, and free from any form of discrimination or bias.

10. Are there any specific categories of employees who an employer is prohibited from making redundant?

Article 87 of the Labour Law prohibits employers from terminating the employment contracts of employees who fall within the following categories:

• pregnant or have a child below one year of age;
• undergoing medical treatment or rehabilitation, substantiated by a medical certificate;
• an employee representative or the head of a trade union;
• involved in legal proceedings or detained and awaiting a judicial decision;
• injured and undergoing medical treatment, substantiated by a medical certificate;
• recently experienced a natural disaster;
• on annual leave or on other leave with the permission of the employer;
• working in another location after being assigned by the employer; or
• in the process of making a claim or taking legal action against the employer, or cooperating with government officials in a claim or legal action against the employer.

If employers wish to terminate contracts of employees that fall in any of the categories above, the employer must obtain approval from the LAA.

11. Are there categories of employees with enhanced protection (e.g., union officials, employees on sick leave or maternity/parental leave, etc)?

There is no enhanced protection other than that set out in question 10. If an employer fails to obtain approval from the LAA before terminating employees in the categories set out in question 10, the terminated employees would be entitled to lodge an unauthorised termination claim against the employer.

12. What payments are employees entitled to when made redundant? Do these payments need to be made within a specified period? Are there any other requirements, such as giving contractual notice, payments into a central fund, etc.

An employee who has been made redundant is entitled to:

• their normal salary up to the date of the redundancy;
• payment in lieu of any unused annual leave or any benefits due in accordance with Article 57 of the Labour Law;
• a certificate of employment;
• severance pay in accordance with Article 90 of the Labour Law; and
• payment in lieu of notice if the employer elects to terminate the employment with immediate effect.

As mentioned above, employers are required to provide employees who perform physical labour with at least 30 days' advance notice of termination, and employees who perform mental labour with at least 45 days' notice, along with an explanation for the termination.

13. If employees are entitled to redundancy/severance payments, are there eligibility criteria and how is the payment calculated?

Under the Labour Law, an employee whose employment has been terminated due to redundancy is entitled to a severance payment, as in the case of no-fault based termination, equal to 10% of the employee's last monthly salary prior to termination multiplied by the number of months worked for the employer.

To view the full article click here.

Originally published by International Employment Lawyer.