Labor laws in Myanmar, like most other laws, are outdated. There is no single employment law, instead a hodgepodge of laws including the Leave and Holiday Act (1951), Factories Act (1951), Workman’s Compensation Act (1923), Employment and Training Act (1950) and others, are used. A new law passed in 2011-the Labor Organization Law-provides a framework for labor unions in Myanmar. Foreign investors don’t need to know everything contained in these laws, so we’ve highlighted two of the most important points below.
Myanmar law stipulates that severance must be paid to all terminated employees. The amount the employer must pay depends on the length of service of the employee. If the employee has worked at the company for less than 3 months, he is entitled to 1 months’ salary as severance pay. If he has worked for the company from 3 months to 1 year, he is entitled to 2 months’ salary. If he has worked for the company for 1-3 years he is entitled to 3 months’ salary. And if he has worked for the company for more than 3 years, the employer must pay 5 months’ salary.
Now there are some caveats to this law. The first is that if the employee willfully quits, then no severance pay is required. Also, if the company can prove that the employee did something damaging to the company’s reputation, the company is not required to pay any severance. These two caveats mean that in reality very few employees are fired from Myanmar companies; instead they are pressured to resign – thereby alleviating the company’s severance pay requirements. We find this practice to be somewhat morally contemptible, but it is something that foreign investors should be aware of. What all this boils down to, is that foreign investors need to be very careful about who they hire, because getting rid of a bad employee is not that easy in Myanmar.
The Labor Organization Law (2011), which was written with the assistance of the ILO, should be of particular interest for foreign investors looking at the manufacturing sector. The law looks similar to many labor laws in other countries and basically gives workers the right to organize. Although this law is officially on the books, currently labor unions have almost no collective bargaining power. When a labor dispute happens, it usually involves workers from a particular factory striking against the factory’s ownership. These workers do not bring in labor union representatives but instead choose leadership from among their own ranks to negotiate. These kinds of strikes have happened at factories owned by foreigners – mostly Japanese and Korean – and most of them have been settled within a short period of time with factory management agreeing to raise wages.
Foreign investors looking to capitalize on the low cost of labor in Myanmar will need to understand that strikes may occur in the future and should draft a contingency plan to deal with such issues. Because unions are still very weak in Myanmar, foreign investors would do well to deal directly with their workers and work to resolve any issues before they result in a full-scale strike.
Depending on the industry, there are a maximum number of hours that employees can work before they are required to be paid overtime. Frankly, this law is not carefully followed in Myanmar, but foreign investors should be aware of it anyway.
For factory workers, miners, oil and gas workers, and other blue collar jobs the maximum number of hours per week is 44, with a maximum of 8 hours per day. Anything beyond this will require overtime pay at double the workers normal rate.
For white-collar organizations such as media companies, private businesses, shops and offices, the maximum number of hours per week is 48, with a maximum of 8 hours per day.