Wednesday 18 December 2013

The Fine Print: Legal & Tax insight

The Employment and Skills Development Law, enacted on August 30 this year, came into force on December 1 and is reshaping the hiring landscape.

The law limits job placement services to state-operated job centres (“employment exchange offices”) and 100-percent Myanmar-owned private recruitment agencies. Foreign human resources companies therefore may have to review their business model. Further, private recruitment agencies now require a licence from the Ministry of Labour, Employment and Social Security and must not charge employees for their services. Violation of these provisions is a criminal offence.

Employers are supposed to inform the job centre (which would in practice be the township labour office) of any vacancies, but the law contains no penalties for non-compliance.

The law stipulates the essential parts that must be included in a labour contract. Apart from the job description and the salary, contracts must cover details such as probationary period, location and duration of the employment, working hours, days off, overtime, accommodation, meals, shuttle service and, of course, termination of employment.

Many employers will probably continue to use the labour contract template issued by the Ministry of Labour, Employment and Social Security, and labour contracts signed before the law came into force continue to be valid.

The labour contract “must be signed within 30 days” after the employer has hired the employee. In practice, this means that the employer must prepare a written contract and present it to the employee for signature no later than 30 days after the commencement of employment.

The law states that “a trainee undergoing pre-hiring training and probationary period is not covered by this provision”. This probably reflects the present practice of having a separate agreement with the employee for the probationary period and signing the actual labour contract only after the hiring decision is made. The law does not stipulate the permissible length of the probationary period. According to present practice, it is three months.

The law also explicitly allows parties to agree on a post-training bond period during which an employee sent for training must not quit the company. Interestingly, “violating any matters contained in the labour contract” is now a criminal offence.

The law now clearly states what has always been the opinion of the township labour offices: namely, that a copy of the labour contract must be sent to the township labour office (the “employment exchange office”) for approval. The law does not, however, specify the consequences of non-compliance.

The Ministry of Labour, Employment and Social Security has yet to issue – as the law requires – a notification specifying the amounts of severance payments.

Present practice requires the payment of a job-loss allowance of 2-5 months’ salary, depending on the length of the employment. The employer is not obliged to pay if the term of a fixed-term labour contract expires, or if the employee resigns voluntarily, or if the employee is dismissed for grave misconduct.

The law also requires the government to set up a “central body for employment and skills development” which, in turn, shall form an “employment development team” and a “skills development team”. None of these units have been established yet, though, and the provisions of the law relating to skills development and assessment have not yet been implemented.

It is also interesting to note that there will be a skills development fund to which each employer will have to contribute at least 0.5 percent of the sum of salaries, and also that foreigners will be allowed to open, and work for, training schools and skills assessment companies.

Sebastian Pawlita and Yi Yi Mon are consultants at Polastri Wint& Partners Legal & Tax Advisors.

source: The Myanmar Times

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