30 April 2013

Highlights of Myanmar's New Law on Minimum Wages

Marla Bu & Kyi Naing
SUMMARY The Myanmar National Assembly has adopted a new Law on Minimum Wages. The new law, Law no. 7 dated 22 March 2013 (the Law) sets out the broad framework for determining the minimum wage in a broad range of industry sectors, which is to be carried out by a designated committee. In this Analysis we briefly outline: Committee will set the minimum wage per sector Laborers and employees How are wages defined? Equal wages Non-compliance basis for which minimum wage is to be calculated. The committee will take into consideration the needs of the employees and their families, the current living standards, the cost of living, the state of the country's economy, the well-being of the employee vis-a-vis his profession, and other considerations presented by the relevant ministry. ABOUT THE AUTHORS
Marla Bu is an American of Burmese descent with a degree in law from the College of Law of England and Wales and a bachelors degree from Fordham University in New York. She has seven years of experience with the United Nations and law firms in New York, where she worked on commercial and civil legal matters and prepared briefs on Myanmar law. She lives in Yangon. marla.bu@vdb-loi.com Kyi Naing is a Myanmar-qualified lawyer with seven years of experience, most recently with DFDL in Myanmar. Experienced in cross-border legal issues, he has assisted international clients with their investment projects in Myanmar, and advised on a wide range of corporate and commercial issues. kyi.naing@vdb-loi.com

On 22 March 2013, the Myanmar National Assembly has adopted a new Law on Minimum Wages, repealing the Minimum Wage Law of 1949 and the Minimum Wage for Agricultural Laborers Law of 1948. The new law, Law no. 7 dated 22 March 2013 (the Law) sets out the broad framework for determining the minimum wage in a broad range of industry sectors, which is to be carried out by a designated committee. Here are the salient points to know. Committee will set the minimum wage per sector The president's office will create a committee comprised of relevant persons in government departments, representatives of employers and employees, to conduct research on the prevalent minimum wages across various industries for employees. (Chapter 2). This research will be the

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The committee will use it's findings to set forth a minimum wage for employees across the various industries for the entire country, including for employees employed in special economic zones (Chapter 6).

The employer is required to pay at least the prevailing minimum wage as dictated by the government committee. (Chapter 7) The employer is also required to inform employees of the prevailing minimum wages and have it be prominently posted for employees (Art. 13(a)). The employer can pay more than the prevailing minimum wage, also has to look after the wellbeing of his employees. (Art. 13 (f))
Laborers and employees Chapter 1 of the law distinguishes "laborers" and "employees". Laborers includes all employed in commerce, agriculture and such businesses where persons are employed with agreement from employer for manual or intellectual labor on a part time or permanent basis. Employees include interns, trainees, apprentices, secretaries an office workers. Government workers, seamen and family members including spouses, children, siblings and parents are not employees for the purposes of this law. Employer is defined as persons who are in the position to hire, be responsible for and remunerate employees employed by the business. (Art. 2(a)) Employers include representatives of the employer, those responsible for remuneration of employees, and board of directors of a company formed under the MCA. (Art. 2(b)). How are wages defined? The Law defines the notion of "wage" for the purpose of determining whether the minimum wage has in fact been paid. In Art. 2(c), the Law sets out that wage means "payment made to an employee by an employer in exchange for his services whether it be by hourly, daily, weekly, monthly or on a project basis". It includes tips, overtime and bonus paid to reward the employee for his good performance. Wage does not include travel expenses, pension, living expenses, medical expenses, and compensation for dismissal.

In other words, tips, overtime and bonuses are included in the concept of wage, but it is unclear if they thus count as minimum wage. The regular salary of an employee could, in that case, be below the minimum wage that is determined. But in order to comply with the Law, the threshold must be reached taking into account the bonus paid to an employee. However, this interpretation does not yet take into account any forthcoming regulations from the Government, so it is difficult to be certain at this stage. Wages may also be paid on a project basis in accordance with the new Law. Equal wages The employee has the right to be paid a minimum wage accorded to him and receive compensation for additional service performed such as overtime work that is outside of agreed duties. The language seems to suggest that the overtime pay is to be paid on top of the minimum wage. As is pointed out in Art.14(h), employees, regardless of gender, have the right to be treated and compensated equally. Non-compliance The rules of the Minimum Wage are a serious matter for employers. Non-compliance with payment of minimum wages will result in the employer being fined up to 3 lakhs[US$ 337 equivalent]1 and up to 6 months in prison. (Art. 25). In both instances, the employer is required to pay the employee the difference in the minimum wage amount owed to him. Chapter 9 states that the relevant ministry will from time to time inspect the payroll records of employers to ensure that minimum wages law is compiled with. Failure to adhere to the guidelines on minimum wage due to dishonesty such as by altering the payroll books will result in the employer being fined up to 5 lakhs [US$ 562 equivalent]2 and face up to one year in prison. (Art. 23) *** For more information on this subject matter, contact: Marla Bu, Legal Associate marla.bu@vdb-loi.com
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At current exchange rate of 1USD = 890 Kyats (April 30, 2013) At current exchange rate of 1USD = 890 Kyats (April 30, 2013) PAGE 2

VDB Loi in Myanmar

Partners
Jean Loi is widely recognized as one of the regions most experienced tax specialists. She was formerly a tax partner with PricewaterhouseCoopers in Southeast Asia. Jean is a highly successful tax advisor with a CPA background. She works on major projects throughout Southeast Asia, dividing her time between Yangon and the rest of the region. Jean lives in Yangon. Edwin was formerly with Loyens & Loeff and a partner at DFDL. He has 21 years of experience as a lawyer, academic and government advisor, including five years of experience on Myanmar tax and investment issues. Edwin has advised oil companies, distributors, property funds, and private equity funds on making investments in Myanmar. He lives full-time in Yangon.

Jean Loi

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Directors and Senior Counsel

Paul is a US attorney with 15 years of experience, and was formerly with Clifford Chance and OMelveny & Myers. He holds an MBA from Cambridge University and a J.D. from Duke University. He has extensive experience in providing integrated solutions for M&A and private equity transactions. He lives full time in Paul Nikitopoulos Yangon. May directs our licensing team, focusing primarily on investment permits, operating licenses and import/export licensing. In addition, her practice areas include customs duties, customs valuation, compliance and company establishment. She holds a bachelors degree in Commerce from the Institute of Economics, University of Yangon. U Myo Nyunt is an advocate to the Supreme Court of Myanmar and one of Myanmars most distinguished senior lawyers. He is the former Director of the Supreme Court and Appellate Judge, and a noted author on Myanmar law. He is a member of the Bar Council, and a member of the board of editors of the Myanmar Law Review. Moto has 20 years of experience working in Southeast Asia as an administrator, auditor and accountant, including several years with PricewaterhouseCoopers as a senior auditor, where she worked with a broad cross-section of organizations and industries. Moto heads the Japanese desk of our firm, dividing her time between Cambodia and Yangon.

U Myo Nyunt

May May Kyi

Yumi Ishimoto

Some of our Managers, Consultants and Associates

Cynthia, living in Yangon, is a Chartered Accountant and a member of the Institute of Chartered Accountants of Scotland. She also holds a Masters in Mechanical Engineering with Business Finance (University College London, UK). Her experience in mining, oil & gas and utilities audits and management accounting are a major asset to VDB Loi. Adam Mcbeth is a US attorney with a J.D. from St. Johns University and an LL.M. from NYU. Adam has experience in assisting clients in Myanmar with the legal structuring of power generation projects, real estate, telecommunications and oil and gas transactions. He lives full-time in Yangon. Marla is an American of Burmese descent with a degree in law from the College of Law of England and Wales and a bachelors degree from Fordham University in New York. She has seven years of experience with the United Nations and law firms in New York, where she worked on commercial and civil legal matters and prepared briefs on Myanmar law. She lives in Yangon. Kyi Naing is a Myanmar-qualified lawyer with seven years of experience, most recently with DFDL in Myanmar. Experienced in cross-border legal issues, he has assisted international clients with their investment projects in Myanmar, and advised on a wide range of corporate and commercial issues. Aung Myat Thu advises on corporate establishment and investment licensing. He has extensive experience liaising with Government offices, especially for the Directorate of Investment and Company Administration, the Myanmar Investment Commission, and the Trade Department.

Cynthia Herman

Adam Mcbeth

Lin holds a Bachelors in Commerce from the University of Newcastle, Australia. She formerly worked with a global audit and advisory firm, where she was based overseas for a number of years. At VDB Loi, Lin advises clients on tax structuring, licensing, general regulatory and customs duty issues. She has Ngwe Lin Myat Chit worked on major projects in the FMCG sector, oil and gas, power and health/life sciences. Chaw has built up a comprehensive knowledge of taxation, including calculation of tax liabilities, preparation of tax returns, and in particular, the tax clearance and audit process. She holds a Bachelors degree and has a diploma in Accounting. She also has an extensive knowledge of company establishment Chaw Nandar Aung and investment licensing. Nay has six years of experience in tax, accounting and corporate compliance working for international enterprises in Myanmar. She liaises with various authorities on licensing issues, and is an accomplished corporate tax advisor. Nay holds a bachelors degree from Yangon University.

Marla Bu

Kyi Naing

Nay Nwai Linn

Aung Myat Thu

Senior lawyers with Myanmar experience not based in-country

Huy is a tax lawyer with a J.D. from Hofstra University and an LL.M. in taxation from Georgetown University. After practicing with Latham & Watkins and Ernst & Young in the US, he came to Southeast Asia in 2008. Huy combines his international tax expertise with a detailed knowledge of tax and laws in Southeast Asia. Huy has worked on Myanmar projects in oil & gas, FMCG, mining, and oilfield services. He is based in Vietnam. Chris is one of Southeast Asias most experienced foreign lawyers. As a Baker & McKenzie lawyer, he advised MNCs on a broad range of legal matters. As a partner with the US firm Duane Morris LLP, Chris headed the firms Ho Chi Minh City office, and later undertook partnership roles with Watson Farley & Williams and Rajah & Tann. He is based in Cambodia PAGE 3 and Singapore. Chris has overseen Myanmar due diligence and M&A projects.

Huy C. Luu

Chris Muessel