National minimum wage rate revised

The National Minimum Wage (NMW) rate has been increased from Nu 50 to Nu 100. The revision of the NMW rate comes 10 years after it was last revised in January, 2001.

The cabinet approved the proposal for the revision this Tuesday after which it was presented to parliament yesterday. The new NMW rate will come into force from August 1.

NMW is the minimum amount that must be paid to a worker, usually on an hourly, daily or monthly basis. It is applicable to all foreign and national labourers working in the country.

Along with the NMW rate, the Ministry of Labour and Human Resources (MOLHR) also released the revised wage rates for the national workforce (NWF), which increased between 60 and 65 percent. Workers of the national workforce are Bhutanese employed by the government agencies for projects executed directly by them.

When the new wage rate comes into force, the wage of category I NWF workers, who include carpenters and masons, will increase from Nu 150 to Nu 240 a day and that of category V workers from Nu 100 to Nu 165 (see table). Now, unskilled NWF worker will get Nu 165 a day.

The wage rates for the national workforce have been increased considering the steady increase in the consumer price index and inflation rate over the years. This is expected to improve the standard of living and alleviate poverty among the NWF workers.

According to the revised wage rates, the workers of the NWF posted at worksites at an altitude of 2,400 metres and above are entitled to a high altitude allowance of Nu 600 a month. This allowance has been granted in view of a similar allowance civil servants are entitled to and to make up for extreme weather conditions and absence of nearby health and education facilities and services.

Among many factors considered for the increase of the NMW rate, the important ones include rising youth unemployment, the country’s continued dependence on foreign workers, paying capacity of employers, increasing rural-urban migration, supply and demand of labour, the cost of living, and psychological and social factors.

Labour Minister Dorji Wangdi said the government will revise NMW rate periodically as part of statutory requirement or through collective bargaining by workers and employers.

The NMW rate is applicable to all workers irrespective of age, sex, ability, and nationality.

Lyonpo Dorji Wangdi said no agency, be it government or private, should consider the NMW rate as the maximum wage to be paid. “It is unlawful to pay workers below the fixed rate, but there is no maximum ceiling,” he said.

While most workers today are paid more than Nu 100 a day, some who are exploited by employers settle for less than Nu 100 a day. The new NMW policy will look into all these aspects of the labour market. It will also help workers attain a certain level of family livelihood and security.

Lyonpo explained that, in general, there are two ways through which a wage rate is fixed – statutory and collective bargaining. Bhutan’s wage rates have been fixed considering both the ways.

The MOLHR formed a taskforce to fix the NMW rate, which studied and analyzed the three factors, namely national poverty line, annual inflation rate, and the consumer basket.

For the first factor, the taskforce calculated the inflation rate (5.6 percent) over poverty line (estimated at Nu1,096 a month). The NMW was accordingly fixed at Nu 1,223 per person per month.

For the second factor, assuming the NMW at Nu 50 and using the annual inflation rate, the taskforce fixed the NMW at Nu 2,902 a month or Nu 100 a day.

For the third factor, the average monthly household expenditure, including food and non-food items, was added to the annual inflation rate. The NMW was accordingly calculated at Nu 15,148 a month or Nu 505 a day.

After reviewing the analysis, the ministry considered the second method based on the annual inflation rate and fixed the NMW at Nu 100 a day or Nu 3,000 a month.

The new wage is expected to secure the wellbeing of workers and their families.

However, Labour Secretary Pema Wangda explained that, with the wage revision, the demand for foreign workers may rise since Bhutanese workers will become expensive. He also said that the cost of production may increase if workers’ productivity cannot keep pace with the increase in wages, and employment issues may arise with young jobseekers.

The NMW revision is reflected in the National Minimum Wage Policy framed for the first time by the MOLHR.

The policy, which will be revised on a regular basis, will have more provisions in future. The ministry, in the meanwhile, will work towards formulating a long-term wage policy.

By Sonam Pelden

One Response to “National minimum wage rate revised”

1. Tshogpa salaries - Tshering Tobgay’s Blog says:

   November 26, 2011 at 12:39 am

   [...] the government can do: increase tshogpa salaries. Why? Because tshogpas were being paid below the national minimum wage. So whether tshogpas deserved a raise or not, and whether the government had enough money or not, [...]

   Reply