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What global businesses need to know about payroll in Brunei
Brunei is a small country in terms of size and population – less than 500,000 people live there – but its vast oil and gas revenues make it a relative economic giant in south-east Asia.
Fossil fuels represent more than half of Brunei’s GDP, but like many other Asian nations that have built their fortunes the same way, the need to diversify is becoming more and more pressing all the time. This gives incoming foreign organizations the opportunity to explore new opportunities in a place that is extremely favorable to business, thanks to low tax rates and a relatively straightforward approach to employment and payroll regulations.
However, Brunei is unique in its combination of English common law (it only gained independence from the United Kingdom in 1984) and Islamic Sharia law. Because of this, understanding the country in detail is a must before doing business there. Before you start, read this guide on the key facts around starting a business, hiring employees, and running payroll in Brunei.
Getting Started
Brunei has one of the simplest company registration procedures around, all managed through the government’s BusinessBN online portal. This can be used for making an application for incorporating a private limited company (a ‘Sendirian Berhad) for BND 300 (approx. £175; $225; €205), or for registering a sole-proprietor or partnership business name for BND 30 (approx. £17.50; $22.50; €20.50). At the end of the process, businesses receive all their relevant certificates, and are automatically enrolled into the Employees’ Trust Fund (TAP). This process can be completed entirely online within a day.
Private companies must have at least two shareholders, while public companies must have at least seven. The minimum share capital for either option is US$1. Once you have proof of your company’s registration, you can then start to set up a corporate bank account in Brunei.
Foreign enterprises can have 100% ownership of a business’s scope and operation in Brunei, without a need for a local partner. However, for certain petroleum and government projects, it becomes necessary for a global company to establish a partnership with a local partner. In these cases, approval of such partnerships can take months.
Employment Considerations
To work in Brunei, employees and employers must complete the state application and register with supporting documents that confirm identity, leases for housing and business premises, and permission from relevant government agencies. Anyone working in Brunei for more than three months will need an identity card, and work permits must be renewed every two years.
Employment law in Brunei includes specific protections for female and minor workers. The minimum age for working in Brunei is 16 years old, and women are prohibited from working in uncertain jobs, at night or on offshore oil platforms.
Maximum working hours in Brunei are eight per day and 44 per week. However, Brunei typically runs a six-day working week, and the daily limit can be increased to nine hours if an employee is only working a five-day week.
Any work over the maximum limits, or that is over and above what is defined in the contract of employment, is considered overtime, which is limited to 72 hours per month. The only workers permitted to work for more than 12 hours per day, inclusive of any overtime, are those essential to people’s lives or security, or if an urgent business need arises. Payment for overtime is 150% of the normal rate.
Notice periods start at one day, rising to one week after six months of service, two weeks after two years, and four weeks after five years. Probation periods are limited to a maximum of 90 days.
Compensation, Bonuses and Severance
Brunei began to introduce a statutory minimum wage for both local and foreign workers in July 2023. Initially, it only applies to the banking, finance, and IT sectors, but it is expected to be rolled out more widely in the future. Full-time workers should be paid at least BND 500 per month (approx. £295; $375; €345), while part-time workers should receive at least BND 2.62 per hour (approx. £1.55; $2.00; €1.80).
Employees should be paid monthly and the payment of bonuses is also allowed in Brunei, up to a maximum limit of one and a half times the employees’ salary. There is no requirement for severance pay, other than ensuring that any outstanding salary payments are made in full.
Foreigners working in Brunei should be aware that Sharia law is in place, which prohibits alcohol even for non-Muslims, and that saying anything negative about the Sultan of Brunei is a very serious criminal offense.
Tax and Social Security
A big part of Brunei’s popularity within international business is its relatively low-tax regime. There is no income tax on personal earnings in Brunei, nor is there any VAT or capital gains tax.
Corporation tax, however, is levied at 18.5%, except for companies in the oil and gas industry, where a special rate of 55% applies. However, these tax rates are levied progressively: the first BND 100,000 of profits (approx. £59,000; $75,000; €69,000) are taxed at one-quarter of the applicable rate, and the following BND 150,000 (approx. £88,000; $112,000; €103,000) at half the applicable rate.
Employees must pay 5% of their gross salary into the TAP Employees’ Trust Fund, while both employees and employers should each pay 3.5% into the SCP (Supplemental Contributory Pension).
Holidays and Leave
There are 16 days of public holidays in Brunei each year. Holidays that fall on Fridays often result in the official public holiday being moved to the Saturday. Paid leave entitlement is 12 days per year, once employees have completed one full year of service. This increases to 14 days after five years of service.
Maternity leave varies between local and foreign workers. Local mothers get two weeks off before the birth and another 13 after it; 13 of these 15 weeks are paid. Foreign workers giving birth get four weeks before the birth and one week after it, theoretically to allow them to return home to give birth. They receive a further four weeks across the six months following the birth. Of these nine weeks in total, eight are paid.
There is no specific paternity leave entitlement in Brunei, and new fathers should therefore use some of their paid leave if they wish to take time off around a birth.
Paid sick leave entitlement is 14 days per year, as long as the illness or injury is medically certified and the employee has at least six months’ service. An extra 46 days of leave applies in the event of hospitalization, taking the total to 60 days.
In Summary
There’s a lot to love about doing business in Brunei: no income tax, low corporate tax rates, simple business set-up procedures, and clear and easily understandable rules around payment and employment. But things are changing in the country, most notably with the introduction of the minimum wage, and respecting Brunei’s Muslim traditions is also very important. Working with a global payroll partner that has up-to-date, Brunei-specific expertise can help you avoid any unfortunate bumps in the road as you expand into the country.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.