Understanding Payroll in Brunei: What Global Companies Need to Know About Brunei Payroll
Brunei may be a small south-east Asian country of less than half a million people, but in global economic and business terms, it punches well above its weight. As of 2020, its GDP per capita was nearly US$62,000, making it the eighth-richest country in the world when adjusted for size, almost on a par with the United States.
Private or public limited companies can be set up in Brunei through the BusinessBN website, where an online application can be filled out for incorporating a company and registering a business name. This includes the payment of a registration fee of 300 Brunei dollars (approximately £160; $220; €190). At the end of the process, businesses receive all their relevant certificates, and are automatically enrolled into the Employees’ Trust Fund (TAP).
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.
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.
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. Overtime is limited to 72 hours per month, and no one is permitted to work for more than 12 hours per day inclusive of any overtime. Payment for overtime is 150% of the normal rate.
Compensation, Bonuses and Severance
There is no statutory minimum wage in Brunei; employees and employers negotiate and mutually agree on wage levels in contracts, which must be put into writing in Malay. Employees should be paid monthly. The payment of bonuses is also allowed in Brunei. 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.
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. £54,000; $74,000; €63,000) are taxed at one-quarter of the applicable rate, and the following BND 150,000 (approx. £81,000; $111,000; €94,000) at half the applicable rate.
The only social security contribution applicable in Brunei is into the TAP Employees’ Trust Fund. Both employers and employees must pay 5% of their gross salary.
Holidays and Leave
Paid leave entitlement in Brunei is seven days per year after one year of service, increasing by one day per year, up to a maximum of 14 days per year after eight years of service. Employees should always get one complete day of rest per week, and should also receive time off on the 11 days of public holiday observed each year.
Maternity leave entitlement is 13 weeks on full pay, plus two weeks of unpaid leave. However, for foreign workers, a reduced rate of eight paid weeks plus one unpaid week applies. There is no statutory paternity leave 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 60 days of leave applies in the event of hospitalization
It’s easy to see how Brunei’s largely relaxed approach to tax and straightforward set-up process makes it so attractive for international expansion. However, not all is as simple as it may seem, especially as incoming businesses must accommodate the demands of what is a strongly Muslim society. Local expertise is therefore an absolute must for all things payroll in Brunei, and so partnering with a global payroll provider is essential for saving time and money, and also in helping to achieve and maintain compliance.
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.