Hire and manage employees in Bangladesh

Complying with labor and employment laws in Bangladesh

Bangladesh labor and employment laws can be a complex compliance maze, especially for businesses that aren’t familiar with the legal landscape in the region. But compliance isn’t optional—understanding and adhering to Bangladesh's labor laws is crucial for smooth operations and maintaining a positive reputation.

The primary legislation governing employment is the Bangladesh Labour Act, 2006, along with subsequent amendments and rules.

Hiring internationally comes with the challenge of navigating unfamiliar labor and employment laws. If you're planning to expand into Bangladesh, Rippling’s EOR can ease the burden. With dedicated HR expertise in local compliance, Rippling helps ensure your business remains aligned with Bangladesh’s legal requirements.

Employment contracts in Bangladesh

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms and conditions of the employment relationship. The Bangladeshi Labour Act doesn’t require written contracts, but they’re still highly recommended to clearly define the terms and conditions of employment. The Labour Act does require employers to provide all employees with an appointment letter, but it doesn’t specify any information that must be included. Best practice is for an appointment letter (and employment agreement) to specify at least the following, but keep in mind that this isn’t an exhaustive list:

• Employee's and employer’s name and address

• Job title and description

• Employee’s start date

• Wage or salary details

• Working hours and leave entitlements

• Termination and notice provisions

Providing a written employment contract—even when not required by law—helps establish clear expectations and reduces potential disputes down the line.

Labor unions in Bangladesh

Employees in Bangladesh have the right to form and join trade unions, and the country is home to more than 9,000 enterprise-level unions. That said, labor participation is low compared to many other countries—the Department of Labour estimates just over 5% of the workforce is represented by a trade union.

Chapter 13 of the Labour Act outlines the procedures for registering and operating trade unions. Here are some of the key points from the Act:

• A minimum of 20% of the workforce in an establishment is required to form a trade union.

• Registered trade unions can engage in collective bargaining and represent employees in disputes.

• Employers are prohibited from interfering with the formation or operation of trade unions.

• Strikes and lockouts are allowed, but are subject to rules under the law. Both employees and employers must follow specific steps and procedures before, during, and after a strike or lockout.

Employers should always strive to communicate openly and foster good relationships with trade unions. This encourages a harmonious workplace for all involved.

Mitigating permanent establishment risk in Bangladesh

Permanent establishment (PE) is a concept in international tax law that refers to a fixed place of business through which a company conducts its business activities in a foreign country. It is a key factor in determining whether a company is subject to corporate tax in a foreign jurisdiction. If a company has a permanent establishment in a foreign country, it may be required to pay taxes on the income generated from its activities in that country.

The definition of permanent establishment can vary depending on tax treaties and local laws. Under Bangladeshi tax law, in relation to income from a business, PE is defined as a fixed place of business through which activities are conducted, which can include:

• Any place of management

• A branch

• An agency

• An office

• A warehouse

• A factory

• A workshop

• A mine, oil or gas well, quarry, or any other place of exploration, exploitation, or extraction of natural resources

• A farm or plantation

• A building site, construction, or installation project

PE can also be triggered by a business providing services, including consulting, in Bangladesh—whether through employees, agents of the business, or an associate of a non-Bangladeshi resident.

Businesses expanding to, doing business, or hiring workers in Bangladesh can mitigate their PE risk by:

• Keeping employees in supportive roles only and avoiding direct contract signings in Bangladesh

• Concluding major sales or signings outside Bangladesh

• Documenting staff tasks carefully to show no final authority for contract closures

• Consulting a local tax advisor for clarity about the risk of inadvertently forming a PE in Bangladesh

Probationary period in Bangladesh

A probationary period is used to assess and monitor the performance of new employees. Under the Labour Act, the maximum length of an employee’s probation period is based on the nature of their work:

After successfully completing the probationary period, an employee is automatically considered a permanent employee, even if a formal confirmation letter has not been issued.

Local laws in Bangladesh

Beyond the Labour Act, employers in Bangladesh are required to understand and comply with other rules and regulations, such as data protection laws and rules governing non-competes for former employees. Observing the entire landscape of labor and employment laws fosters trust among employees and ensures your business doesn’t hit compliance snags during its expansion into Bangladesh.

Employers must also be aware of other relevant laws and regulations, such as:

• Data security: Bangladesh's Cyber Security Act, 2023, outlines provisions for data protection, as well as a framework for identifying, preventing, suppressing, and prosecuting offenses committed through digital means.

• Equal opportunity and nondiscrimination: In Bangladesh, it’s illegal for any employer to discriminate based on gender, religion, political beliefs, and other protected characteristics during the hiring process or in the workplace.

• No non-competes: Under Section 27 of the Contract Act, 1872, agreements restraining trade are generally allowed, but they must be reasonable in scope and duration to be enforceable.

Staying informed and compliant with these laws is essential for ethical and lawful business operations in Bangladesh.

Worker classification and misclassification in Bangladesh: Contractors vs. employees

When hiring new talent in Bangladesh, you need to decide which type of working arrangement—independent contractor or full-time employee—is better suited for your business needs. Both come with their own set of implications, so it’s important to understand the differences. If you misclassify workers in Bangladesh, you could face penalties, back taxes, and serious legal action.

Worker classification in Bangladesh: Key differences between contractors and employees

Consequences of misclassification in Bangladesh

Misclassifying workers in Bangladesh can result in serious consequences. Some of the potential risks include: 

• Legal liability: Courts may reclassify the worker as an employee, making the employer liable for unpaid wages, benefits, and taxes.

• Penalties: Employers may face fines and be required to pay backdated contributions to social security and other statutory benefits.

• Reputational damage: Noncompliance can harm the company's reputation and employee relations. 

To mitigate these risks, employers in Bangladesh should clearly define the nature of the working relationship in contracts, make sure that independent contractors operate with a high degree of autonomy, and consult a legal expert to assess their worker classification if they’re unsure they’re classifying their workforce correctly.

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Wages and payroll in Bangladesh

When expanding into (or hiring in) a new, foreign jurisdiction, managing wages and payroll is one of the most complex parts of the process. Managing wages and payroll in Bangladesh involves understanding minimum wage regulations, payroll frequency, bonus structures, and compliance requirements. Just know that calculating your new employee’s salary is only the first step, and you’ll still need to comply with labor and tax laws and make proper withholdings for each employee you hire in the country. 

Here’s what employers need to know about wages and payroll in Bangladesh.

Minimum wage in Bangladesh

Bangladesh does not have a universal minimum wage. Instead, the Minimum Wage Board sets minimum wages that vary depending on location, industry, and skill level. For all non-probationary workers, minimum wage includes a base wage, house rent allowance, medical allowance, and transport and food allowance. The amounts shown below are the total monthly wages, including the base wage and all allowances (except for probationers, who receive the base wage only).

Leather goods and footwear industry minimum wage

• Grade 1: BDT13,520

• Grade 2: BDT10,520

• Grade 3: BDT9,350

• Grade 4: BDT8,525

• Grade 5: BDT7,775

• Grade 6: BDT7,100

Ready-made garment industry minimum wage

Location: Dhaka

• Grade 1: BDT15,035

• Grade 2: BDT14,273

• Grade 3: BDT13,550

• Grade 4: BDT12,500

• Probationers: BDT9,875

Rerolling mills industry minimum wage

• Grade 1: BDT16,800-20,400

• Grade 2: BDT15,150-18,900

• Grade 3: BDT13,800-16,800

• Grade 4: BDT13,800-23,600

• Grade 5: BDT12,750-21,050

• Grade 6: BDT10,650-11,700

• Probationers: BDT7,500

Road transport industry minimum wage

• Grade 1: BDT16,680-20,200

• Grade 2: BDT14,440-16,600

• Grade 3: BDT12,200-13,000

• Grade 4: BDT10,100-10,750

• Probationers: BDT7,500

Tannery (leather) industry minimum wage

Location: Divisional City and Savar

• Grade 1: BDT34,168

• Grade 2: BDT28,388

• Grade 3: BDT24,002

• Grade 4: BDT20,993

• Grade 5: BDT18,001

• Probationers: BDT11,330

Other locations:

• Grade 1: BDT32,264

• Grade 2: BDT26,824

• Grade 3: BDT22,696

• Grade 4: BDT19,864

• Grade 5: BDT17,048

• Probationers: BDT11,330

Payroll frequency in Bangladesh

The standard payroll cycle in Bangladesh is monthly, but it’s not a legal requirement under the Labor Act or any local labor laws. The payroll cycle can be daily, weekly, or biweekly, if the employer and their employees agree to it. What the law does dictate is that employees must be paid within seven days after a pay period ends.

13th month pay in Bangladesh

13th month pay is an additional payment given to employees, usually equivalent to one month’s salary. Employers commonly give this payment as a holiday or year-end bonus. In Bangladesh, both 13th month pay and 14th month pay are mandatory for employees who have completed at least one year of service. These are known as festival bonuses and are typically paid out during Eid-ul-Fitr and Eid-ul-Azha. Each payment should be no more than one month’s pay.

It’s best practice for employers to clearly outline bonus structures in their employment contracts so employees know exactly what to expect and when.

Run payroll compliantly in Bangladesh

To make sure they stay compliant with Bangladeshi payroll regulations, employers should:

1. Register with the relevant authorities: This may include tax and social security agencies.

2. Maintain accurate payroll records: Keep detailed records of employee wages, deductions, and payments.

3. Deduct and remit taxes: Withhold appropriate income taxes and remit them to the National Board of Revenue. We’ll cover this in greater detail in the next section.

4. Know your payment deadlines: Timely payment of wages, bonuses, and taxes will help your business avoid noncompliance and potential penalties.

Hiring and paying employees abroad can be tricky, especially when it comes to running payroll. But partnering with an EOR allows you to offload critical compliance work, like figuring out deductions, following wage laws, and accurately paying employees. Rippling EOR helps you hire and pay global employees faster than ever before.

Employer and employee taxes in Bangladesh

In Bangladesh, the National Board of Revenue (NBR) oversees tax collection and compliance. While entities need to adhere to the Income Tax Ordinance, 1984, Bangladesh has a simpler tax structure than many countries, making it an attractive place for companies to expand and hire a global workforce.

Here are the key things to understand about employer and employee taxes in Bangladesh.

Employer taxes in Bangladesh

There are no mandatory employer contributions in Bangladesh. Instead of social insurance, employers pay a number of allowances for housing, healthcare, food, and transportation that are built into the minimum wage.

Employee taxes in Bangladesh

There are no mandatory social contributions for employees in Bangladesh; however, Bangladeshi employees do pay progressive income tax, meaning they pay higher tax rates as their earnings increase.

All income up to BDT350,000 is tax-free, and certain categories of taxpayers have higher tax-free thresholds:

After the tax-free limits, the tax rates for all Bangladeshi taxpayers are as follows:

Non-residents who are not Bangladeshi citizens are taxed at a flat rate of 30%.

Penalties for not paying taxes in Bangladesh

While Bangladesh’s tax structures are straightforward, there are still penalties for failing to comply. Businesses should be aware of the dangers of:

• Late filing: A penalty of 10% of the tax payable, subject to a minimum of BDT1,000

• Continuous default: An additional BDT50 for each day of continued default on outstanding tax liability

• Use of a fake TIN: Penalties up to BDT20,000 and even possible imprisonment for deliberate misuse

Employee benefits in Bangladesh

Offering competitive employee benefits in Bangladesh can help your company stand out—and that’s especially true in a competitive global employment landscape. Like most countries, Bangladesh has certain benefits that are required by law, but many employers offer additional benefits beyond those to help attract top talent to their companies.

Getting a clear handle on benefits requirements from the start can help you avoid compliance issues with Bangladeshi authorities later on. Below is a breakdown of the mandatory and optional employee benefits in Bangladesh.

Mandatory benefits in Bangladesh

Mandatory benefits are legally required, meaning employers have to offer them to their employees. In Bangladesh, the structure differs slightly from many other countries, where benefits are covered by social insurance. Instead, employers cover certain mandatory benefits by paying their employees allowances that are built into the minimum wage, where it applies.

Keep in mind that Bangladesh doesn’t have a universal minimum wage, so this won’t apply to every employee. It also doesn’t apply to probationary employees, who only receive a base wage without any allowances. But for employees who are entitled to a minimum wage based on their industry, location, and role, employers must provide:

• House rent allowance: Helps employees cover the cost of housing

• Health insurance allowance: Helps employees and their dependents pay for healthcare

• Transport allowance: Helps employees cover the cost of transportation, which can be especially valuable if they need to travel long distances to go to work

Sometimes, food allowance is also required, or is combined with the transportation allowance.

Optional benefits in Bangladesh

Investing in optional and fringe benefits improves your chances of attracting top talent, but choosing which ones to offer can feel overwhelming. Here are the most common additional benefits in Bangladesh:

• Mobile phone allowance: Helps employees cover the cost of a business-related mobile phone or similar device

• Professional training or development: Covers courses, workshops, or further education for employees who want to move up in their careers

• Flexible work arrangements: In the age of remote work, flexible work benefits are extremely popular. Work-from-home stipends, flexible schedules, and other benefits for remote workers can help attract talented employees.

• Group life insurance: Secures reduced rates for life insurance for employees to provide income for their families in the event of their death

• Enhanced health insurance: Private group health care can be more comprehensive and provide access to faster, better care than basic plans

• Provident fund contributions: These may be mandatory for certain companies based on their size. They help employees save for their retirement.

• Gratuity: Covers employees who leave their jobs for reasons other than retirement

Implementing a combination of mandatory and optional benefits not only ensures compliance with Bangladeshi labor laws but also enhances employee satisfaction and loyalty.

Working hours, overtime, and leave in Bangladesh

One of the most complex aspects of hiring international employees is navigating working hours, overtime, and leave laws, which can all vary significantly across international borders, and sometimes even in different jurisdictions within the same country. Global employers, including those in Bangladesh, must be familiar with all the relevant laws because compliance is crucial to avoid penalties and ensure a safe, fair working environment.

The Bangladesh Labour Act, 2006, outlines specific regulations to ensure fair labor practices, and understanding these provisions helps employers maintain compliance and foster a supportive work environment. Below, learn about Bangladeshi laws so you can follow them to protect employees from overwork and ensure they receive the rest they’re entitled to.

Standard working hours in Bangladesh

A standard workweek in Bangladesh is 48 hours (or eight hours per day spread evenly over a six-day workweek). Employees typically work from Monday to Saturday, and the workweek is generally fixed, but some flexibility can be negotiated based on the employer.

Start and end times are usually fixed by the employer, typically from 9 a.m. to 5 p.m. (with a one-hour lunch break), but flexible work arrangements may be possible in some cases.

While the 48-hour workweek is standard, it isn’t mandatory, and some workplaces have adopted a 40-hour workweek to more closely align with global standards. This is especially prevalent for white-collar workers.

Overtime laws in Bangladesh

Overtime applies only to non-exempt employees. Most employees working beyond eight hours per day or 48 hours per week are entitled to overtime pay.

Overtime is allowed if it is specified in the employment contract. Eligible employees are limited to two hours of overtime per day to avoid overwork, and overtime hours must be paid at 200% of the employee’s usual rate of pay.

Rest period and break laws in Bangladesh

Bangladeshi law requires employers to provide adequate breaks for employees to rest and recharge, both during work and between shifts. Employees are entitled to:

• Weekly rest: At least one full day of rest per week, typically on Sunday (but it can be another day, as long as it’s consistently observed)

• Breaks during work: At least one hour for every five hours worked. If the employee works more than six hours, their one hour can be split into two or more break periods, but one of them must be at least 30 minutes long. If the employee works up to five hours, no mandatory breaks are required, but reasonable breaks are implied by law.

Leave laws in Bangladesh

In addition to the rules around working hours and overtime, the laws in Bangladesh require employers to provide their employees with several kinds of paid leave, from annual time off to maternity leave, sick leave, and more.

Here are the types of leave employees are entitled to receive in Bangladesh:

• Annual leave: Employees are entitled to one day of earned leave for every 18 days worked in a calendar year. This applies to full-time employees and is calculated based on the actual number of days worked. Employers can offer more leave than this, but they cannot offer less paid leave than the statutory minimum.

• Sick leave: Employees are generally entitled to 14 days of paid sick leave per year, paid by their employer. This is an annual entitlement that cannot be carried over from one year to the next. To use paid sick leave, employees must present a medical certificate.

  • Casual leave: In addition to sick leave, employees are entitled to 10 days per year of “casual leave,” which they can use for any urgent matter, including sudden illness, minor accidents, and other personal issues. This leave also cannot be carried forward from one year to the next and does not accumulate.

• Maternity leave: Female employees who have completed at least six months of service are entitled to 16 weeks of paid maternity leave—eight weeks before the birth and eight weeks after. Women must take maternity leave after giving birth. They are prohibited from working for eight weeks following the birth. Maternity leave is paid by the employer. Employees who have worked less than six months or who already have two surviving children are entitled to unpaid maternity leave.

  • Female employees who suffer a miscarriage before maternity leave begins are entitled to four weeks of paid leave.

• Paternity leave: There is no statutory paternity leave in Bangladesh, but many companies offer it voluntarily to help attract top talent.

• Public holidays: Bangladesh observes 18 public holidays. These include:

  • Shab-e-Barat

  • Shaheed Day

  • Sheikh Mujibur Rahman’s Birthday

  • Independence Day

  • Laylat al-Qadr

  • Jumatul Bidah

  • Eid-ul-Fitr

  • Bengali New Year’s Day

  • Labour Day/May Day

  • Buddha Purnima (Boishakhi Purnima)

  • Eid ul Adha

  • Ashura

  • National Mourning Day

  • Shuba Janmashtami

  • Eid-e-Milad-un-Nabi

  • Vijaya Dashami

  • Victory Day

  • Christmas Day

• Casual leave: In addition to sick leave, employees are entitled to 10 days per year of “casual leave,” which they can use for any urgent matter, including sudden illness, minor accidents, and other personal issues. This leave also cannot be carried forward from one year to the next and does not accumulate.

• Female employees who suffer a miscarriage before maternity leave begins are entitled to four weeks of paid leave.

• Shab-e-Barat

• Shaheed Day

• Sheikh Mujibur Rahman’s Birthday

• Independence Day

• Laylat al-Qadr

• Jumatul Bidah

• Eid-ul-Fitr

• Bengali New Year’s Day

• Labour Day/May Day

• Buddha Purnima (Boishakhi Purnima)

• Eid ul Adha

• Ashura

• National Mourning Day

• Shuba Janmashtami

• Eid-e-Milad-un-Nabi

• Vijaya Dashami

• Victory Day

• Christmas Day

Work permits in Bangladesh

If you're planning to expand your business into Bangladesh, you’ll first need to make sure your candidate can legally work there. A work permit is often required when a business wants to hire an employee who isn’t a citizen or permanent resident in the country where they plan to work, but every country has different visas, requirements, and processes. Whether you're hiring local talent in Dhaka or bringing in foreign expertise, compliance with Bangladesh's immigration laws ensures smooth hiring and protects your organization's reputation.

The Bangladesh Investment Development Authority (BIDA) oversees the process, ensuring that foreign workers meet the necessary criteria to contribute to the country's workforce. Navigating their requirements and all the steps correctly is crucial when applying for a work visa for an employee. Here’s what Bangladeshi employers need to know.

Who needs a work visa in Bangladesh?

Any foreign national intending to work in Bangladesh must obtain both an appropriate visa and a work permit. Typically, they need a visa first, and then can apply for a work permit once they’ve secured a visa.

How long does it take to get a work visa in Bangladesh?

The processing time for a work visa in Bangladesh varies depending on many factors, including the job candidate’s country of origin and whether their visa application was complete when submitted. It can also depend on the specific embassy or consulate. If your new hire needs to start work by a specific date, it’s a good idea to start the visa application process well in advance to make sure they have plenty of time to complete it and absorb any potential delays.

Required documents include:

• The employee’s completed and signed visa application

• Two recent passport photos

• Their original passport and a copy of the photo page

• A letter from the employee’s Bangladeshi employer confirming they have a job offer in the country

• An appointment letter and employment contract with full employment terms and salary details

Types of work visas in Bangladesh

Bangladesh offers several types of work visas and permits. The primary visa categories for employment are:

• E2 visa: For foreign employees working in private sector industries

• E3 visa: For foreign employees working in machinery and software installation, maintenance supervision, or project inspection

• PI visa: For private investors investing in Bangladesh

These visas are prerequisites for applying for a work permit through BIDA. Tourist visas cannot be converted into work permits.

Termination and redundancy in Bangladesh

When making your first hire in Bangladesh, termination policies might be far from your mind. But the Labour Act outlines the procedures and entitlements related to termination—from notice periods to severance pay—so if you don’t know the requirements, you could be setting yourself up for trouble when it’s time to part ways with an employee down the road.

Understanding the rules around termination and redundancy not only protects your brand’s reputation but also protects you from legal disputes that can arise if you terminate an employee without following the letter of the law. Here’s what to know about termination and redundancy rules in Bangladesh.

Does at-will employment exist in Bangladesh?

At-will employment is a legal doctrine in which either the employer or the employee can terminate the employment relationship at any time, for any reason (or even for no reason). Where at-will employment is recognized, no party is required to give prior notice, as long as the reason for the termination is not illegal (such as discrimination). At-will employment is most common in the United States.

In Bangladesh, at-will employment is not recognized. Employers must have a valid reason for terminating an employee and must follow the procedures stipulated in the Labour Act during the process of ending an employment relationship. Acceptable grounds for termination include:

• Willful insubordination or disobedience

• Theft, fraud, or dishonesty

• Taking bribes or illegal gratification

• Habitual absence without leave

• Absence without leave for more than 10 days

• Habitual late attendance

• Habitual breach of law or company rules

• Riotous or disorderly behavior

• Inciting others to riotous or disorderly behavior

• Striking illegally

• Damage to the employer's property

• Inefficiency or negligence causing loss or damage

• Breach of the terms of employment

Notice periods in Bangladesh

A notice period refers to the advance time either an employee or employer must provide before terminating an employment arrangement. It allows the employee to wrap up their responsibilities while giving the employer time to handle the transition or begin searching for a replacement.

In Bangladesh, the statutory notice period is one month for permanent employees. A different notice period may be agreed upon in the employment contract, but it cannot be shorter than the statutory notice period—only longer.

The only time the notice period can be shorter than the statutory minimum is during probation, typically around seven days.

Severance pay in Bangladesh

Severance pay is compensation provided to an employee when they are laid off, terminated, or leave a company under certain conditions.

In Bangladesh, severance pay, also known as retrenchment, is calculated based on the employee’s length of service and the reason for the termination:

How to terminate employees compliantly in Bangladesh

Ending an employment contract in Bangladesh requires a cause, statutory notice, and severance pay, in most cases. Mishandling any step can lead to legal trouble for employers. Here are the key steps in the process:

1. Identify valid grounds. Make sure the reason for termination aligns with the acceptable grounds outlined in the Labour Act.

2. Provide appropriate notice. Issue the required notice or pay wages in lieu thereof, depending on the employee's status and the reason for termination.

3. Calculate and pay entitlements. Accurately compute any severance pay, gratuity, or other dues owed to the employee.

4. Document the process. Maintain thorough records of the termination process, including notices issued and payments made.

5. Notify relevant authorities. In cases of retrenchment, inform the Chief Inspector of Labour and any trade union present in the establishment.

If you employ a global team, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries. An alternative is to hire through an EOR, which can monitor termination requirements for you, ensuring you compliantly onboard and offboard employees every time.