Employer of Record (EOR) in Bangladesh

Employment Laws and Regulations in Bangladesh

Employment Contracts

Employment in Bangladesh’s private sector is governed by the Bangladesh Labour Act 2006, as amended in 2013, 2018, and most recently by the Bangladesh Labour (Amendment) Act 2023, administered by the Ministry of Labour and Employment and the Department of Inspection for Factories and Establishments (DIFE). Written contracts and an appointment letter are mandatory under Section 5, and must set out the parties, job title, start date, wage, working hours, leave, probation, and the duration of the contract.

Contracts can be for permanent, probationary, temporary, casual, apprentice, or substitute workers, each category defined in Section 4. A worker who completes probation is automatically confirmed as permanent. Bengali and English bilingual contracts are common in international employment; the Bengali version prevails in any dispute before a labour court.

Working Hours and Overtime

The standard private-sector workweek in Bangladesh is 48 hours, typically arranged as 8 hours per day over six days, with a cap of 10 hours per day including overtime (Sections 100 and 102, Labour Act 2006). Friday is the weekly rest day for most establishments, though shops and some industrial sites follow different weekly rest schedules.

Overtime is paid at 200% of the ordinary rate under Section 108, which is one of the highest overtime premiums in the region. Weekly working hours including overtime cannot normally exceed 60 hours, and the yearly average cannot exceed 56 hours per week. These caps are enforced through inspections by DIFE.

Working hours in Bangladesh are capped under Chapter IX of the Bangladesh Labour Act 2006, with a standard eight-hour day and 48-hour week under Sections 100 and 102. Section 108 sets the overtime allowance at twice the ordinary rate of basic wage and dearness allowance for any hour worked beyond those limits. The same chapter caps daily overtime at two hours and weekly overtime at 12 hours, with a 56-hour annual average ceiling.

Minimum Wage

Bangladesh does not set a single national minimum wage. Instead, the Minimum Wages Board recommends sector-specific rates, which the government notifies through the Labour and Employment Ministry. The most referenced benchmark is the ready-made garment (RMG) sector, where the minimum monthly wage was raised to BDT 12,500 (approximately USD 102) in December 2023, a 56% increase from the previous BDT 8,000 floor (The Daily Star reporting).

Other sectors including tea plantations, shipbreaking, jute, cotton, pharmaceutical, and private road transport have their own board-set minima, and professional, technology, and white-collar roles are not subject to statutory minimums at all. In practice, employers benchmark wages against the average salary in Bangladesh, with Dhaka-based professional roles typically starting well above any sector floor.

Probation Period

The probation period in Bangladesh is set by Section 4 of the Labour Act. Clerical workers may be placed on probation for up to six months, while workers in other roles may be placed on probation for three months, extendable by another three months if their performance is not clear at the end of the initial period. A worker who continues in employment after the probation expires is automatically confirmed as permanent, whether or not the employer issues a formal confirmation letter.

During probation, the employment may be terminated by either party with shorter notice than the periods applying to confirmed workers, making probation a practical trial window for both sides. Only one probation period is allowed with the same employer for the same type of work.

Leave Entitlements

Bangladesh’s statutory leave framework sits inside Chapters VIII and IX of the Labour Act 2006 and covers annual, casual, sick, maternity, and festival leave. The rules apply to all workers and employees in establishments covered by the Act, regardless of nationality.

Annual Leave

Under Section 117, workers are entitled to one day of paid annual leave for every 18 days of work performed in the preceding calendar year, which works out to roughly 20 working days per year for a full-time employee. Shop and commercial establishment workers accrue leave faster, at one day for every 18 days worked, and workers in tea plantations at a slightly different ratio.

Annual leave must be granted in the following calendar year, and untaken leave may be encashed in cash at the employee’s basic wage rate at the time of termination. Employers commonly allow leave to be taken in full or half-day blocks with prior approval.

Casual Leave

Section 115 provides ten days of fully paid casual leave per calendar year. Casual leave is designed for unforeseen short absences and cannot be accumulated or carried over from one year to the next. Employers may not demand a medical certificate for single-day casual leave.

Sick Leave

Under Section 116, workers are entitled to fourteen days of paid sick leave per calendar year on production of a medical certificate from a registered medical practitioner. Sick leave is funded by the employer and does not require social insurance involvement because Bangladesh has no national sickness scheme. Sick leave cannot be carried forward and is not encashable.

Maternity Leave

Section 46 of the Labour Act, as amended in 2023, provides 112 days of fully paid maternity leave (extended from the previous 16 weeks), split between before and after delivery. The benefit is payable by the employer to women who have completed at least six months of service and have fewer than two surviving children. The employer also cannot dismiss a pregnant employee during maternity leave under Section 50, and the payment is calculated on the average daily wage over the three months preceding notice of pregnancy.

There is no statutory paternity leave in Bangladesh, though larger employers and multinational subsidiaries increasingly offer between three and ten days voluntarily as a retention benefit.

Festival Leave

Section 118 provides eleven days of festival leave per year on full pay, on days declared by the employer in consultation with workers. These days are normally aligned with gazetted public holidays.

Statutory Employee Benefits

Mandatory employee benefits in Bangladesh are organised around the Labour Act 2006 rather than a central social security scheme. Bangladesh has no national pension, no mandatory unemployment insurance, and no state health insurance for private-sector workers, which keeps statutory payroll loads far lower than in most developed markets. The main obligations are gratuity on termination, paid leave, maternity benefit, and two annual festival bonuses for workers who have completed at least one year of service.

Provident fund participation is governed by Section 264 and is not automatic. An employer must establish a recognised provident fund when at least three-quarters of workers demand it in writing, after which the employer and employee both contribute at a fixed rate between 7% and 8% of basic wages (PwC Bangladesh Other Taxes). Because this is opt-in, most informal-sector employers skip it, but formal employers and EOR providers typically set up a provident fund by default to align with employee expectations. Group life insurance is required for establishments with 100 or more permanent employees under Section 99, payable to nominees in the event of death in service.

Recent Regulatory Updates 2026

The most significant recent change is the Bangladesh Labour (Amendment) Act 2023, which took effect in November 2023 and extended maternity leave from 16 weeks to 112 days, tightened definitions of collective bargaining agents, and broadened access to group insurance under Section 99. The 2023 amendment also clarified the rules on transfer of service when an establishment changes ownership, which matters for EOR migrations to a client-owned entity.

Finance Ordinance 2025, gazetted on 22 June 2025, replaced the seven-slab personal income tax structure with a six-slab system from income year 2025/26 onwards, raising the general tax-free threshold from BDT 350,000 to BDT 375,000 and reshaping the rate bands (PwC Bangladesh personal income tax). The same ordinance raised the maximum ceiling for deductible salary expense to BDT 500,000, which affects high-salary tax planning. Employers should expect further NBR circulars through FY 2026-27 as the new Income Tax Act 2023 continues to be implemented.

Work Permits and Visas in Bangladesh

Work Permit Requirements

Who Needs a Work Permit

All foreign nationals who intend to work in Bangladesh need a Bangladesh work visa and permit before they can take up employment. Work permits for private-sector employees are issued by BIDA through its One Stop Service (OSS) portal for industrial and commercial establishments, by the Bangladesh Export Processing Zones Authority (BEPZA) for EPZ companies, and by the NGO Affairs Bureau for foreign nationals working with registered NGOs. Bangladeshi nationals and naturalised citizens do not require a work permit.

Eligibility and Required Documents

To qualify, the sponsoring employer must hold an active BIDA registration, be within the cap of 5% foreign workers in industrial enterprises (20% in the top management tier), and have no outstanding compliance issues. The standard documentation bundle includes a signed employment contract, a copy of the passport valid for at least 6 months, academic and professional certificates, a recent passport photo, a company resolution appointing the foreign worker, a declaration on Bangladeshi nationals considered for the role, and supporting business registration documents.

Processing Time and Validity

BIDA processes new work permit applications in approximately 15 working days once the file is complete, though applications that raise security clearance questions can take longer (BIDA One Stop Service portal). Work permits are initially issued for up to two years and are renewable. Foreign workers must also hold a valid E-visa, which is normally stamped on arrival once the work permit is approved, and register their residence with the Department of Immigration and Passports.

Renewal Process

Renewal applications should be filed at least 30 days before expiry and are processed in around 10 working days. The employer must show continuing business activity, updated audited accounts, and any changes to the employee’s role or salary. Late renewals expose the foreign worker to overstay penalties and can jeopardise future applications.

Common Visa Types for Foreign Workers

Foreign nationals taking up salaried employment in Bangladesh must be sponsored under one of the categories administered by the Bangladesh Investment Development Authority (BIDA) One Stop Service, the NGO Affairs Bureau, or BEPZA for export processing zone employers. The table below summarises the main work visa types, their typical duration, and whether they offer a route to long-term residency in Bangladesh.

Dependents of sponsored workers hold residence rights under the F-visa but need their own work permit and visa category if they later take up paid employment in Bangladesh.

How an EOR Handles Work Permits

An employer of record in Bangladesh is the legal sponsor for BIDA purposes, which means it files the work permit application, pays the fees, and assumes the compliance obligations toward BIDA, the Department of Immigration and Passports, and NBR. The EOR handles employer-side steps like BIDA registration, the 5%–20% foreign worker cap compliance, contract drafting, and coordination with Home Ministry for security clearance. The employee still needs to provide personal documents, attend biometrics, and complete any in-person immigration steps.

Because the BIDA application plus security clearance typically adds four to six weeks for applicants outside Bangladesh, expatriate onboarding runs closer to five to seven weeks end to end rather than the one to two weeks quoted in the timeline for Bangladeshi hires. The EOR can only sponsor work permits within the employment relationship it controls, so clients needing EPZ-specific benefits still need to operate through a BEPZA-registered entity.

Payroll, Taxes, and Social Security in Bangladesh

Employer Contributions

Employer statutory costs in Bangladesh are modest by regional standards because there is no national pension, no mandatory unemployment insurance, and no public health scheme for private-sector workers. The main ongoing contributions are the employer side of a recognised provident fund (where one is established) and a monthly accrual for gratuity, with a small group life insurance premium for establishments that cross the 100-employee threshold. Festival bonuses and the Workers’ Profit Participation Fund sit outside the monthly contribution rate and are handled as separate line items.

On top of the monthly rates, workers with at least one year of service receive two festival bonuses per year, each equal to one month’s basic wage under long-standing custom and confirmed by Section 2 of the Labour Act and Labour Court precedent. Companies with 100 or more workers and at least BDT 2 crore in paid-up capital must also contribute 5% of their annual net profit to the Workers’ Profit Participation Fund (WPPF), distributed through worker welfare funds under Chapter XV of the Labour Act.

Employee Contributions

Employee-side deductions in Bangladesh come from two sources: the employee share of the provident fund (when one is established) and PAYE income tax withheld at source by the employer under Section 86 of the Income Tax Act 2023. There is no separate social insurance deduction, no public pension contribution, and no health insurance withholding on the employee side.

Income Tax

Bangladesh taxes residents on worldwide income and non-residents who are Bangladeshi citizens on the same slab schedule. Under the Finance Ordinance 2025, a six-slab structure applies for income years 2025/26 and 2026/27, starting with a tax-free band of BDT 375,000 and rising to a top marginal rate of 30% on income above BDT 3,575,000 (PwC Bangladesh individual tax summary). Non-resident foreign nationals who are not Bangladeshi citizens are taxed at a flat 30% on all Bangladesh-sourced income.

If total income exceeds the tax-free threshold, a minimum tax of BDT 5,000 applies (BDT 1,000 for first-time filers). Women, senior citizens aged 65 or older, taxpayers with physical disabilities, and gazetted war-wounded freedom fighters qualify for higher personal exemption limits. A wealth surcharge of 10% to 35% may apply on top of regular tax where net wealth exceeds BDT 40 million.

Payroll Cycle

Wages are paid monthly under Bangladesh’s payroll and income tax rules, no later than the seventh day after the end of the wage period under Section 123 of the Labour Act. Payment is made in Bangladeshi taka through a scheduled commercial bank, which is the standard channel for formal employment in Dhaka and Chattogram.

Payslips must be provided and should show gross pay, provident fund deductions, PAYE tax, any other deductions, and net pay. PAYE tax withheld during the month is deposited with NBR within the following month, and employers file annual salary certificates (TDS return) by 31 October covering the preceding income year ending 30 June.

13th Month Salary and Bonus Pay

A single 13th-month salary is not mandatory in Bangladesh, but two festival bonuses each equal to one month’s basic wage are the closest equivalent and are paid once at Eid-ul-Fitr and once at Eid-ul-Adha (or Puja and Christmas for workers of other faiths, under Section 118 and long-standing Labour Court precedent). Workers qualify for festival bonuses after one year of continuous service.

Discretionary performance bonuses, target-based incentives, and sales commissions are common in technology, banking, and commercial services. When bonuses are paid, they are generally included in taxable income and subject to PAYE under the regular slab schedule.

Cost of Hiring Through an EOR in Bangladesh

EOR Service Fees

Employer-of-record services in Bangladesh typically cost between $300 and $600 per employee per month in USD, depending on provider, complexity, headcount, and whether BIDA work permit sponsorship is included. The fee generally covers compliant contract drafting, monthly payroll, NBR PAYE filing, provident fund administration, gratuity tracking, festival bonus handling, BIDA sponsorship, offboarding, and ongoing compliance monitoring. Medical insurance, visa fees, and any voluntary benefits are usually passed through at cost.

Total Employment Cost Breakdown

The all-in cost of employing someone in Bangladesh goes well beyond gross salary. The table below walks through a realistic cost build-up for a typical hire, layering mandatory employer social contributions, statutory benefits, and payroll taxes on top of base pay so finance teams can budget accurately before an offer goes out.

At a $1,500 monthly gross salary for a formal-sector hire, the total employer cost works out to roughly $2,202 per month, or about 46.8% above gross once provident fund, gratuity, festival bonus provision, group insurance, and a representative EOR fee are included. PAYE income tax is withheld from the employee’s pay rather than added on top, so it does not increase the employer’s cost line. All USD amounts are approximate conversions at 1 USD = 123 BDT (April 2026 rate).

Contact RemotePeople to get started with an employer of record in Bangladesh. We handle employment contracts, payroll, PAYE withholding, provident fund and gratuity administration, BIDA sponsorship, and full Labour Act compliance, with no local entity needed.

Benefits of Using an EOR in Bangladesh

The strongest argument for an employer of record in Bangladesh is speed to market. A full trade licence plus Registrar of Joint Stock Companies (RJSC) incorporation, BIDA registration, NBR and VAT registration, and bank account setup typically takes two to four months when coordinated through a local lawyer, whereas an EOR can onboard a first Bangladeshi hire in one to two weeks. That difference is often the deciding factor when a project has a narrow hiring window.

Compliance assurance is the second big win. The Labour Act 2006, the Income Tax Act 2023, NBR circulars, BIDA foreign worker caps, and DIFE inspection practices all evolve on their own timelines, and every misstep carries administrative penalties, back-tax assessments, and potential labour court exposure. An EOR absorbs that regulatory maintenance, reducing the ongoing burden on the client’s legal and finance teams and removing the risk that payroll or work permit mistakes lead to fines, employee disputes, or visa cancellations.

Finally, EOR services scale cleanly in both directions. Adding a second or tenth hire follows the same onboarding path as the first, and scaling down requires nothing more than serving a compliant notice period and processing final settlement, rather than dissolving a local entity. That flexibility, combined with local HR expertise, better employee experience through timely payments and correct benefits, and cost efficiency for small teams where entity overhead would dwarf salary budget, makes the EOR model the default choice for most companies testing Bangladesh for the first time.

Termination and Offboarding in Bangladesh

Notice Periods

Under Section 26 of the Labour Act, either party must give 120 days’ written notice (or payment in lieu of notice) to terminate a permanent monthly-rated worker’s employment without cause. For non-monthly-rated workers, the notice period is 60 days. During the notice period, the employee remains on full pay and continues to accrue benefits.

Termination on disciplinary grounds under Section 23 follows a separate procedure and does not require a notice period, provided the employer conducts a written charge, an explanation, and an inquiry in line with the principles of natural justice. Termination during probation can be effected with 14 days’ notice under Section 4.

Statutory notice obligations in Bangladesh are set out in Sections 26 and 27 of the Bangladesh Labour Act 2006. The length of the notice period depends primarily on whether the worker is monthly-rated and permanent, with separate rules for dismissal on disciplinary grounds under Section 23. Employers may always pay wages in lieu of notice instead of serving it out.

Severance Pay

Bangladesh severance entitlements combine Section 26 termination compensation with the gratuity formula in Section 2(10). On any termination without cause, the worker receives 30 days of wages for every completed year of service OR gratuity under Section 2(10), whichever amount is higher. Dismissal for proven misconduct under Section 23 does not trigger severance, but unpaid wages and accrued leave must still be settled. The table below shows the schedule applied to a worker earning BDT 30,000 (approximately USD 244) in basic monthly wage.

Calculation Method

Section 26(4) of the Labour Act requires compensation of 30 days’ wages for each completed year of service when a permanent worker is terminated without fault, in addition to any gratuity accrued under the terms of the employment or a recognised gratuity fund. Section 20 covers retrenchment for economic reasons at the same 30-days-per-year rate, and Section 27 covers discharge on health or capability grounds at 14 days’ wages per year.

Gratuity under Section 2(10) is 30 days’ basic wage per year of service for employees with less than ten years of tenure and 45 days per year for employees with ten or more years of tenure. Gratuity is payable on all terminations except dismissal for proven misconduct. The calculation base is the last drawn basic wage, with partial years pro-rated.

Caps and Exceptions

There is no statutory cap on gratuity in Bangladesh, and the amount scales with tenure and wage. Employees dismissed for proven misconduct under Section 23 may forfeit gratuity but retain accrued wages, leave encashment, and provident fund balance. Fixed-term contracts terminated early by the employer without cause typically attract the same 120-day notice and 30-day-per-year compensation rules, subject to the specific language of the contract.

Grounds for Termination

The Labour Act allows termination with or without cause. Termination without cause requires notice and the statutory 30-days-per-year compensation plus gratuity. Termination for cause under Section 23 is allowed for specific misconducts including theft, dishonesty, wilful damage, habitual absence without leave, insubordination, and conviction for a criminal offence involving moral turpitude. The employer must serve a charge sheet, allow the worker to respond, and conduct a domestic inquiry before issuing dismissal.

Protected categories include pregnant workers during maternity leave (Section 50), workers on approved sick leave, and trade union officers during their term. Unlawful dismissal claims go to the Labour Court under Section 33 and can result in reinstatement or compensation up to the full wages for the period between dismissal and judgment.

EOR vs. Other Hiring Models in Bangladesh

EOR vs. Setting Up a Local Entity

Choosing between an Employer of Record and setting up your own legal entity in Bangladesh comes down to timeline, upfront cost, ongoing administrative burden, and how quickly you can scale up or wind down. The table below lays out both paths side by side across setup time, cost, compliance risk, and flexibility so you can match the right model to the size and duration of your Bangladesh hiring plan.

For companies hiring fewer than 15 people in Bangladesh, the EOR model is almost always more cost-effective than opening a local company. Avoided setup costs, RJSC fees, legal and accounting retainers, and ongoing corporate administration usually exceed a full year of EOR service fees for the first one or two hires. You can review RemotePeople’s transparent EOR pricing before you commit. Only when a business needs direct access to EPZ benefits, sector-specific licences, or a headcount large enough to justify in-house HR, finance, and compliance staff does the balance tilt toward a local entity.

Companies planning regional South Asian expansion often run an EOR in India alongside Bangladesh to serve both markets before opening entities. A common pattern is to start with an EOR, validate the Bangladesh market and build a local team, and then transition to a company-owned entity once headcount crosses 15–20 people. A good EOR supports that migration and coordinates the transfer of employees with no break in tenure, preserving annual leave balances, provident fund membership, and gratuity accrual.

EOR vs. Hiring Independent Contractors

Classifying a Bangladesh-based worker as an independent contractor rather than an employee can expose you to back-taxes, unpaid social contributions, and reclassification penalties if the working relationship looks like employment in practice. The table below contrasts EOR employment with contractor engagement across legal relationship, tax and benefits treatment, IP ownership, and misclassification risk so you can pick the right model role by role.

Independent contractors are only appropriate in some cases, such as short-term project work, specialised consulting, or roles with genuine autonomy where the worker controls their own schedule, tools, and other clients. The misclassification concern in Bangladesh arises when a contractor behaves like an employee (fixed hours, exclusive relationship, integration into the team), which can expose the client to back taxes, unpaid leave, gratuity, and unpaid PF contributions if a labour court or NBR recharacterises the relationship.

For core team members who work full time on your business, the EOR route is cleaner. It eliminates classification risk, provides the employee with full statutory benefits including gratuity and festival bonuses, gives the client stronger IP protection through employment-law default rules, and simplifies ongoing administration because everything runs through the EOR’s payroll rather than a mix of invoices and ad-hoc payments. When contractors are genuinely the right fit, RemotePeople can help you hire and pay contractors in Bangladesh compliantly through our dedicated contractor management solution.

EOR vs. PEO (Professional Employer Organization)

EORs and PEOs both simplify international hiring, but only an EOR becomes the legal employer of record in Bangladesh — a critical distinction when you don’t have a local entity of your own. The table below maps the practical differences across legal employer status, entity requirement, liability allocation, and scope of coverage.

Bangladesh has no formal Professional Employer Organization framework in the way that exists in the United States or the Philippines. The “PEO” label is sometimes used loosely by local HR outsourcing firms, but the underlying service is usually HR administration and payroll processing for a client that already holds its own trade licence, TIN, BIDA registration, and NBR files. The key legal distinction is who the NBR, BIDA, and DIFE recognise as the employer of record for payroll, work permit, and inspection purposes, and in the true PEO model that remains the client company.

Because PEO-style services only work for companies that already have an entity in Bangladesh, they are not a market-entry option. The practical choice for a business without a local presence is between an EOR (employ through a third party) and setting up a local company. Once a client has its own Bangladeshi entity, PEO-style payroll outsourcing becomes a reasonable option for reducing HR overhead.

Public Holidays in Bangladesh

Bangladesh observes a defined set of official public holidays on which most private-sector employers must give staff a paid day off (Office Holidays Bangladesh 2026). The table below lists the statutory holidays employers need to build into payroll calendars and leave planning for the year, along with the date rule for each.

The Ministry of Public Administration notifies about 28 national holidays per year for 2026, combining general holidays, executive-order holidays, and optional religious days. Work performed on a public holiday entitles the worker to an additional day of compensatory leave under Section 103 of the Labour Act, and employers in continuous-process industries pay double-rate overtime in line with Section 108. Islamic holiday dates are confirmed by official moon sighting and can shift by one day from the projected calendar. The 2026 list uniquely includes parliamentary election days in February, which may be observed in industrial areas.

How to Get Started with an EOR in Bangladesh

Getting started with RemotePeople as your employer of record in Bangladesh is a short, repeatable process:

• First, share the job description, target salary range, and candidate details so we can confirm Labour Act compliance and quote an accurate monthly fee.
• Second, sign the service agreement and we draft a compliant English (or bilingual English-Bengali) employment contract under the Bangladesh Labour Act 2006.
• Third, we open the employee’s e-TIN file with NBR, file the BIDA work permit application (if applicable), and set up payroll through a scheduled commercial bank.
• Fourth, the employee signs the contract, submits KYC documents, and begins work on a scheduled start date.
• Fifth, we run monthly payroll, withhold and remit PAYE tax, administer provident fund and gratuity, manage benefits, and handle any termination or renewal events for as long as the employment continues.

Contact our team to build your Bangladesh team without a local entity. RemotePeople handles the contracts, payroll, and compliance so you can focus on hiring the right people.

Where companies hiring in Bangladesh expand next

Companies hiring in Bangladesh commonly expand across South Asia, drawing on shared English proficiency and deep tech talent pools. Many companies add hiring in India first, drawing on access to pan-Asian talent and supply-chain clusters. An EOR partner in Pakistan follows as deep Asian tech and services talent, while Sri Lanka offers Asia-Pacific connectivity and English-proficient hires. A team in Nepal is often the fourth step, valued for the Asia-Pacific gateway with multilingual workforce.