Sri Lanka, officially known as the Democratic Socialist Republic of Sri Lanka, is an island country in the Indian Ocean in South Asia. It has a workforce population of 7.8 million people (2024) and a GDP of 84.36 billion US dollars (2023).

The economy of Sri Lanka has stabilized since a deep economic crisis in 2022, with a 5% increase in the first quarter of 2024. Tourism, tea export, rice production, and the service industry are the main contributors to Sri Lanka’s economy, and they rely on China and India predominantly for imports and debt financing. Labor law is highly important in Sri Lanka to protect workers’ rights and to ensure fair treatment regarding working hours, annual leave, plus access to benefits such as maternity leave and sick pay.

This help guide will provide a comprehensive overview of Sri Lankan labor law, with details on all mandatory employee benefits and recommendations for supplementary benefits employers should consider. We’ll also explain how Remote People can assist in simplifying employee benefits in Sri Lanka through our Employer of Record (EOR) services.

Sri Lankan Labor Law

The Labour Code of Sri Lanka dictates all rules and regulations regarding working practices in Sri Lanka, including information on working hours, maternity benefits, sick pay, and overtime compensation.

It encompasses many different acts that are designed to protect workers’ rights including the following:

  • Wages Boards Ordinance
  • National Minimum Wage Act
  • Maternity Benefits Ordinance
  • Service Contracts
  • Termination of Employment of Workmen

It’s strongly advised that companies seek legal advice prior to employing in Sri Lanka to make sure all compulsory employee benefits and labor laws are complied with. 

Mandatory Employee Benefits in Sri Lanka

The below sections explain each of Sri Lanka’s mandatory employee benefits in detail, providing information on what must be provided to comply with Sri Lankan labor laws.

Social Security Contributions

Sri Lanka operates under a Social Security Board which provides pension and social security benefits to people working in Sri Lanka. Social Security contributions fund four different departments:

  • Social Security Family Allowance
  • Work Injury Fund
  • Employees Provident Fund
  • Employees Trust Fund

The Social Security Rate in Sri Lanka currently sits at 20%, which is made up of 12% of employers and 8% of employees. Companies are responsible for ensuring that employee contributions are paid from their wages along with their own contributions.

Annual Paid Leave

Employees in Sri Lanka are entitled to annual leave, the amount of which is determined by their years of service.

In an employee’s first year of service, the following number of annual leave days are applicable:

Employment Start Date Leave Entitlement
On or after 1st January but before 1st April 14 days
On or after 1st April but before 1st July 10 days
On or after 1st July but before 1st October 7 days
On or after 1st October 4 days

From the second year of employment, employees are entitled to 14 days of paid annual leave provided that they have completed at least 12 months of continuous service.

Working Hours

A normal working week in Sri Lanka consists of 48 hours worked at 8 hours per day.  Any hours exceeding this limit will count as overtime, of which a maximum of 12 hours can be worked.  Employees are entitled to a one-hour break for every 8 hours worked.

National Minimum Wage

Companies employing in Sri Lanka must pay employees the National Minimum Wage, which currently sits at LKR 30,000 per month as of 1st January 2026.

Previous Budgetary Relief Allowances have been consolidated into this single basic wage under the National Minimum Wage of Workers (Amendment) Act, No. 11 of 2025, making LKR 30,000 the total minimum gross salary and the base for all statutory contributions.

Overtime Pay

If employees work over their set contracted hours, these extra hours are defined as overtime and must be paid accordingly.

Overtime hours are typically paid at 150% of the rate of an employee’s normal pay, and overtime hours cannot exceed 12 hours per week.

Night work hours are not paid at a compensatory rate.

Public Holiday Leave

Workers in Sri Lanka are entitled to paid days off on public and religious holidays. The public holidays in Sri Lanka are as follows:

  • Duruthu Full Moon Poya Day (January 3) (date varies)
  • Tamil Thai Pongal Day (January 15)
  • Navam Full Moon Poya Day (February 1) (date varies)
  • National Day (February 4)
  • Mahasivarathri Day (February 15) (date varies)
  • Madin Full Moon Poya Day (March 2) (date varies)
  • Eid al-Fitr (March 21) (date varies)
  • Bak Full Moon Poya Day (April 1) (date varies)
  • Good Friday (April 3) (date varies)
  • Sinhala and Tamil New Year’s Eve (April 13)
  • Sinhala and Tamil New Year’s Day (April 14)
  • May Day (May 1)
  • Vesak Full Moon Poya Day (May 1)
  • Day after Vesak Full Moon Poya Day (May 2) (date varies)
  • Eid al-Adha (May 28) (date varies)
  • Poson Full Moon Poya Day (June 29) (date varies)
  • Esala Full Moon Poya Day (July 29) (date varies)
  • Nikini Full Moon Poya Day (August 27) (date varies)
  • Milad-Un-Nabi (August 26) (date varies)
  • Binara Full Moon Poya Day (September 26) (date varies)
  • Vap Full Moon Poya Day (October 25) (date varies)
  • Deepavali (November 8) (date varies)
  • Il Full Moon Poya Day (November 24) (date varies)
  • Unduvap Full Moon Poya Day (December 23) (date varies)
  • Christmas Day (December 25)

Sick Leave

Employees in Sri Lanka who work in either the public or private sectors are entitled to 7 days of sick leave per year at full pay. This also applies to trainee workers in the private sector.

Employees must provide a medical certificate issued by a registered medical professional to be entitled to paid sick pay.

Maternity Leave

In the event of pregnancy, female employees in Sri Lanka are entitled to maternity leave as determined by the Maternity Benefits Ordinance.

Employees are entitled to 12 weeks of fully paid maternity leave, which is usually separated into 2 weeks before birth and 10 weeks after birth. This is paid in full by the Social Security System.

In the four weeks after the birth of the child, mothers are not permitted to work and companies must not knowingly employ someone in these first four weeks.

Paternity Leave

Fathers working in the public sector of Sri Lanka are entitled to 3 days of paid paternity leave. These 3 days must be taken within 3 months of the birth.

There are currently no statutory laws regarding paternity leave for private-sector workers.

Pensions

Pensions in Sri Lanka vary depending on whether an employee works in the public or private sector.

Public sector employees are entitled to a Public Service Pension Scheme (PSPS), which is a non-contributory scheme funded by government revenue.

Private sector employees are covered by defined contribution plans such as the Employees Provident Fund (EPF).

There isn’t currently a dedicated pension scheme for all older people, however, Sri Lanka does offer other schemes including the following:

  • Contributory pension schemes for farmers, fishermen, and informal sector workers
  • Cash transfer programs such as the Public Welfare Assistance Allowance (PAMA) give benefits to low-income households and the elderly
  • Elderly Assistance Program granting benefits to elders aged 70+ without any other income
  • Social Security Board provides benefits to self-employed people upon retirement
  • Manasuvi Scheme provides payment and pension options to migrant workers upon reaching 60 years of age

Severance Pay

Employees in Sri Lanka who work for companies employing 15 people or more are entitled to severance pay provided that they have worked for said company for at least 5 years.

The amount of severance payable should be equal to half a month’s salary for each completed year of service for monthly paid workers, or 14 days’ wages per year of service for non-monthly paid workers.

Supplementary Employee Benefits in Sri Lanka

Companies employing in Sri Lanka are advised to offer supplementary employee benefits to attract employees and to improve staff retention rates.

Some examples of supplementary benefits that could be offered include:

  • Access to private healthcare schemes
  • Expenses such as transport, housing, and food
  • Performance bonuses
  • Enhanced pension opportunities
  • Improved sick pay

Optimize Employee Benefits with Remote People

Companies looking to hire in Sri Lanka can simplify the process with Remote People’s Employer of Record (EOR) services. Our EOR solution allows you to hire employees in full compliance with Sri Lankan labor laws—without the need to set up a local entity.

You can also contact Remote People to learn how our EOR services can support other areas such as payroll, tax compliance, and benefit administration.

Hiring in Sri Lanka can also be made easier via Remote People’s Sri Lanka Recruitment Services. Our team of experienced people are well accustomed to the Sri Lankan recruitment industry and can help you hire talented employees in Sri Lanka with ease.