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Mercans offers complete payroll, PEO and HR services in Sri Lanka

Strategically located at the intersection of major shipping routes to South Asia, Europe and America, Sri Lanka is home to the top 25 container ports globally. Sri Lanka makes the list of the 2021 Top 50 Outstanding Destination Global Service Location Index. It is an attractive investment destination thanks to its agile talent pool, easy access to international travel, fast developing infrastructure and investment protection initiatives.


Doing Business in Sri Lanka

Sri Lanka’s location advantage and ports contribute to the development of the economy. Further, Sri Lanka has entered into 28 bilateral investment promotion and protection treaties which protect foreign investments in the country. Investment incentives include attractive corporate income tax rates and a number of applicable exemptions.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Sri Lanka is straightforward. Choose how your company operates from a range of entity types that suit your individual circumstance.


Banking Hours: 9:30 am to 3:00 pm from Monday to Friday.

Working Week

The standard working week is from Monday to Friday from 9:00 am - 1:00 pm.

Labor Law

The main pieces of governing law include the Employees Provident Fund Act, Industrial Disputes Act No. 43 of 1950, Wages Board Ordinance No. 27 of 1941 and Factories Ordinance No. 45 of 1942.

Main Industries

Textiles & clothing, tourism, telecommunications, information technology services,

GDP Growth


Dates & Numbers


Official State Name

Democratic Socialist Republic of Sri Lanka


21.92 million


Sri Jayawardenepura Kotte (legislative), Colombo (executive and judicial)

Major Languages

Sinhala and Tamil


Sri Lankan Rupee

Internet Domain


International Dialing Code


Sri Lanka
Colombo, LK
12:59 pm, June 14, 2024
temperature icon 31°C
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Humidity 77 %
Wind Gust: 16 mph


The national minimum wage is set for all employees, regardless of the industry. All wage boards have fixed minimum wages payable in respect of different classes of workers, which are dependent on whether the wages are daily, monthly or contract rates.

It is acceptable to provide employees with online payslips


Payroll reports must be kept for four years


Employees are entitled to receive paid annual leave of 14 days

Annual Leave

Employees are entitled to receive paid sick leave of 7 days

Sick Leave

Employees are entitled to 12 weeks of unpaid maternity leave and there are no statutory laws regarding paternity leave

Maternity & Paternity Leave

Employees are required to be provided with six months notice of termination of employment

Employee Termination

There are no provisions mandated by law regarding the 13th month salary

13th month salary

12500 LKR per month

Minimum Wage

Overtime payment is calculated at the rate of 1.5x the employee's ordinary rate of pay


Employees paid monthly are entitled to 2.5 months’ pay for each year of employment after the first two years of service

Severance Pay


Tax and Social Security

Corporate income tax exemptions include tax holidays and exemptions for corporate income tax for agriculture, fisheries and livestock farming. Social security contributions are regulated under the Employees Provident Fund Act No. 15 of 1958.


Sri Lanka has entered into Double Taxation Avoidance Agreements with 44 countries to mitigate or eliminate any juridical double taxation.


Corporate Income Tax


Personal Income Tax


Sales Tax



Social Security

Employers are required to contribute 12% of the employee’ monthly salary and contribute 8% of the employee’s salary to the EPF Fund.


Social Security Rate


Social Security Rate for Employers


Social Security Rate for Employees


Employment Law

Sri Lankan employment laws do not distinguish between foreign or local employees and are applied regardless of whether the employment is regular, on a fixed-term basis or casual.

Employment Agreement

While the employment agreement does not need to be in writing to be legally binding, certain information must be provided in writing to employees, especially those who work in shops and offices.

Working condition

Shift workers must be provided additional rest breaks. Employees are not entitled to a rest break where they have a shorter working day.


Any employee required to work on a weekly holiday is entitled to payment at the overtime rate. An employee falling under the Shop and Office Employees (Regulation of Employment & Remuneration) Act No 19 of 1954 (SOEA) is entitled to 14 days of annual leave at full pay for every completed year of service.

Employment termination

The Termination of Employment of Workmen (Special Provisions) Act No 45 of 1971 (TEWA) makes it mandatory for the employer to inform employees, in writing, of the reason for the dismissal before the expiry of the second working day after the dismissal has taken place.


30 days

Minimum notice period for terminating an employee


26 days

Total number of public holidays



Working hours per week


7 days

Total number of days for Compassionate & Bereavement Leave



Different visa categories are available depending on whether it is intended for an investor, dependent or expatriate worker. These include entry visas, residence visas, extensions of the residence visa and temporary visas. The BOI (Board of Investments) will facilitate a visa when a company provides the relevant requirements. Expatriate workers are required to fall between 18 – 60 years of age with the required qualifications and experience for the role.


Residency permits

An investor or expatriate employee should arrive in Sri Lanka using an Entry Visa or business visa which must be converted into a residence visa within a month from the date of the arrival entry visa. Departure from the country within the entry visa period, there are no conversions available to allow the visa to be converted into a residence visa.

Work Permit Validity

1 year

Required Documents

A letter from the applicant’s employer in Sri Lanka

A Board of Investment (BOI) certificate for the employer in Sri Lanka

A copy of the bio-data page of the applicant’s passport

A copy of the company’s registration certificate

A letter of recommendation from the respective Ministry in Sri Lanka.

Compliant, reliable, error-free and touchless payroll in Sri Lanka

Build the best team and hire top talent compliantly in Sri Lanka. Get in touch with Sri Lanka payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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