Employer of Record (EOR) in Bangladesh
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An Employer of Record (EOR) in Bangladesh serves as the legal employer for workers, managing essential employment-related tasks and ensuring full compliance with local labor laws. Often referred to as a Global Professional Employer Organization (Global PEO), this service streamlines global hiring by overseeing critical aspects like payroll, taxes, statutory benefits, and employment agreements.
The Employer of Record (EOR) in Bangladesh handles:
- Ensuring that all employment practices comply with local labor laws.
- Managing payroll processes and ensuring timely salary distribution.
- Handling the filing of employment-related taxes and necessary documentation.
- Providing workers with payslips and managing local compliance requirements.
With Mercans’ Global PEO services, your business can expand into Bangladesh without the need for entity setup. Our Employer of Record (EOR) service ensures a legal presence, full compliance with regulations, and protection of your intellectual property. We simplify global mobility, work visas, and employee management, allowing your business to build a diverse and efficient global workforce. Partner with Mercans, your trusted EOR in South Asia, to manage your global employment needs effortlessly and efficiently.
Employment Contracts in Bangladesh
An Employment Agreement in Bangladesh is a legal document that defines the terms of employment between an employer and an employee. If the employment period exceeds one month, a written contract must be provided within the first two months. A well-drafted agreement includes key details such as:
The agreement should also include clauses like severability, governing jurisdiction, and a clear statement that it is the final agreement between both parties. This ensures transparency and legal compliance while outlining both parties’ rights and responsibilities.
Working Hours
Under the 2006 Labour Act, the standard working hours are set on both a daily and weekly basis. Employees are to work 8 hours per day, with appropriate breaks as outlined in section 108. Weekly working hours should not exceed 48 hours, but can extend to a maximum of 10 hours per day, up to 60 hours per week, with an average of 56 hours per week. Female workers are not permitted to work night shifts (from 10:00 pm to 6:00 am) without their consent. Additionally, workers are prohibited from engaging in double employment.
Probation Period
As per section 4(8) of the Labour Act, the probation period varies based on job type. For clerical workers, the probationary period is six months, while for other workers, it is three months.
13th Month Salary
There is no legal requirement in Bangladesh to provide a 13th-month salary.
Termination, Severance Pay and Notice Period
In Bangladesh, employment termination is governed by the Labor Act of 2006, which outlines the rights and responsibilities of both employers and employees during the termination process.
Termination by Employers
Employers can terminate employees by providing a written notice, with specific notice periods based on the employee’s status. For permanent workers, employers must provide 120 days’ notice for monthly-rated employees and 60 days for others. For temporary workers, the notice period is 30 days for monthly-rated employees and 14 days for others. Alternatively, employers may pay wages in lieu of notice.
Termination by Employees
Employees can also resign by providing written notice. Permanent employees must give 60 days’ notice, while temporary workers must provide 30 days’ notice (or 14 days if non-monthly-rated). Employees may choose to pay the employer the wages for the notice period instead of serving it.
Severance Pay
If an employee resigns after five years of service, they are entitled to compensation of 14 days’ wages per year of service. For ten or more years of service, the compensation increases to 30 days’ wages per year.These legal provisions ensure compliance and fair treatment in employment termination.
Overtime Pay
Overtime compensation in Bangladesh differs based on an employee’s pay structure. For hourly and salaried workers, overtime is typically paid at one and a half times the regular hourly rate for any hours worked beyond the standard limit. For employees paid by piecework or commission, overtime is calculated by converting their earnings into an equivalent hourly rate, after which the overtime multiplier is applied to determine the final overtime pay.
Employees vs Independent Contractors
In Bangladesh’s evolving labor landscape, the distinction between employees and independent contractors has become increasingly significant. As the gig economy gains traction, understanding the differences between these two classifications is essential for both employers and workers alike. Employees benefit from job security and a suite of legal protections, while independent contractors relish the freedom and autonomy that comes with project-based work. However, with these differences come varying responsibilities and risks. This nuanced relationship raises important questions about rights, obligations, and the future of work in Bangladesh, making it crucial to explore the implications of each classification.
| Criteria | Employees | Independent Contractors |
|---|---|---|
| Working Tenure | Hired for an indefinite period; typically work under direct supervision and control of the employer. | Engaged for specific projects or tasks; operate independently, managing their own schedules and deadlines. |
| Extent of Financial Risk | Financial responsibilities, such as taxes and social security contributions, are handled by the employer. | Bear their own financial risks, including expenses for equipment, materials, insurance, and tax obligations. |
| Level of Job Security | Enjoy greater job security with a guaranteed income stream; entitled to benefits like health insurance and paid leave. | Face less job security; income is often project-based without guaranteed benefits such as health insurance or paid time off. |
| Legal Rights and Protections | Protected by various labor laws ensuring fair treatment, minimum wages, and safe working conditions; can seek legal recourse in workplace disputes. | Have limited legal protections; rely more on contractual agreements for dispute resolution, with fewer statutory rights. |
Social Security in Bangladesh
In Bangladesh, the notion of social security is virtually nonexistent. However, companies that meet specific size criteria are obligated to contribute 5% of their profits to a Workers’ Profit Participation Fund, which does not require any contributions from employees. Additionally, all taxpayers must submit an annual tax return.
Payroll Compliance for Employers
Employers in Bangladesh must adhere to specific payroll compliance requirements, which include mandatory reporting obligations. Here are the key aspects:
- Frequency: Monthly
- Deadline: Returns must be submitted within 15 days following the end of the relevant month.
- Details: Employers must report the tax deducted from employees’ salaries.
- Frequency: Annually
- Deadline: This report is to be submitted with the monthly TDS return by September each year.
- Details: Employers must detail salaries paid to employees throughout the year.
- Frequency: Annually
- Deadline: This must be submitted along with the monthly TDS return by April each year.
- Details: Employers are responsible for compiling and submitting information regarding employees’ tax filings, which includes:
- e-TIN
- Date of filing the return
- Serial number provided by the authority upon filing the individual tax return
Summary Table of Mandatory Reporting
| Activity | Frequency | Deadline | Penalty | Reference |
|---|---|---|---|---|
| Details of tax deducted from salaries | Monthly | 15 days after the relevant month | - | SR0-206-AI N/Income Tax-01/2023 & Section 177 & 266 of ITA 2023 |
| Details of salaries paid to employees | Annual | 15 September of each year | Higher of: - 10% of last assessed income - Tk 5,000 Continuing default incurs Tk 1,000/month | - |
| Details of employees' personal income tax filing | Annual | 15 April of each year | - | - |
Perquisites
At the time of filing the annual return, employers must provide a Statement of Excess Perquisites via an Annexure along with the Computation of Total Income. Perquisites are defined as any payments made to employees by the employer in forms other than salary, excluding:
- Advance salary
- Leave encashment
- Overtime pay
- Contributions to recognized provident funds
- Contributions to approved pension, gratuity, and superannuation funds
The maximum limit for perquisites paid to an employee is Tk 1,000,000 per year. Any amount exceeding this limit will be disallowed by tax authorities, with excess amounts treated as income and taxed at the standard rate.
Payroll Compliance for Employees
Individuals who fall under certain categories are required to file an income tax return at the end of the tax year:
- Individuals must possess a 12-digit e-TIN, even if they do not have taxable income.
- Individuals whose earnings exceed the maximum tax-free income limit for the year.
- Individuals assessed for tax during any of the preceding three years.
- Shareholder directors, partners in firms, and government employees.
- Individuals who own a motor vehicle or a club membership.
- Business owners with a trade license.
- Members of recognized professional bodies (e.g., doctors, lawyers).
- Registered income tax practitioners, chamber of commerce members, or candidates for local government positions.
- Individuals participating in government tenders or holding executive positions in businesses.
Exemptions from filing tax returns include:
- Non-resident individuals with no fixed base in Bangladesh.
- Classes of individuals exempted by the tax board.
Penalties for Non-Compliance
Failure to file an income tax return can result in a penalty of:
- The higher amount of tax payable on the last assessed income or for those who have never filed a return.
- A daily penalty if the default continues.
Individuals required to file must pay the difference between total tax payable and any deductions made at source by the due date to avoid a penalty of 25% on total or deficit tax.
Universal Self-Assessment
Under this system, individuals can submit their tax returns electronically or manually by the specified deadline, along with the payment of any owed taxes. The Deputy Commissioner of Taxes (DCT) will issue an acknowledgment, which serves as an assessment order for the fiscal year. Tax returns submitted may be selected for audit within two years of the assessment year, except if they show a 15% increase in income over the last assessment year.
Deadline for Filing Tax Returns
The final date for individual tax return filing is set for November 30 following the end of the income year, known as Tax Day.
Minimum Wages
In 2024, the minimum wage in Bangladesh remained stable at 12,500 BDT per month, the same as in 2023.
Payroll Cycle
The payroll cycle in Bangladesh can be structured on a daily, weekly, bi-weekly, or monthly basis, depending on the employer and the specific sector. According to the Employee Rights and Labor Law in Bangladesh, employees must receive their salaries within seven days following the end of the last working period.
Personal Income Tax in Bangladesh
In Bangladesh, personal income tax is structured around fixed income slabs that determine tax liabilities for individuals based on their total income. The tax rates for the Assessment Years (AY) 2024-25 and 2025-26 are as follows:
Income Tax Rates for AY 2024-25
- First Tk. 350,000: Nil
- Next Tk. 100,000: 10%
- Next Tk. 400,000: 15%
- Next Tk. 500,000: 20%
- Next Tk. 500,000: 25%
- Balancing Amount: 30%
- First Tk. 400,000: Nil
- Next Tk. 100,000: 10%
- Next Tk. 400,000: 15%
- Next Tk. 500,000: 20%
- Next Tk. 500,000: 25%
- Balancing Amount: 30%
- First Tk. 475,000: Nil
- Next Tk. 100,000: 10%
- Next Tk. 400,000: 15%
- Next Tk. 500,000: 20%
- Next Tk. 500,000: 25%
- Balancing Amount: 30%
- First Tk. 500,000: Nil
- Next Tk. 100,000: 10%
- Next Tk. 400,000: 15%
- Next Tk. 500,000: 20%
- Next Tk. 500,000: 25%
- Balancing Amount: 30%
Note: Parents or legal guardians of disabled individuals are eligible for an additional exemption of Tk. 50,000 beyond the standard tax-free limit. However, if both parents are taxpayers, only one can claim this increased exemption.
The tax rate for non-resident foreigners is fixed at 30% on their income.
Bangladesh Employee Hiring Cost
Cost of Employing in Bangladesh
| Bangladesh | |
|---|---|
| Gross annual salary | BDT 10,000.00 |
| Annual employer costs | BDT 833.00 |
| Festival Allowance (13th Month Salary) | BDT 833.00 |
| Total annual cost | BDT 10,833.00 |
In Bangladesh, for an employee with a gross annual salary of BDT 10,000.00, the total annual cost to the employer amounts to BDT 10,833.00. This total includes the gross salary, annual employer costs of BDT 833.00, and a festival allowance equivalent to one month’s salary (BDT 833.00), commonly referred to as the 13th month salary.
Employee Benefits in Bangladesh
Mandatory Benefits
In Bangladesh, the Labor Act ensures that all employees receive certain mandatory benefits, which are essential for their security and well-being. These benefits create a legal and ethical framework for employers to follow. Here are some of the key mandatory benefits:
Paid Leave Entitlements
Employees in Bangladesh are entitled to various types of paid leave:
- Annual Leave: The amount of paid leave depends on the industry:
- For most sectors like factories and shops, employees earn 1 day of leave for every 18 days worked.
- In tea plantations, it’s 1 day for every 22 days worked.
- In newspaper establishments, employees receive 1 day for every 11 days worked.
- Festival Holidays: Employees enjoy 11 paid holidays per year for government-declared national holidays.
- Casual Leave: Each employee gets 10 days of paid casual leave each calendar year.
- Sick Leave: Employees are entitled to 14 days of paid sick leave annually, which can’t be carried over to the next year. A medical certificate is necessary to claim this leave.
Maternity Leave
Female employees in Bangladesh receive generous maternity leave benefits:
- Maternity Leave Duration: Women are entitled to 16 weeks (4 months) of maternity leave with full pay.
Overtime Compensation
If employees work beyond their regular hours, they must receive overtime pay, which is determined according to industry regulations.
Optional Benefits
While the mandatory benefits are crucial, many employers in Bangladesh also provide additional perks to attract and retain talent. These optional benefits can enhance the overall work experience:
Health and Wellness Benefits
- Health Insurance: Though not legally required, many employers offer health insurance to cover medical expenses, making it a popular benefit.
- Dental and Vision Insurance: Some companies include these in their health plans for comprehensive care.
- Employee Assistance Programs (EAPs): These programs provide confidential counseling for personal or work-related issues, promoting overall well-being.
Financial Security Benefits
- Provident Funds: These are savings plans sponsored by employers, allowing employees to save for retirement. Both the employer and employee contribute to this fund.
- Gratuity Payments: Some organizations provide a lump sum payment upon an employee’s retirement or termination after a certain period.
Work-Life Balance Benefits
- Flexible Work Arrangements: Options like flexible hours and remote work can help employees manage their time better.
- Childcare Assistance: This can include childcare subsidies or on-site facilities for working parents.
Other Optional Benefits
- Transportation Allowances: Employers may offer allowances to help cover commuting costs.
- Meal Vouchers or Subsidized Meals: Providing meals or vouchers can make daily work life easier for employees.
- Employee Discounts: Many companies negotiate discounts for their employees on various products and services.
- Training and Development Opportunities: Investing in employee development through training programs can foster a culture of growth and learning.
Health Insurance Requirements
Although health insurance isn’t mandatory in Bangladesh, it’s becoming increasingly common for employers to offer it as part of their employee benefits package. Some industries might have specific health insurance guidelines, so it’s wise for companies to consult relevant industry bodies.
- Employer-Sponsored Plans: Many larger organizations include health insurance in their compensation packages, which is attractive for potential hires.
- Individual Coverage: Employees can also choose to purchase their own health insurance plans if they prefer.
Future Considerations
The government has considered implementing mandatory health insurance schemes in the past, which could lead to significant changes in employee benefits in the future.
Retirement Plans
Traditionally, retirement support in Bangladesh relied heavily on family structures, but changes are on the horizon with new programs emerging:
Universal Pension Scheme (UPS)
Introduced in 2023, this voluntary scheme aims to provide a monthly pension for private-sector employees upon retirement.
- Eligibility: Open to Bangladeshi citizens aged 18 to 50 in the private sector, with special conditions for those over 50.
- Key Features: Employees can voluntarily participate, contributing to their individual accounts.
- Benefits: A tax-free monthly pension is available after retirement age (60 years) for those who have contributed for a minimum of 10 years.
Provident Funds
These employer-sponsored retirement plans allow both employers and employees to contribute a portion of the salary toward retirement savings, promoting financial security.
Work Permit in Bangladesh
When seeking to work in Bangladesh, foreign nationals must secure a work permit and an employment visa. Here’s an overview of the general requirements and specific details necessary for obtaining these documents.
General Requirements for All Categories
To apply for a work permit or employment visa, you’ll need to complete the following steps:
- Online Application: Begin by filling out the online application form available at www.visa.gov.bd.
- Photographs: Prepare two recent passport-sized photographs (45x35mm), taken within the last six months, against a white background.
- Original Passport: Ensure your passport is valid for at least six months from the date of application.
- Visa Fee Payment Receipt: While Indian citizens do not need to pay a visa fee, applicants from other countries must provide a receipt as proof of payment.
- Old Passport: If you have an old passport, include it in your application.
Preparation for Online Submission
When filling out the online application, it’s helpful to have the following information ready:
- Your original passport (valid for at least six months).
- A digital photograph in JPEG format, sized 45x35mm, and no larger than 300KB.
- A complete address in Bangladesh, including details such as village, post office, police station, district, pin code, city, and country.
- Your phone number and email address for contact purposes.
Requirements for Employment (E) Visa
The Employment (E) visa is specifically for foreign experts, consultants, and employees working in various sectors, including government, semi-government, autonomous projects, and contractors from both home and abroad.
Eligibility
To be eligible for an E visa, applicants should fall into one of the following categories:
- Experts or consultants working in specialized fields.
- Employees of government agencies or organizations.
- Workers in semi-government or autonomous organizations.
- Employees in projects or farms managed by contractors.
Purpose of Arrival
The main purpose of the visa is to fulfill professional responsibilities or job-related tasks.
Essential Documents for Issuance
When applying for an E visa, you must provide:
- An appointment letter from the employer in Bangladesh.
- A recommendation from the Bangladesh Investment Development Authority (BIDA) or the Bangladesh Export Processing Zones Authority (BEPZA), along with approval from the concerned ministry.
Essential Documents for Extension
If you need to extend your employment visa, you will need to submit:
- A recommendation from your appointing authority.
- A valid work permit.
- Security clearance documents.
EOR Solutions in Bangladesh
Best Employer of Record Bangladesh
Conclusion
In conclusion, Mercans provides exceptional Employer of Record (EOR) solutions in Bangladesh, ensuring accuracy, compliance, and efficiency in payroll management. Our all-encompassing services optimize operations, making us a dependable partner for businesses navigating the intricacies of the Bangladeshi employment landscape. Rely on Mercans to simplify your global workforce management, facilitating a smooth and successful expansion into Bangladesh.