Bangladesh payroll and benefits guide
What global businesses need to know about payroll in Bangladesh
Did you know that more than three-quarters of Bangladesh’s exports are ready-made garments? This sector employs an estimated four million people in the country—the vast majority of them women—as businesses from around the world seek to make their clothing production more cost-effective.
Bangladesh is a developing country of around 175 million people, and while there are cost efficiencies to be found there, incoming foreign businesses should proceed with caution. Issues around wages and living costs are a particular hotspot, while there are also many more complexities around payroll processing and employment law to navigate.
This guide gives you the latest picture around running payroll in Bangladesh, and some of the key requirements to stay ahead of.
Getting Started
Most foreign businesses tend to set up as private limited companies. Public limited companies are subject to much more stringent regulations and audit requirements, and are only really suitable for larger operations.
Businesses setting up in Bangladesh should start by obtaining a company name and the associated clearance certificate, and then draft the Memorandum and Articles of Association for approval by the Register of Joint Stock Companies and Firms (RJSC). After this, you’ll need to get a trade license from the local city corporation, a tax identification number, and a VAT registration. You’ll also need to open a bank account in Bangladesh.
Foreign business entities may find it difficult to handle the banking system in Bangladesh, but Bangladesh is gradually modernizing its systems and online bank services are now offered by the major banks. Nonetheless, working with a partner that understands the ins and outs of Bangladeshi business and finance can be a real help throughout this process.
Employment Considerations
Union involvement in Bangladesh is increasing, especially in light of the situation with minimum wages in the garment industry (see below).
The maximum working week in Bangladesh is 48 hours per week and eight hours per day. This reduces to 36 per week and six per day for workers under the age of 18 (the minimum working age in Bangladesh is 14). Generally speaking, standard working hours are 9am to 5pm from Sunday to Thursday: this reflects the need to respect Friday as the Islamic day of prayer, as more than 90% of Bangladesh’s population is Muslim.
Overtime is limited to two hours per day and is paid at double time. Employees should not work more than 60 hours in any one week, and should not average more than 56 hours per week across a full year. In the garment sector, however, employers can apply up to four hours of overtime per day during particularly busy periods.
Probation periods in Bangladesh are normally three months, although this can be extended to six months for employees engaged in clerical work. Notice periods are one month, or two months when employees resign. Pay in lieu of notice can be given if mutually agreed.
Compensation and Severance in Bangladesh
Minimum wage is a sensitive topic in Bangladesh. In late 2023, it was raised by over 56% to 12,500Tk per month (approx. £90; $115; €105) for the millions of Bangladeshis who work in the garment industry. However, at the time, this was met with strikes and violent protests from workers who said that their earnings weren’t keeping up with inflation.
Although the minimum wage rate hasn’t officially been increased since then (at the time of writing), garment workers were given a 9% pay increase in December 2024. It’s therefore vital to keep track of developments around earnings and wages in Bangladesh, even if you don’t intend to operate in the garment industry.
A 13th-month bonus in advance of major festivals such as Eid are often expected, although they aren’t compulsory. Performance bonuses are also discretionary. However, many employees— especially those on lower wages—will expect or even need allowances for meals, transport, health coverage and mobile phones. Severance pay is normally 30 days’ pay per year of service.
Tax and Social Security
Income tax rates are progressive, although the first 350,000Tk per year (approx. £2,500; $3,200; €2,900) is exempt. This exemption allowance is higher for women, men over 65, employees with a disability, and ‘freedom fighters’ who were wounded in conflict. Above this, there are six bands, starting at 5% and reaching the highest band of 30% for earnings above 3.85 million Tk (approx. £23,300; $31,700; €27,100).
Employers are required to withhold income tax from employees and make payments on a Pay-As-You-Earn (PAYE) basis, and the tax year runs from July 1 to June 30.
Although Bangladesh has a social security system that supports pensioners and the disabled, neither employers nor employees are required to make any contributions to it. However, employees can force their employers to set up a provident fund if at least three-quarters of them request it in writing. In this situation, employees and employers each make contributions of between 7% and 8%.
Corporate tax rates are variable, depending on the type of business. For example, private companies are taxed at 27.5%, but this reduces to 25% or even 22.5% when some of its shares are listed and traded publicly. Banking and finance institutions are subject to rates of between 37.5% and 40%. With a number of different federal and local rules in place alongside these, taxation can be a very complex area in Bangladesh. The standard rate of VAT is 15%.
Holidays and Leave in Bangladesh
Paid leave entitlement is one day for every 18 days worked, but as with many other employment arrangements in Bangladesh, rates vary by industry: for example, workers on tea plantations earn one day for every 22 days worked, but newspaper workers get one day per 11 days worked. On top of this, employees can also take up to ten days of paid ‘casual leave’ each year, to cover urgent personal issues.
Although Bangladesh has approximately 22 days of national holidays each year, employees are only entitled to take 11 of them off as paid holiday, and it is the employer’s choice as to which ones. However, employees who are required to work on a public holiday must be compensated by two additional days off at another time.
Sick leave entitlement is 14 days per year on full pay, but requires a medical certificate and cannot be carried over from one year to the next.
Maternity leave entitlement is 16 weeks on full pay, eight weeks either side of the birth, as long as they have at least six months of service. Employers are required to cover these payments. There are no other paternity or parental leave requirements, although some businesses offer paternity leave as an additional employee benefit.
Bangladesh Payroll: A Summary
Bangladesh has plenty of complexities from a payroll and employment perspective, and the situation with the minimum wage needs particularly close attention. It’s therefore really important that you have access to the most up-to-date information, from payroll experts that understand Bangladesh inside-out. Working with a global payroll partner can give you that access, not only for Bangladesh, but every other country you operate in, too.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional. Click here to see more country payroll guides from CloudPay.