Bangladesh Payroll and Benefits Guide

What global businesses need to know about payroll in Bangladesh

If you’re looking for a developing country to do business in that has huge growth potential, then Bangladesh should be pretty high on your list. It has a huge population of 173 million, costs are low (although consistently rising), and there’s a good mix of business types across agriculture, industry, and services. 

Internationally, Bangladesh is probably best known from a business perspective for garment and clothing manufacturing, including many well-known retail names from the West. That’s played a big part in the fact that its GDP has more than trebled in the last ten years, with not even the onset of the pandemic able to halt its growth.

It should be noted, however, that Bangladesh is not necessarily the most accessible country for foreign investors. It is less technologically advanced in its financial systems than its larger neighbor India, and as a country isn’t quite as used to business from overseas. Nonetheless, if you can navigate past these hurdles, the potential for success is great. Here are all the key facts about doing business in Bangladesh from a payroll and employment standpoint.

Getting Started

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 their company. There are three main types of company: limited by shares, limited by guarantee, and unlimited liability.

After this, companies will need to open a bank account in Bangladesh to get the encashment certificates required to officially complete registration. These certificates prove that foreign money has been exchanged for the local currency, the Bangladeshi taka. Then all required documentation can be submitted to the Register of Joint Stock Companies and Firms (RJSC) for approval, which should take around 28 days.

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

Collective bargaining is the oldest form of employee negotiation in Bangladesh, but in practice, it’s not used very often. However, as the garment industry continues to grow, employers may start to see greater involvement from unions. 

Rules around working time and overtime in Bangladesh are very similar to those in India, except for the fact that the day of rest is normally Friday, reflecting the majority Muslim population in the country. The standard working week is 40 hours (five shifts of eight hours each), and can be extended to a maximum of 48 hours. Any work above 48 hours is classed as overtime and paid at double the employee’s normal rate. For some types of blue-collar and manual work, the amount of overtime they are allowed to work is limited to two hours per day.

Probation periods in Bangladesh are normally three months, although this can be extended to six months for employees engaged in clerical work.

Compensation and Severance

On December 1 2023, the national minimum wage in Bangladesh was raised by more than 56% in one go. The minimum is now 12,500TK per month (approx. £90; $115; €105). The authorities have also confirmed that this will continue to rise at 5% a year for at least the next few years. However, there have been protests in Bangladesh that the increases don’t go far enough, so the possibility of larger rises to come cannot be ruled out.

It should be noted that wages generally comprise a basic salary and other allowances for rent, food, transport, and healthcare. Employees who have been with a company for at least one year also receive two festival bonuses annually.

Severance pay is normally 30 days’ pay per year of service. Notice periods are generally between one and four months, depending on the industry, and pay in lieu of notice can be given.

Tax and Social Security

Income tax rates are progressive, although the first 350,000Tk per year (approx. £2500; $3200; €2900) is exempt. This exemption allowance is higher for women, men over 65, employees with disability, and ‘freedom fighters’ who were wounded in conflict. Above this, there are five bands, starting at 5% and reaching the highest band of 25% for earnings above 1.65 million Tk (approx. £11,900; $15,000; €13,700).

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.

Corporate tax is levied at 22.5% for companies that are publicly listed and 30% for those that aren’t. However, there are a number of sector-specific exemptions in place, which can make this rate higher or lower: for example, tobacco companies are taxed at 45% and mobile phone operators 40%. However, education and textiles are two areas where lower rates are generally applied. With a number of different federal and local rules in place alongside these, taxation can be a very complex area in Bangladesh.

Holidays and Leave

Paid leave runs on an accrual basis: most workers earn one day for every 18 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 worked. 

Although Bangladesh has 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 then required to work on one of their designated holiday days must be compensated by two additional days off at another time.

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 with their current employer. There is no entitlement to paternity leave at the time of writing, although the Bangladeshi government has discussed introducing it, and there are now a number of companies that voluntarily offer it as a contractual employee benefit. There is no further provision for parental leave.

Sick leave entitlement is 14 days per year on full pay, but requires a medical certificate. Employees in Bangladesh are also entitled to a further ten days of paid ‘casual leave’ to attend to personal emergencies, such as illness, accidents, and pressing personal matters. Neither sick leave nor casual leave can be rolled over into the following year.

In Summary

Compared to some other countries in the region such as India, the requirements around payroll and employment in Bangladesh are relatively straightforward. However, there are still many variations in rules according to job type and industry, so staying compliant can still be a challenge, especially if you intend to employ large numbers of people in multiple locations. In any case, we’d recommend you explore a partnership with a global payroll expert, who can help you navigate the business set-up challenges, achieve payroll compliance, and keep you there for the long term.

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.

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