Employment laws in Bangladesh

If you’re building a team in Bangladesh, everything starts with the Bangladesh Labor Act, 2006. Since then, the employment laws in Bangladesh have been consistently evolving and work hand in hand with the Bangladesh Labor Rules. Between the two, they dictate how you hire, what you pay, when people work, and how you let them go. 

Furthermore, Bangladeshi courts typically favor employees in times of disputes. For companies without a local presence, an Employer of Record (EOR) offers a practical way to stay compliant with the labor laws in Bangladesh. 

A robust solution like Payoneer Workforce Management can support onboarding, payroll, and compliance in South Asian countries and others, including Bangladesh.

Key employment laws in Bangladesh

Several laws sit at the center of labor law compliance in Bangladesh. Here are the major ones to consider: 

• Bangladesh Labor Act, 2006: It sets the rules on employment relationships, wages, working hours, safety standards, union activity, and how employment ends.
• Bangladesh Labor Rules, 2015: It fills in the procedural gaps the Act leaves open. Think of them as the operating manual.
• On the tax side, the Income Tax Act, 2023, governs salary withholding. The NBR administers it. 
• Two agencies matter on the enforcement front: DIFE (the Department of Inspection for Factories and Establishments) handles compliance checks, while MOLE (Ministry of Labor and Employment) sets policy direction.

Contract employment laws in Bangladesh

Employment relationships in Bangladesh must be drafted in line with the Bangladesh Labor Act, 2006, typically a contract outlining key terms of employment. These should be provided at the start of employment to ensure compliance.

Types of contract: 

While the Bangladesh Labor Act, 2006, classifies workers by category, these can be broadly aligned with internationally recognized contract types:

• Indefinite Contract or Permanent Employment: The employee is hired on a long-term basis with no fixed end date, after completing probation.
• Definite/ Fixed Contract or Temporary Employment: The employee is hired for a specific period or project, and the role ends once that period or work is completed.

Here are some additional types of contracts. However, the employer must consult local regulations before choosing a contract type.

• Casual Employment: The employee is hired as needed for short-term or irregular work, with no guarantee of ongoing employment.
• Apprenticeship: The employee is hired for a training or probation period, after which they may be offered a permanent role.
• Substitute (Badli) Employment: The employee is hired to fill in for another employee and works only until that person returns.
• Trainee (Learner) Engagement: The individual is hired mainly for training and may receive an allowance instead of full wages.

An EOR in Bangladesh can help you draft compliant contracts based on your requirements.

Essential contracts terms

Every worker needs a written appointment letter before they start. You can include the following details in the contract: 

• Names of both parties
• Employee role and duties
• Salary and its components in local currency
• Working hours, leave, notice terms, and probation length. 

And most importantly, every employee must be provided with a photo ID card.

Working hours in Bangladesh

The standard permissible working hours in Bangladesh are eight hours a day, amounting to 48 hours a week. Additionally, breaks during the shift are also mandated. 

However, in certain circumstances, you can ask employees to work overtime up to ten hours or 60 hours a week. Moreover, over the course of a year, the weekly average can’t go above 56 hours. Further, the overtime laws in Bangladesh specify additional wages up to twice the basic pay. 

Mandatory benefits

In addition to enforcing duties, you are also obliged to secure employee rights in Bangladesh. Let’s discuss these rights in brief: 

• Pension: The employment laws in Bangladesh do not mandate any health insurance or social security benefits. However, you may enroll employees in the government-run Essential Health Services Package (ESP). 
• Minimum wage: The current monthly minimum wage is BDT 12,500. Moreover, wages vary based on the industry. 
• Leave and holidays: You have to pay full salary for earned annual leave, public holidays, sick leave, casual leave, and maternity leave. Refer to our Bangladesh leave policy guide for details. 
• Festival bonuses: You have to account for festival bonuses every year, equaling a month’s basic salary. It can be extended based on the religion of your employee. 
• End-of-service gratuity: You must extend 30 days’ wages per year (bumped to 45 days per year after a decade of service) towards gratuity payments.
• Severance pay in Bangladesh: You are liable to extend one month’s salary per completed year towards severance pay upon termination. That’s on top of the end-of-service gratuity.

Furthermore, our Employee Cost Calculator gives you a clearer picture of the total employment costs in Bangladesh for a specific role. 

Termination

If an employee resigns or both parties agree to end the contract, the process is simpler and less regulated. Beyond that, an employer can end things during probation or after probation for misconduct, poor performance, unauthorized absence, or redundancy. 

Moreover, misconduct cases require a formal inquiry, as termination laws in Bangladesh lean heavily in favor of the worker. Without proper grounds, proper notice, and proper paperwork, you’re inviting a labor court case.

Notice period in Bangladesh

The rule for notice period in Bangladesh varies based on the following circumstances: 

• If the employer initiates termination, they have to account for a minimum notice period of 60 days. 
• Even when an employee resigns, they have to serve a minimum of 60 days. 
• Nothing is required by statute during the probation period, though 14 days is considered reasonable. Moreover, pay instead of notice is allowed.

Navigate employment laws in Bangladesh with Payoneer Workforce Management

The overload of contracts, overtime math, termination procedures, and gratuity calculations can prove complex. This could make labor law compliance in Bangladesh more of a liability than a formality.

Payoneer Workforce Management helps you manage hiring, payroll, and compliance in a single platform. And all this without the need to set a local entity. It works just as well if you’re also building teams in India, Pakistan, or Sri Lanka.

Book a demo today.