Your guide to Bangladesh payroll

Want to pay employees in Bangladesh but not sure where to start? Between salary taxes, festival bonuses, overtime calculations, and VAT on invoices, there’s quite a bit of payroll compliance in Bangladesh to keep track of.

Payroll in Bangladesh requires compliance with the Bangladesh Labor Act, 2006. Employers must process salary payments on a month-end, and failure to do so can result in legal penalties.

Key elements of Bangladesh payroll include a progressive personal income tax ranging from 0% to 30%, no mandatory employer social insurance contributions, and legally required festival bonuses twice a year.

This guide covers Bangladesh payroll processing in detail, from wage structures and deductions to compliance requirements. We’ll also discuss how an Employer of Record (EOR) solution can take some of that complexity off your hands.

Bangladesh payroll: Wages and other payments

If you’re running payroll management in Bangladesh, you’ll need to understand how wages, bonuses, and overtime are structured under local law.

Payroll cycle in Bangladesh

Bangladesh operates on a monthly payroll cycle. Salaries are typically disbursed on the last working day of each month, in Bangladeshi Taka (BDT). 

Minimum wage in Bangladesh

The current minimum wage in Bangladesh is BDT 12,500 per month. Moreover, most industries have their own wage boards and minimum wage levels. When you pay employees in Bangladesh, always check the applicable sector rate. 

Overtime pay

Standard working hours are eight per day and 48 per week. Anything beyond that counts as overtime, subject to these limits:

• Daily cap: An employee can only work for ten hours per day as overtime (including regular hours)
• Weekly cap: 60 hours total, with a yearly average of 56 hours per week
• Rate: Double the basic wage, calculated on Basic + Dearness Allowance + ad-hoc wage. Already-paid overtime and bonuses are excluded from the calculation

Moreover, if an employee works on a weekly rest day, they get equivalent compensatory time off. Working on a festival holiday triggers one substitute day off plus two days’ compensatory wages.

Festival bonuses

Two festival bonuses per year are customary and widely expected in Bangladesh. Each bonus equals roughly one month’s basic salary. The timing depends on the employee’s religion: 

• Muslim employees receive theirs during Eid-ul-Fitr and Eid-ul-Azha
• Hindu employees during Durga Puja, and 
• Christian employees during Christmas.

End-of-service benefit and severance

Employees who complete at least one year of service are entitled to a gratuity of 30 days’ wages for each year served. After 10 years, that figure rises to 45 days’ wages. On termination, severance pay equals one month’s salary per completed year of service. 

Payroll in Bangladesh: Contributions and deductions

One of the first things international employers notice about employer taxes in Bangladesh is how different the structure is from Western payroll systems. There’s no traditional social security tax. The burden falls mostly on income tax withholding.

Income tax in Bangladesh

You must deduct income tax at source from every paycheck and remit it to the National Board of Revenue (NBR). The system is progressive, with rates from 0% to 30%. 

Employment costs in Bangladesh

Employer costs run at approximately 7% on top of annual salary (based on a USD 60,000 benchmark). There are no mandatory employer-side social security contributions in the traditional sense. 

Alternatively, you can use our employee cost calculator to model total employment costs in Bangladesh for your specific scenario.

Other employee benefits

Beyond wages and bonuses, there are several leave-based and insurance-related entitlements to build into your payroll.

Leave entitlements

• Annual leave: One day for every 18 days worked, after completing a full year. Unused earned leave can carry forward up to 60 days.
• Sick leave: 14 paid days per year; moreover, you may ask for a medical certificate.
• Casual leave: Ten days per year. Moreover, you can deny employees from carrying forward such leaves.
• Public holidays: You must grant 11 days of paid leave every year to eligible employees. 
• Maternity leave: You are obliged to provide up to 120 days of paid leave. Further, there is no statutory requirement for paternity leave. 

Health insurance

Bangladesh has no national public health insurance scheme. However, there is a government-run health program called the Essential Health Service Package (ESP), which covers a range of services.

Private health insurance is not mandatory. That said, many international employers offer it as a voluntary perk.

For companies looking to hire in Bangladesh, adding health coverage can make a real difference in attracting talent.

Bangladesh payroll compliance best practices

Payroll compliance in Bangladesh comes down to staying up to date with the Labor Act and National Board of Revenue (NBR) regulations, and ensuring every payroll run reflects that. Here are some practical steps:

• Deduct and remit income tax on time: Late submissions attract penalties from the NBR.
• Track overtime carefully: The double-rate calculation formula (Basic + DA + ad-hoc wage) trips up employers who include bonuses by mistake.
• Issue proper payslips: While specific payslip formatting isn’t heavily regulated, documenting gross pay, deductions, and net pay protects both sides.
• Audit payroll quarterly: Cross-check against leave records, overtime logs, and festival bonus disbursements.

Alternatively, an Employer of Record (EOR) can step in and support the compliance side of talent engagement and payroll management in Bangladesh for you.

Your options for payroll services in Bangladesh

There are a few ways to set up and engage talent and run payroll in Bangladesh. The right choice depends on your headcount, budget, and how many other countries you’re hiring in.

1. Set up a local entity

Register with the Registrar of Joint Stock Companies and Firms (RJSC) and get Bangladesh Investment Development Authority (BIDA) clearance to run payroll directly. It gives you full administrative control, but the setup takes time and financial resources. You’ll also need a local accountant who knows tax filing requirements inside out.

2. Hire contractors

Engaging independent contractors can help you avoid statutory compliance and save on employment costs in Bangladesh. However, misclassification becomes the biggest risk factor. You may be liable to penalties if the arrangement looks like regular employment with time or work oversight. 

However, modern workforce management solutions like an Agent of Record (AOR) or a Contractor Management System can help manage that risk.

3. Work with an EOR

If you want to engage full-time employees and optimize escalating employment costs, you can switch to Employer of Record (EOR). 

An EOR, like Payoneer Workforce Management, acts as the legal employer and supports onboarding, payroll in local currency (Bangladeshi Taka, BDT), withholding taxes, managing timesheets, compliance, and more. 

In other words, EOR helps handle the administrative work. Especially practical if you’re also hiring in India, Pakistan, or Sri Lanka at the same time.

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