Employer of Record in Bangladesh

Bangladesh offers a dynamic and growing market for international businesses seeking to expand their talent pool. However, navigating the country's specific labor laws, tax regulations, and compliance requirements can be complex for foreign companies. Understanding the various pathways to legally engage employees is crucial for successful and compliant operations.

When considering hiring employees in Bangladesh, companies generally have a few primary options, each with distinct implications for compliance, cost, and administrative burden.

• Establishing a Local Entity: This involves setting up a subsidiary or branch office in Bangladesh, a process that requires significant time, capital, and a deep understanding of local corporate and labor laws.
• Utilizing an Employer of Record (EOR): Partnering with a global EOR provider, such as Rivermate, allows companies to hire employees in Bangladesh without establishing a local legal entity. The EOR acts as the legal employer, handling all local compliance.
• Hiring as an Independent Contractor: While seemingly straightforward, classifying workers as independent contractors requires careful consideration of Bangladesh's labor laws to avoid misclassification risks, which can lead to significant penalties.

How an EOR Works in Bangladesh

An Employer of Record simplifies international hiring by acting as the legal employer for your workforce in Bangladesh. This allows your company to focus on daily management and strategic objectives, while the EOR handles all local employment complexities. Specifically, an EOR takes care of:

• Legal Employment Compliance: Drafting compliant employment contracts, ensuring adherence to local labor laws, and managing all statutory requirements.
• Payroll Processing: Accurately calculating and disbursing salaries, managing income tax withholdings, and processing social security contributions and other mandatory deductions.
• Benefits Administration: Setting up and administering locally compliant employee benefits packages, including health insurance, leave entitlements, and other statutory benefits.
• HR Administration: Handling onboarding, managing leave requests, maintaining employee records, and overseeing termination processes in accordance with Bangladeshi law.
• Risk Mitigation: Assuming legal responsibility for employment liabilities, including severance, wrongful termination claims, and compliance with all local regulations.

Benefits for Companies Looking to Hire in Bangladesh Without Establishing a Local Entity

Opting for an EOR solution provides numerous advantages for businesses aiming to tap into Bangladesh's talent market efficiently and compliantly.

• Rapid Market Entry: Hire employees in Bangladesh quickly, without the delays and costs associated with setting up a local entity.
• Ensured Compliance: Mitigate the risk of non-compliance with local labor laws, tax regulations, and employment standards.
• Reduced Administrative Burden: Delegate complex HR, payroll, and legal tasks to the EOR, freeing up internal resources.
• Cost-Effectiveness: Avoid the significant financial investment and ongoing operational costs of establishing and maintaining a local subsidiary.
• Access to Top Talent: Confidently hire any professional in Bangladesh, regardless of their location, and ensure they are employed compliantly.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Bangladesh includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Bangladesh.

Employers in Bangladesh must fulfill social security and payroll obligations, including contributions to Provident Funds (typically 10% each for employer and employee), Workers' Welfare Fund, and possibly group insurance. They are also responsible for withholding income tax (TDS) from employees' salaries and remitting it to the government monthly by the 7th. Income tax rates for individuals (2024-2025) are progressive, ranging from 0% for income up to BDT 350,000 to 25% for income above BDT 1,650,000.

Employees can reduce taxable income through deductions such as investment allowances (up to 25% of income or BDT 15 million), house rent, medical, and transport allowances. Tax compliance deadlines include TDS deposits by the 7th of each month, individual tax returns by November 30, and company filings within six months of fiscal year-end. Non-compliance risks penalties and interest.

Foreign workers and companies face additional regulations: residency status affects taxation scope, with tax treaties (DTAAs) offering relief. Corporate tax for foreign companies is generally 40%, with incentives possible for certain sectors. Foreign entities can remit profits under exchange control rules, and foreign workers must secure proper visas and work permits to operate legally in Bangladesh.

Bangladesh's salary landscape varies significantly across industries, roles, and locations, with typical monthly salaries ranging from BDT 8,000 for garment factory workers to over BDT 200,000 for senior banking managers. Key sectors like IT, pharmaceuticals, and FMCG offer competitive pay, especially for skilled professionals, with salary ranges such as Software Engineers earning BDT 30,000–80,000 and Project Managers earning BDT 60,000–150,000. Employers must comply with minimum wage regulations, which as of 2025 are approximately BDT 8,000/month overall and BDT 12,500/month for the garment sector.

Compensation packages often include bonuses and allowances, notably festival bonuses (up to one month's salary per festival), provident funds, gratuity, housing, medical, transport, and other allowances. Salaries are typically paid monthly via bank transfer, with increasing use of mobile financial services like bKash. Salary trends are upward, driven by economic growth, inflation, and skill shortages, especially in high-demand sectors. Employers should monitor these trends to remain competitive and ensure compliance with evolving legal and market standards.

Bangladesh's labor laws mandate various leave types, including annual vacation, public holidays, sick leave, parental leave, and others, to promote employee well-being. Annual leave entitlements depend on employment type: factory workers receive 1 day off per 18 days worked, while shop and commercial employees get 1 day off per 22 days worked, both after completing one year of service. Employers must pay employees their regular wages during leave, which can be taken in one or multiple installments, with unused leave typically carried forward within limits.

Public holidays are observed annually, with key dates such as Independence Day (March 26), Victory Day (December 16), and Bengali New Year (April 14). Some holidays like Eid and Durga Puja vary based on lunar calendars. Employees are entitled to paid time off on these days. Sick leave generally offers 14 days per year, with pay varying and medical certification often required for extended absences. Parental leave includes 16 weeks of paid maternity leave, usually split evenly before and after delivery, and shorter paternity leave, typically a few days to weeks. Additional leave types include bereavement, study, sabbatical, and casual leave, with policies depending on employer-specific regulations.

Bangladesh's employee benefits are governed by legal requirements and evolving expectations. Mandatory benefits include the Provident Fund (contributions from both employer and employee), gratuity payments after certain service periods, festival bonuses during major holidays like Eid, various leave entitlements (annual, sick, maternity), and workers' compensation for workplace injuries.

Employers often supplement these with optional benefits such as health insurance, life insurance, transportation and meal allowances, performance bonuses, training, and employee assistance programs. Health insurance is increasingly valued due to public healthcare limitations, with coverage ranging from outpatient to comprehensive plans, often involving shared costs and provider networks.

Retirement benefits primarily consist of the statutory Provident Fund, with some companies offering additional pension plans or retirement counseling. Benefit packages vary by industry and company size, with multinationals providing comprehensive perks, SMEs offering basic benefits, and sectors like garments and technology tailoring packages to sector needs.

Employment agreements in Bangladesh are vital for establishing clear, legally compliant working relationships, primarily governed by the Bangladesh Labour Act, 2006. They define key employment terms such as job roles, compensation, and working hours, serving as a reference for dispute resolution and ensuring mutual understanding. Employers should be aware of various contract types, including indefinite (permanent), fixed-term, probationary, part-time, and apprenticeship agreements, each suited to different employment needs.

Legal validity requires employment contracts to include essential clauses such as job description, salary, working hours, leave entitlements, termination conditions, and dispute resolution mechanisms. Understanding these contractual nuances helps employers ensure compliance and foster a productive work environment.

Remote work in Bangladesh is expanding due to increased internet access, a tech-savvy workforce, and global business trends. While specific legislation is lacking, existing labor laws like the Bangladesh Labour Act, 2006, provide a framework for employment contracts, working hours, health and safety, and termination procedures. Employers should clearly define remote work policies, address data security, and ensure compliance with legal standards.

Key flexible arrangements include full-time remote work, hybrid models, flextime, compressed workweeks, and job sharing. Successful implementation requires clear policies, training, effective communication, performance monitoring, and ensuring equity among employees. Data protection is critical, with measures such as secure networks, device security, and employee training to safeguard sensitive information.

Technology infrastructure is vital, involving hardware provision, software access, cloud services, cybersecurity, and remote IT support. Internet connectivity remains a challenge in some areas, so employers should support reliable internet access and equipment reimbursement. The following table summarizes key data points:

Employment termination in Bangladesh is regulated by the Bangladesh Labour Act, 2006, requiring employers to follow specific procedures to ensure lawful dismissal. Key steps include issuing proper notices, conducting investigations if needed, and documenting reasons for termination. Failure to comply can lead to legal disputes and penalties.

Notice periods vary based on employee type and length of service. For permanent employees with over one year of service, a 60-day notice from the employer and a 30-day notice from the employee are required. Severance pay, calculated at one month's basic salary per year of service, is payable upon termination, especially in cases of retrenchment or incapacity.

Termination grounds include misconduct (with cause) or redundancy (without cause). Employers must follow procedural fairness, including issuing notices, conducting inquiries, and allowing employee responses. Employees are protected against wrongful dismissal, with rights to appeal, reinstatement, or compensation if termination is deemed unjust, and protections against discrimination based on gender, religion, or ethnicity.

Bangladesh is experiencing a notable increase in freelancing and independent contracting, driven by global demand for specialized skills and the flexibility of remote work. This shift necessitates a clear understanding of the differences between independent contractors and traditional employees, as misclassification can lead to legal and financial repercussions. Key distinctions include control over work, integration into business operations, economic dependence, provision of tools, duration of relationship, and payment methods. Independent contractors typically maintain autonomy, use their own tools, and are paid per project, unlike employees who are integrated into the company and receive regular salaries.

A well-drafted contract is essential for independent contractor engagements, outlining parties, scope of work, payment terms, confidentiality, intellectual property, and termination conditions. Intellectual property rights are critical, with contracts needing clear clauses for IP assignment to the client. Contractors in Bangladesh must manage their own tax obligations, including income tax and potentially VAT, and may need to consider insurance like professional indemnity. Freelancing is prevalent in sectors such as IT, BPO, creative industries, marketing, consulting, education, and healthcare, reflecting the growing digital economy.

Foreign nationals seeking employment in Bangladesh must obtain both a valid visa and a work permit, with the Bangladesh Investment Development Authority (BIDA) overseeing permit issuance. Employers play a key role in sponsoring and submitting permit applications, which require documentation such as employment contracts, educational and professional certificates, company registration, and potentially a No Objection Certificate (NOC). The process involves application submission, document verification, possible interview, and permit issuance, typically taking several weeks to months, with fees varying.

Key visa types include Business, Investment, and Special Visas, each suited to different employment or investment purposes. Work permits are generally valid for a limited period and renewable. For permanent residency, options include long-term employment, substantial investment, or marriage to a Bangladeshi citizen, though these pathways have specific criteria. Dependents can be sponsored through a dependent visa, requiring proof of relationship and financial support.

Employers are responsible for sponsorship, accurate application information, labor law compliance, and timely renewal of permits. Employees must maintain valid visas and work permits, adhere to visa conditions, and report changes or departure upon employment termination.