Companies typically use an Employer of Record for fast entry, payroll management for existing entities, and entity setup for durable presence. Bangladesh's festival bonus expectation and its Labour Act compliance requirements are the features requiring the most careful planning.

Employer of Record in Bangladesh

An EOR removes the need to register with the National Board of Revenue and navigate Bangladesh Labour Act requirements directly. It suits early hires and outsourcing teams; it is less suited to established entities. Bangladesh's growing technology sector and its large English-proficient graduate workforce make it an increasingly attractive market for companies building cost-competitive remote teams.

How payroll works in Bangladesh

Bangladeshi payroll withholds income tax at progressive rates under the Income Tax Act. There is no broad universal social security contribution system comparable to many other markets, though a Workers' Welfare Foundation contribution and provident fund arrangements are common where established by the employer. Payroll is monthly, and a festival bonus (equivalent to one or two months' salary, tied to major religious festivals) is a common and often contractually mandated payment that should be budgeted as expected annual cost.

Payroll frequency and reporting obligations

Monthly payroll is standard, with income tax withholding remitted to the National Board of Revenue. Festival bonuses are typically paid ahead of major religious holidays — Eid ul-Fitr and Eid ul-Adha are the most common occasions — under company policy or applicable service rules. Annual tax reconciliation is required. Employers must register with the National Board of Revenue for income tax withholding before the first employee starts work.

Key payroll nuances

Festival bonus, while not universally mandated by a single national statute for every employer, is deeply embedded practice and often required under company service rules or sector norms. It should be budgeted as expected annual cost — typically one month's salary for each of the two main Eid festivals, totalling two months' salary per year. Provident fund participation, where an employer establishes one, involves both employer and employee contributions and is a significant retention benefit. There is no broad payroll tax burden comparable to many other markets, keeping statutory employer on-cost comparatively light.

Pay components and employer costs

Typical pay components include base salary and festival bonus (two months' salary per year in most companies). Employer statutory on-cost is comparatively light — the main mandatory contribution is income tax withholding administration, with provident fund contributions where offered adding to total compensation cost. Bangladesh's low salary levels combined with light statutory on-cost make it one of the more cost-competitive markets for outsourcing and technology hiring.

Benefits and leave entitlements

Statutory annual leave is generally 10 to 11 days per year under the Labour Act, varying by sector, rising with tenure. Sick leave is a statutory entitlement under the Labour Act. Maternity leave is 16 weeks (8 weeks before and 8 weeks after birth), with the employer funding the maternity benefit for qualifying employees. Public holidays include national and religious observances, with Islamic holidays shifting by lunar calendar each year.

Hiring and employment contracts

Written contracts (appointment letters) are standard practice and often required under the Labour Act for permanent staff. Probation periods are commonly three to six months, contract-defined. Termination requires notice (one month for most permanent employees) and, in some cases, statutory compensation based on tenure under the Labour Act. The Labour Act sets out specific procedural requirements for termination that must be followed to avoid wrongful dismissal claims.

Entity setup in Bangladesh

A private limited company registered with the Registrar of Joint Stock Companies and Firms (RJSC) is the standard vehicle for foreign employers. Post-incorporation, the entity registers with the National Board of Revenue for income tax and VAT before hiring. End-to-end setup typically takes six to eight weeks, with RJSC registration and bank account opening often the pacing items.

EOR vs Payroll Management vs Entity Setup — Bangladesh

Frequently asked questions