How to Use An Employer of Record in
Bangladesh

Hiring in Bangladesh requires navigating the Bangladesh Labour Act 2006 (amended 2018), which mandates a 5% employer contribution to the Workers' Profit Participation Fund for certain enterprises, alongside detailed collective bargaining agreement obligations that vary by sector and can add 15-30% to base employment costs. An Employer of Record in Bangladesh becomes the legal employer of your staff, ensuring full compliance with statutory contributions, collective agreements, and mandatory contract terms without requiring you to establish a private limited company or branch office. The EOR eliminates the risk of misclassifying workers under the 2006 Act, which carries penalties of up to BDT 25,000 and potential criminal liability for directors, while you retain complete day-to-day management of your team.

What Is an Employer of Record in Bangladesh?

An Employer of Record in Bangladesh is a third-party organisation that becomes the legal employer of your staff under Bangladesh law, handling all statutory obligations, payroll processing, and compliance filings with the Ministry of Labour and Employment while you retain full operational control over daily work, assignments, and performance management. The EOR holds the employment contract, manages the relationship with government authorities, and assumes liability for meeting all requirements under the Bangladesh Labour Act 2006.

Under the Bangladesh Labour Act 2006 and the Bangladesh Labour Rules 2015, every employment relationship must include written contracts specifying wage components, working hours, leave entitlements, and termination procedures. Employers must also navigate sector-specific collective bargaining agreements, maintain registration with the Chief Inspector of Factories and Establishments, and comply with minimum wage orders issued by the Minimum Wage Board for over 40 classified sectors. The EOR ensures your employment contracts include mandatory clauses on gratuity calculation, festival bonuses (two per year for Muslim employees), and notice periods that comply with both the Act and applicable collective agreements.

The division of responsibility is clear. You manage your employee's day-to-day tasks, set objectives, approve leave, and direct their work. The EOR owns the legal employment relationship, processes monthly payroll in Bangladeshi Taka, withholds income tax under the Income Tax Ordinance 1984, files returns with the National Board of Revenue, handles termination procedures including severance calculation, and ensures ongoing compliance with all amendments to labour legislation.

How Does an Employer of Record Work in Bangladesh?

When you hire through an Employer of Record in Bangladesh, the process begins with defining the role and moves through compliance validation, contract preparation, government registration, payroll setup, and ongoing administration. Every stage is governed by specific provisions of the Bangladesh Labour Act 2006 and enforced by the Department of Inspection for Factories and Establishments. Here is how the end-to-end process works in practice.

Step 1: Define Role and Terms

You provide the EOR with the job description, proposed salary, work location, and employment type. The EOR reviews your terms against the Minimum Wage Board orders for the relevant sector, which set monthly minimums ranging from BDT 12,500 for certain agricultural workers to BDT 25,000 for garment sector roles as of 2026. If a collective bargaining agreement applies to your sector or location, the EOR identifies additional obligations such as transport allowances, shift differentials, or enhanced leave entitlements. This step ensures your offer meets or exceeds all statutory and negotiated floors before you extend it to the candidate.

Step 2: EOR Compliance Check

The EOR conducts a full compliance review of the proposed employment terms. This includes verifying that the salary structure separates basic wage from allowances (required for accurate gratuity and overtime calculation), that working hours do not exceed 8 hours per day or 48 hours per week as prescribed by Section 100 of the Labour Act, and that the role classification matches the definitions in the Bangladesh National Occupational Classification. The EOR confirms whether the role qualifies as a worker, employee, or managerial staff under the Act, as this determines eligibility for overtime, the applicability of the Factories Act 1965 for industrial roles, and registration requirements with the Chief Inspector of Factories and Establishments. Any misclassification can result in back-payment claims, penalties, and potential prosecution of the nominal employer.

Step 3: Employment Contract Preparation

The EOR prepares a written employment contract in both English and Bangla, as Bangla is the official language and labour courts give primacy to Bangla-language documents in disputes. The contract must include the employee's full name and address, job title and duties, place of work, start date, wage breakdown showing basic pay and allowances separately, working hours and rest days, annual leave entitlement (minimum 11 days per year after 12 months of service under Section 115), casual leave (10 days), sick leave (14 days), festival holidays (11 public holidays plus two festival bonuses), notice period (which varies from 30 to 120 days depending on role and service length under Section 26), probation period (maximum 6 months under Section 4), and gratuity calculation basis. For fixed-term contracts, the Act permits a maximum initial term of one year with renewal provisions, but repeated renewals beyond three years create a presumption of permanent employment. The EOR issues this contract as the legal employer and registers it with the local labour office where required by the Chief Inspector.

Step 4: Government Registrations

The EOR registers the new employee with the National Board of Revenue for income tax withholding using the employee's existing Tax Identification Number (TIN) or facilitating TIN application if the employee does not yet have one. Every employer in Bangladesh must register with the Department of Inspection for Factories and Establishments and obtain a registration certificate under Section 41 of the Labour Act, which the EOR holds on your behalf. If your operations qualify as an establishment under the Act (employing 5 or more workers), the EOR ensures compliance with additional registration and reporting obligations including maintenance of a statutory register of workers, muster rolls, and wage registers. Registration with the Employees' Provident Fund Board is required if you employ 20 or more workers or if your industry is covered by a notification under the Employees' Provident Fund Ordinance 1965, though this typically applies after a threshold is reached. Late registration or failure to maintain required records can result in fines up to BDT 5,000 per violation and potential closure orders from the Chief Inspector.

Step 5: Payroll Processing

The EOR processes monthly payroll in Bangladeshi Taka (BDT), with wages legally required to be paid by the 7th day of the following month under Section 123 of the Labour Act. The EOR calculates and withholds income tax at source according to the progressive tax brackets set by the National Board of Revenue, which for 2026 range from 0% on the first BDT 350,000 of annual income to 25% on income exceeding BDT 3,000,000 for resident taxpayers. The EOR remits withheld tax to the National Board of Revenue and files monthly salary statements within the prescribed deadlines. Payslips must detail basic wage, allowances (house rent, medical, conveyance), overtime (paid at double the ordinary rate under Section 108), festival bonuses, and all deductions including tax, provident fund contributions if applicable, and any court-ordered garnishments.

Step 6: Ongoing Compliance Management

The EOR maintains continuous compliance with Bangladesh employment law, which includes several recurring obligations. Monthly income tax returns must be filed with the National Board of Revenue, and the EOR remits withheld tax by the 15th of the following month. Quarterly wage statements are submitted to the Department of Inspection for Factories and Establishments detailing total employment, wage distributions, and any changes in workforce composition. The EOR monitors amendments to the Labour Act and Labour Rules, updates to Minimum Wage Board orders (which are revised every 3-5 years per sector), and new collective bargaining agreements that may impose additional obligations. The EOR maintains all statutory records including the register of workers, attendance records, leave records, and wage payment documentation for a minimum of 3 years as required by Section 90. The EOR also ensures timely payment of the Workers' Profit Participation Fund contribution (5% of net profit for eligible establishments under the 2015 amendment) and files the annual return with the Chief Inspector of Factories by 30 June each year.

Step 7: Termination and Severance

When you decide to terminate an employment relationship in Bangladesh, the EOR manages the process in full compliance with the Labour Act. Termination without just cause requires notice or payment in lieu according to Section 26: 120 days for permanent workers, 60 days for temporary workers, and 30 days during probation. Just cause termination under Section 23 (including misconduct, gross negligence, or breach of contract) requires a formal domestic inquiry giving the employee an opportunity to respond to charges, and the EOR manages this procedural requirement to minimise wrongful termination risk. Severance pay (gratuity) is calculated at 30 days of wages for each completed year of service after one year of continuous employment, based on the last drawn basic wage plus dearness allowance. Collective agreements in some sectors require enhanced severance multiples or additional payments, and the EOR calculates these correctly. The EOR issues the termination letter, processes final pay including accrued leave encashment, provides the employment certificate required under Section 5, and files termination notification with the Chief Inspector of Factories within 30 days where required by the Labour Rules 2015.

Employment Laws and Compliance an Employer of Record Handles in Bangladesh

When you hire through an Employer of Record in Bangladesh, they assume full legal responsibility for compliance with the Bangladesh Labour Act 2006, Labour Rules 2015, and all supporting legislation. This means you do not need to build an in-country HR team or maintain expertise in Bangladeshi employment law to remain compliant.

• Employment Contracts: Every employment relationship must be documented in a written contract in Bangla, the official language, under Section 5 of the Bangladesh Labour Act 2006. The contract must specify basic wage separately from allowances to enable accurate gratuity and overtime calculations, state the probation period (maximum 6 months), define notice periods (30 to 120 days depending on role and tenure), and detail all leave entitlements and festival bonuses. Failure to issue a written contract can result in the employee claiming permanent status and full statutory benefits from day one.
• Income Tax Withholding: Employers must deduct income tax at source from employee salaries under the Income Tax Ordinance 1984 and remit it to the National Board of Revenue by the 15th of the following month. Tax is calculated on a progressive scale: 0% on the first BDT 350,000, 5% on BDT 350,001 to BDT 450,000, 10% on BDT 450,001 to BDT 750,000, 15% on BDT 750,001 to BDT 1,150,000, 20% on BDT 1,150,001 to BDT 1,650,000, and 25% on income exceeding BDT 3,000,000 for resident individuals in 2026. Late remittance incurs interest at 2% per month and penalties up to 50% of the tax due.
• Provident Fund Contributions: Establishments employing 20 or more workers, or those in notified industries, must register with the Employees' Provident Fund Board under the Employees' Provident Fund Ordinance 1965 and contribute monthly. The contribution rate is typically 8.33% of basic wages for both employer and employee, though this can vary by notification. Failure to register and remit contributions results in penalties of up to 37.5% of the unpaid amount plus interest.
• Annual Leave and Public Holidays: Employees are entitled to a minimum of 11 days of paid annual leave after completing 12 months of continuous service under Section 115 of the Labour Act, plus 10 days of casual leave and 14 days of sick leave per year. Bangladesh observes 11 gazetted public holidays, including Independence Day, Victory Day, Eid-ul-Fitr, Eid-ul-Adha, and Pohela Boishakh. Muslim employees are entitled to two festival bonuses per year (one basic month's wage each, paid before Eid-ul-Fitr and Eid-ul-Adha), and non-Muslim employees receive equivalent bonuses before their respective religious festivals under the Payment of Wages (Amendment) Act 2018.
• Termination and Severance: Termination of permanent workers requires either just cause under Section 23 (following a domestic inquiry) or notice/payment in lieu under Section 26 (120 days for permanent workers, 60 days for temporary workers). Gratuity is payable at 30 days of wages for each completed year of service after one year, calculated on last drawn basic wage plus dearness allowance. Wrongful termination claims can result in reinstatement orders, back-pay for the entire period of unemployment, and compensation up to BDT 25,000, all enforceable through the Labour Court established under the 2006 Act.
• Working Time and Overtime: The standard working week is 48 hours (8 hours per day over 6 days) under Section 100, with overtime paid at twice the ordinary hourly rate under Section 108 for hours beyond the daily limit. Workers are entitled to one weekly rest day (typically Friday) and must not work more than 60 hours in any week including overtime. Manufacturing and industrial establishments must maintain daily attendance registers and overtime records for inspection by the Chief Inspector of Factories, with penalties up to BDT 5,000 for non-compliance.
• Health and Safety: Employers must provide a safe working environment complying with the Factories Act 1965 and Bangladesh Labour Rules 2015, including adequate ventilation, lighting, first aid facilities, drinking water, and sanitary arrangements. The Chief Inspector of Factories and Establishments conducts inspections and can issue improvement notices or closure orders for serious violations. Failure to report workplace accidents within 7 days or to maintain a register of injuries results in fines up to BDT 3,000 per violation.
• Data Protection and Privacy: While Bangladesh does not yet have comprehensive data protection legislation equivalent to GDPR, employers must comply with the Digital Security Act 2018 when processing employee personal data electronically. Unauthorised disclosure of personal information, identity theft, or misuse of employee data can result in imprisonment up to 5 years and fines up to BDT 1,000,000. Best practice involves obtaining written consent for data processing, limiting data collection to employment purposes, and securing employee records against unauthorised access.
• Collective Agreements: Many industries and sectors in Bangladesh are covered by collective bargaining agreements negotiated between trade unions and employer associations. These agreements often set wage floors above the Minimum Wage Board orders, mandate additional allowances (transport, meal, shift differentials), enhance leave entitlements, and establish dispute resolution procedures. Employers must apply the terms of any applicable collective agreement to all workers in the covered category, and violation can lead to industrial disputes, work stoppages, and orders from the Labour Directorate to pay arrears.
• Workers' Profit Participation Fund: Establishments in certain sectors (including manufacturing, banking, insurance, and shipping) that generate a net profit must contribute 5% of that profit to the Workers' Profit Participation Fund under the Bangladesh Labour (Amendment) Act 2013. This contribution is distributed among eligible workers (those earning below a specified salary threshold) and must be calculated and paid within 9 months of the close of the financial year. Non-compliance can result in penalties, interest charges, and prosecution of company directors under Section 234 of the Labour Act.

How Much Does It Cost to Use an Employer of Record in Bangladesh?

The total cost of hiring through an Employer of Record in Bangladesh consists of two components: the statutory employer costs mandated by law, and the EOR service fee. Statutory costs are fixed by the Bangladesh Labour Act 2006, Income Tax Ordinance 1984, and other regulations, and apply regardless of whether you hire through an EOR or your own entity. Playroll's EOR service fee starts from $399 per employee per month, billed separately from payroll and statutory costs, covering all compliance management, contract preparation, government filings, and ongoing administration.

Let's look at an example that includes a base salary and the EOR service fee.

The EOR service fee covers preparation and maintenance of compliant employment contracts in Bangla, monthly payroll processing and income tax withholding, filing of all returns with the National Board of Revenue and Department of Inspection for Factories and Establishments, management of leave entitlements and public holidays, termination procedures including severance calculation and domestic inquiry support, ongoing monitoring of legislative changes and Minimum Wage Board updates, and dedicated support from Bangladesh employment law specialists.

Employer of Record vs Setting Up an Entity in Bangladesh

Companies expanding into Bangladesh face a choice: hire through an Employer of Record or establish a local legal entity. Foreign companies typically incorporate a private limited company under the Companies Act 1994, which requires registration with the Registrar of Joint Stock Companies and Firms, obtaining a business identification number, registering for VAT with the National Board of Revenue, and securing approval from the Bangladesh Investment Development Authority for most sectors. The incorporation process realistically takes 12 to 16 weeks and costs between $8,000 and $15,000 in legal fees, registration charges, and professional advisor costs, not including ongoing audit, tax filing, and corporate secretarial obligations.

For companies hiring fewer than 15 employees in Bangladesh, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries, so you can transition from EOR to your own compliant entity in Bangladesh when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in Bangladesh Through an Employer of Record?

The typical timeline to hire and onboard an employee in Bangladesh through an Employer of Record is 10 to 15 business days from signed offer to first day of work, assuming the candidate has all required documentation ready and no complex collective agreement applies.

• Stage 1: Contract preparation and signing (2 to 3 business days): The EOR drafts the employment contract in both English and Bangla, incorporating all mandatory clauses under the Bangladesh Labour Act 2006 including wage breakdown, leave entitlements, notice periods, and gratuity calculation. The contract is reviewed by your legal or HR team if needed, then issued to the candidate for signature. Timing depends on how quickly the candidate reviews and returns the signed contract, and whether any negotiation or clarification is required.
• Stage 2: Government registrations (3 to 5 business days): The EOR registers the new employee with the National Board of Revenue for income tax purposes and files notification with the Department of Inspection for Factories and Establishments where required under the Labour Rules 2015. If the employee does not yet have a Tax Identification Number (TIN), the EOR facilitates the application, which can add 5 to 7 business days. Registration with the local labour office must be completed before the employee begins work in sectors covered by the Factories Act 1965, and late registration can result in fines and complications with statutory benefit claims.
• Stage 3: Payroll configuration and first cycle (2 to 3 business days): The EOR configures the employee in the payroll system, setting up their bank account details for salary transfer, calculating income tax withholding based on their annual projected income, and scheduling the first payroll run. Bangladesh law requires monthly salary payment by the 7th of the following month, so employees hired mid-month typically receive a prorated first payment in the next cycle. The first payslip is issued within 3 business days of payroll processing.
• Stage 4: Bangladesh-specific requirements (concurrent, 3 to 5 business days): If your sector or the employee's role is covered by a collective bargaining agreement, the EOR reviews the agreement to identify any additional onboarding requirements such as union notification, mandatory benefits enrolment, or sector-specific training obligations. This review runs in parallel with contract preparation and does not typically extend the overall timeline unless the collective agreement requires pre-start approvals or registrations.

Timelines can extend by 5 to 10 business days if the employee lacks a Tax Identification Number and must apply for one, if a collective agreement requires union or employer association approval before hiring, if the role requires security clearance or professional registration, or if there are delays in obtaining signed documentation from the candidate. Public holidays and the month of Ramadan (when government offices operate on reduced hours) can also add 2 to 5 business days to registration steps.

In contrast, setting up your own private limited company in Bangladesh and making your first compliant hire takes 12 to 16 weeks from incorporation filing to onboarding, plus the time required to establish payroll systems, register with all statutory authorities, and hire or train an in-country HR team.

How Playroll's Employer of Record Process Works in Bangladesh

Hiring through Playroll in Bangladesh follows a straightforward process designed to get your employee onboarded and compliant in under 15 business days.

1. You Define the Role

You provide Playroll with the job description, proposed salary and benefits, work location, and employment type (permanent, fixed-term, or probationary). Playroll's Bangladesh team reviews your terms against the Minimum Wage Board order for the relevant sector and identifies any applicable collective bargaining agreement obligations, ensuring your offer meets all statutory floors before you extend it to the candidate.

2. Playroll Prepares the Contract

Playroll drafts a compliant employment contract in both English and Bangla under the Bangladesh Labour Act 2006, including all mandatory clauses such as wage breakdown separating basic pay from allowances, probation period (up to 6 months), notice period (30 to 120 days), leave entitlements, festival bonus provisions, and gratuity calculation basis. The contract is issued as the legal employment document with Playroll as the Employer of Record.

3. Employee Onboarding and Payroll

Once the candidate signs the contract, Playroll completes government registrations with the National Board of Revenue and the Department of Inspection for Factories and Establishments, configures the employee in the payroll system, and schedules the first monthly salary payment. The typical onboarding timeline is 10 to 15 business days from contract signature to first day of work, assuming the employee has their Tax Identification Number and all required documentation ready. Playroll notifies the Chief Inspector of Factories where required by the Labour Rules 2015.

4. Ongoing Compliance Management

Playroll manages all ongoing statutory obligations including monthly payroll processing, income tax withholding and remittance to the National Board of Revenue, quarterly filings with the Department of Inspection for Factories and Establishments, annual return submissions, leave tracking, and monitoring of legislative changes including Minimum Wage Board updates and collective agreement amendments. If your hiring in Bangladesh grows to a point where establishing your own entity makes sense, Playroll can handle that too through its global entity setup service, allowing you to transition from EOR to local entity without changing providers or rebuilding your payroll and compliance infrastructure.