Hire employees in Bangladesh
What a foreign company needs to know before employing people in Bangladesh in 2026: whether you need a local entity, why there is no social security tax but festival bonuses, provident fund and gratuity still add up, how the Finance Act 2026 tax slabs work, what the 2026 Labour Act changes mean, and what a termination really costs. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first.
Do I need a local entity in Bangladesh to hire?
No. There are three routes:
- Employer of Record. Dryft Global employs the person through a compliant Bangladeshi employer, issues the appointment letter required by the Labour Act, withholds income tax and runs festival bonuses, provident fund, gratuity and group insurance. You direct the work.
- Direct local entity. You register a private limited company with the Registrar of Joint Stock Companies and Firms (RJSC), remit capital through a bank, and register for tax, VAT and with the Bangladesh Investment Development Authority (BIDA) before the first payroll.
- Independent contractor. Lawful only for a genuinely independent business. Someone who works full time under your direction is an employee whatever the contract says.
When should I use an EOR instead of registering locally?
Use an EOR for your first hires and for engineering, customer support or back-office teams of up to about 50 people. You start in days and avoid incorporation, capital remittance and the post-registration steps. Your own entity earns its keep for a large delivery centre, when you will sell into the Bangladeshi market, or when you want to run your own IT export operation.
What does an employee actually cost beyond salary?
Bangladesh has no social security contribution on salary. The real cost is two customary festival bonuses (each up to a month's basic), a matched provident fund, gratuity and group life and health cover. Together these add roughly 10% to 30% to salary depending on the package, with about 21% typical for a professional hire.
How difficult is termination in Bangladesh?
For a permanent monthly-paid worker, termination without cause needs 120 days' written notice or pay in lieu, plus compensation of 30 days' wages per year of service. Redundancy needs one month's notice and the same compensation. Dismissal for misconduct needs a proper inquiry, and since the 2026 amending Act the worker still receives 15 days' wages per year except for theft, fraud and similar offences. Staff appointed in writing to managerial roles are governed by their contract.
Can Dryft Global legally employ my team in Bangladesh?
Yes. Dryft Global acts as the legal employer in Bangladesh. We issue appointment letters under the Labour Act, withhold income tax under the Finance Act 2026 slabs, run festival bonuses, provident fund, gratuity and group insurance, and manage leave, notice and terminations.
Hiring routes compared
Speed, local registration, tax administration and liability differ by route.
| Factor | Direct local entity | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Time to operational state | Several weeks or more | Days to 2 weeks | Days |
| Local entity required | Yes, RJSC private limited company | No | No |
| Tax and Labour Act benefits | Your NBR file, funds and schemes | Handled by Dryft Global | Contractor self-reports |
| Statutory liability | Direct corporate exposure | Assumed by Dryft's local employer | High if reclassified |
| Best fit | Large centre, local sales, own export base | Teams of 1 to about 50 | Discrete project work |
What an employee costs in Bangladesh
With no social security tax, the employer's cost comes from customary and Labour Act benefits calculated on basic salary. The model below is a Dhaka software engineer on BDT 150,000 a month in 2026-27, with basic salary at 60% of gross.
| Component | Employer share | Notes |
|---|---|---|
| Social security | 0% | No state social security contribution on salary |
| Festival bonuses | ~10% | Two a year, each up to one month's basic, after one year's service |
| Provident fund | ~4.8% | Employer match of 8% of basic where a fund exists |
| Gratuity | ~5% | 30 days' basic per year of service |
| Group life and health | ~1.3% | Typical budget; group insurance is required at 100+ permanent workers |
| Total employer on-cost | ~10% to 30% | About 21% on the model salary |
For an employee on BDT 150,000 a month, budget roughly BDT 2.18 million a year all-in before the EOR fee, about USD 17,500 at BDT 124.35 to the dollar. The Workers' Profit Participation Fund (5% of net profit of qualifying companies) is a levy on the employing company, not per-employee payroll. Termination compensation is a contingent cost on top. Ask us for a cost model with current rates applied.
Payroll and tax
Salaries are paid monthly in taka, within seven working days after the end of the wage period. The employer withholds income tax every month under section 86 of the Income Tax Act 2023, at the average rate on the employee's estimated income for the year, deposits it within two weeks after the month ends and files withholding returns quarterly. Each employee receives a withholding certificate. All final dues must be paid within 30 working days of termination.
Individual income tax, Finance Act 2026
For 2026-27 the first BDT 400,000 of taxable income is tax free, then rates step through 10%, 15%, 20% and 25% to 30%. The old 5% band was removed. Salary income is reduced by an exemption of one third of salary or BDT 500,000, whichever is lower, and women and people aged 65 and over have a BDT 450,000 threshold. On the model salary with two festival bonuses, tax is about BDT 166,000 a year and monthly net pay about BDT 129,000.
IT and IT-enabled services exemption
Business income from qualifying IT and IT-enabled services is exempt from tax until 30 June 2027 where all income, expenses and investments go through bank transfers. It benefits the employing business or freelancer, not employee salaries, which remain taxable. The 2026-27 budget did not extend it.
Minimum wage
Bangladesh has no national minimum wage. The Minimum Wage Board sets rates by sector, now reviewed every three years. Entry-level garment workers receive BDT 12,500 a month from December 2023, with a new board being formed in 2026. Software and IT services have no sector minimum, so pay is set by the market.
Leave and mandatory benefits
- Annual leave. One day for every 18 days worked after one year's continuous service, with carry forward up to a cap.
- Casual leave. 10 days a year on full pay.
- Sick leave. 14 days a year on full pay with a medical certificate.
- Festival holidays. 13 paid days a year since the 2026 amending Act, with dates fixed by the employer, usually aligned with Eid ul-Fitr, Eid ul-Azha, Independence Day, Victory Day, Pahela Baishakh and the other national days.
- Maternity. 120 days on full pay, 60 before and 60 after delivery, paid by the employer, for a woman with at least six months' service.
- Paternity. No statutory entitlement for private employers; many technology employers offer it by policy.
- Working time. 8 hours a day and 48 hours a week, up to 60 hours in a week with overtime, paid at twice the ordinary rate.
- Festival bonuses, provident fund and gratuity. Two festival bonuses a year, a matched provident fund where one exists, and gratuity of 30 days' wages per year of service.
- Supplementary benefits. Group life and health insurance, transport allowance, internet and power backup for hybrid staff.
Termination and notice periods
Probation is three months, or six for clerical workers, extendable by three months for skilled workers. After that, a permanent worker is protected by the Labour Act and every exit has a set notice and payment formula.
| Situation | Requirement |
|---|---|
| Without cause, permanent monthly-paid worker | 120 days' notice or pay in lieu, plus 30 days' wages per year (or gratuity if higher) |
| Redundancy | 1 month's notice, notice to the Chief Inspector, 30 days' wages per year |
| Dismissal for misconduct | Inquiry first; 15 days' wages per year except for theft, fraud and similar offences |
| Resignation by a permanent worker | 60 days' notice; benefit of 7, 15 or 30 days' wages per year by length of service |
- Final dues. Payable within 30 working days of termination.
- Disputes. A grievance to the employer, then the Labour Court.
- Managerial staff. Excluded from the worker definition when appointed in writing to a managerial, administrative or supervisory role, so set notice and termination terms clearly in the contract.
- Restrictive covenants. Non-competes are hard to enforce. Confidentiality and IP clauses are standard.
Can I use independent contractors?
Only where the person genuinely runs their own business: their own clients, schedule and tools, invoicing for output rather than a fixed monthly fee. The Labour Act covers anyone employed for wages directly or through a contractor, and the substance of the relationship decides. Since 2026, agencies that supply workers to other businesses must be registered with the government. Bangladesh has a large freelance base paid from abroad, but a full-time person who works like an employee should be employed. For anyone in that position, an EOR is the compliant route.
The legal framework in brief
Labour law is national. The Bangladesh Labour Act 2006 and the Labour Rules 2015 apply across the country, and the 2026 amending Act changed several core rules in April 2026. The instruments you will hear most:
- Bangladesh Labour Act 2006. Appointment letters, probation, hours, leave, maternity, termination, provident fund, gratuity, profit participation and group insurance. Protects workers; managers appointed in writing are excluded.
- The 2026 amending Act. Maternity raised to 120 days, festival holidays to 13, new resignation and dismissal benefits, agency registration and anti-discrimination rules, and minimum wage reviews every three years.
- Income Tax Act 2023 and the Finance Act 2026. Individual slabs, salary withholding and corporate tax, administered by the National Board of Revenue (NBR).
- Data protection. The Personal Data Protection Ordinance 2025 is now in force, with further legislative changes in 2026, alongside the Cyber Security Ordinance 2025.
- Immigration and right to work. E visa plus a work permit from BIDA, BEPZA or BEZA, with security clearance, local to foreign staff ratios and a fee of BDT 10,000 a year.
- Authorities. Ministry of Labour and Employment, Department of Inspection for Factories and Establishments, NBR, BIDA, BEPZA, BEZA and the RJSC.
Where the talent is
About 170 million people and a labour force of 71.7 million, with unemployment of 3.66% in the 2024 Labour Force Survey. More than 300,000 people work in software and IT-enabled services firms, and about 650,000 freelancers are active. English is widely used in business and technology. Bangladesh Standard Time is UTC+6 with no daylight saving, which overlaps the Gulf and Asian working day fully and the European morning.
| Region | Talent and industry concentration |
|---|---|
| Dhaka | Largest software, IT services and business services cluster; head offices and universities |
| Chattogram | Main port, logistics, finance and a growing services base |
| Sylhet | Hi-tech park and diaspora-linked services |
| Khulna and Rajshahi | Universities and emerging IT parks |
Bangladesh Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step.
- Step-by-step checklist, from route selection to first payroll
- Worker or manager: how to classify each role under the Labour Act
- Appointment letter checklist and salary structure guide
- Income tax worksheet with the Finance Act 2026 slabs
- Festival bonus, provident fund, gratuity and group insurance set-up guide
- Notice, inquiry procedure and termination pack under the 2026 amending Act
- Every official Bangladeshi authority with direct links
This guide is general information, not legal, tax or immigration advice. Tax slabs change with each Finance Act, sector minimum wages change when wage boards report, and implementing rules under the 2026 amending Act and data protection regulations are still being issued. Confirm current figures with a qualified adviser or with Dryft. Last reviewed November 2026.
Ready to hire in Bangladesh?
Tell us who you want to hire and where they sit. You will get a cost model and a compliant route within a day, from a person who has done this before.