One employee in Bangladesh means 12 government registrations, monthly tax filings, and mandatory provident fund contributions. Most companies don't find out until they're already non-compliant and facing penalties starting at ৳50,000 per violation.
Your lawyer just quoted 4-6 months for entity setup, but your perfect candidate can't wait that long. The market's competitive, and good developers get multiple offers within weeks. By the time you're legally ready to hire, they're gone.
Here's the reality: you've got three ways to hire in Bangladesh, and each comes with different costs, timelines, and headaches.
Option 1: Set up your own entity
- Cost: ৳8-15 lakh upfront, ৳3-5 lakh annual maintenance
- Timeline: 4-6 months minimum
- Complexity: RJSC registration, tax registration, provident fund setup, VAT registration, trade license
- Makes sense when: Hiring 20+ people long-term, permanent market presence
Option 2: Hire contractors
- Cost: None upfront, but limited control
- Timeline: Immediate
- Risks: Misclassification fines (৳2-5 lakh), back taxes, labor disputes
- Makes sense when: Short projects (< 6 months), specialized skills
- Note: Hire with Columbus also handles contractor agreements and payments
Option 3: Use an employer of record (Recommended for most)
- Cost: $179/month per employee
- Timeline: 2-3 days to hire
- Complexity: None - we handle everything
- Makes sense when: 1-50 employees, testing markets, multi-country teams
If you're hiring 1-10 people, entity setup costs more than 4-5 years of EOR fees. At $179/month per employee ($2,148/year), you're looking at ৳2.5 lakh annually versus ৳8-15 lakh upfront plus ongoing compliance costs. An EOR like Hire with Columbus handles employment contracts, payroll processing, EPF contributions, tax withholdings, and keeps you compliant with Bangladesh's frequently changing labor laws.
Ready to hire in Bangladesh without the compliance headaches? Get started with Hire with Columbus.
What employment types can you use?
You've got three ways to bring someone onboard in Bangladesh. The costs and risks are pretty different across each option.
Setting up your own entity costs $8,000-12,000 upfront and takes 4-6 months. Hiring contractors seems faster but comes with serious misclassification risks that can cost you 25% penalties on unpaid taxes. An employer of record (EOR) like Hire with Columbus lets you hire in 2-3 days for $179/month per employee.
Let's break down your options so you can pick the right approach.
How can you hire in Bangladesh?
Most companies use this decision framework:
| Approach | Upfront Cost | Timeline | Best For | Key Risk |
|---|---|---|---|---|
| Own Entity | $8,000-12,000 | 4-6 months | 20+ employees, permanent presence | High setup costs, ongoing compliance |
| Contractors | $0 | Immediate | Short projects (<6 months) | Misclassification penalties (25% of unpaid taxes) |
| EOR (Recommended) | $0 | 2-3 days | 1-50 employees, testing market | None - we handle compliance |
Setting up your own entity makes sense if you're planning to hire 20+ people long-term. You'll need to register with the Registrar of Joint Stock Companies and Firms, get tax clearance from the National Board of Revenue, and set up payroll systems. The ongoing costs include annual compliance fees ($2,000-3,000), accounting, and HR infrastructure.
Hiring contractors works for specialized, short-term projects. But Bangladesh's labor laws are strict about what qualifies as independent contractor work. If the government decides your "contractor" should be an employee, you'll pay 25% penalties plus back taxes and social security contributions. That $3,000/month developer could suddenly cost you an extra $9,000 in penalties.
Using an EOR is the sweet spot for most companies. Hire with Columbus becomes the legal employer in Bangladesh while you manage the day-to-day work. We handle employment contracts, payroll, tax compliance, and benefits administration. For 5 employees, you'd pay $895/month instead of the $12,000+ entity setup costs.
Employment contract types in Bangladesh
Once you've decided on your hiring approach, you need to pick the right contract type. Bangladesh recognizes several employment arrangements, each with specific rules.
Permanent employment contracts are your go-to for core team members. These don't have end dates and provide maximum job security. Employees get full benefits, including 14 days casual leave, 10 days sick leave, and festival bonuses. Most companies use permanent contracts for roles they expect to last over a year.
Fixed-term contracts work for project-based roles or temporary coverage. You can set these for up to 2 years initially, with one renewal possible. After that, the contract automatically converts to permanent employment. The employee gets the same benefits as permanent staff, but you have a clear end date.
Part-time employment is less common but perfectly legal. Part-time employees get prorated benefits based on their working hours. Someone working 20 hours per week gets half the vacation days of a full-time employee.
Probationary periods can be added to any contract type. You can set probation for up to 6 months for permanent roles, during which either party can terminate with just 7 days' notice. After probation, standard notice periods apply (30-120 days depending on position level).
The contract types compare like this:
| Contract Type | Max Duration | Benefits | Notice Period | Best For |
|---|---|---|---|---|
| Permanent | Indefinite | Full | 30-120 days | Core roles, long-term hires |
| Fixed-term | 2 years + 1 renewal | Full | Per contract terms | Projects, seasonal work |
| Part-time | Any | Prorated | 30-120 days | Flexible arrangements |
| Probationary | 6 months max | Full | 7 days | Testing new hires |
When you use Hire with Columbus, we draft compliant contracts for whichever type fits your needs. We also handle the legal requirements like registering contracts with local authorities and ensuring proper termination procedures. You don't need to figure out Bangladesh's labor law complexities yourself.
The most common setup? Permanent contracts with 3-6 month probation periods. This gives you flexibility early on while providing job security that attracts top talent in Bangladesh's competitive market.
How does payroll and taxation work?
Your €60,000 employee in Bangladesh actually costs €78,600 per year once you factor in all employer contributions and taxes. That's a 31% markup that catches most companies off guard when they run their first payroll.
Bangladesh's tax system hits both you and your employee with multiple layers. Income tax starts at 5% for local residents and climbs to 25% for higher earners, while non-residents face a flat 30% rate. The real surprise comes from employer-side contributions that add another €15,600+ to your annual costs.
Tax brackets for 2025
Here's what your employees will pay in income tax:
| Annual Income (BDT) | Tax Rate | Annual Income (EUR) |
|---|---|---|
| Up to 350,000 | 0% | Up to €2,800 |
| 350,001 - 450,000 | 5% | €2,801 - €3,600 |
| 450,001 - 750,000 | 10% | €3,601 - €6,000 |
| 750,001 - 1,150,000 | 15% | €6,001 - €9,200 |
| 1,150,001 - 1,650,000 | 20% | €9,201 - €13,200 |
| Over 1,650,000 | 25% | Over €13,200 |
Non-resident employees pay 30% flat rate on all income, which makes hiring expats expensive fast.
Social security and employer contributions
Bangladesh keeps employer contributions relatively simple compared to European standards, but they still add up:
| Contribution Type | Employer Rate | Employee Rate | Total |
|---|---|---|---|
| Provident Fund | 10% | 10% | 20% |
| Group Insurance | 0.5% | 0.5% | 1% |
| Welfare Fund | 0.5% | 0.5% | 1% |
| Total | 11% | 11% | 22% |
The Provident Fund is mandatory for all permanent employees and acts like a retirement savings account. Both you and your employee contribute 10% of basic salary monthly.
Payment schedule and bonuses
Bangladesh follows a monthly payroll cycle with payments typically made by the 7th of each month. Miss this deadline and you'll face penalties starting at BDT 10,000 (€80) per violation.
Employees expect two annual bonuses that aren't optional:
- Eid bonus: One month's basic salary before Eid-ul-Fitr
- Festival bonus: One month's basic salary before Eid-ul-Adha or Durga Puja
These bonuses are legally required and calculated on basic salary only, not total compensation. Budget an extra 16.7% annually just for mandatory bonuses.
Total employment cost breakdown
Let's break down the real cost of that €60,000 salary:
| Cost Component | Amount (EUR) | Percentage |
|---|---|---|
| Base salary | €60,000 | 76.3% |
| Employer contributions (11%) | €6,600 | 8.4% |
| Annual bonuses (2 months) | €10,000 | 12.7% |
| Payroll processing | €1,200 | 1.5% |
| Administrative overhead | €800 | 1.0% |
| Total Annual Cost | €78,600 | 100% |
That 31% markup doesn't include potential overtime, medical allowances, or transport subsidies that many companies provide to stay competitive.
Payroll cycle and deadlines
Bangladesh tax authorities are strict about deadlines. Here's your monthly calendar:
- By 7th: Employee salary payments due
- By 15th: Provident Fund contributions submitted
- By 30th: Monthly tax deductions filed with NBR
- By 15th (next month): VAT returns if applicable
Miss any deadline and penalties compound daily. Late Provident Fund submissions cost 2% monthly interest on the outstanding amount.
Common payroll mistakes that cost money
Most companies stumble on these Bangladesh-specific requirements:
Bonus calculation errors: Companies often calculate bonuses on total salary instead of basic salary only. This inflates costs by 30-40% and creates employee disputes.
Provident Fund miscalculations: The 10% contribution applies to basic salary plus dearness allowance, not total compensation. Get this wrong and you'll face back-payments with interest.
Non-resident tax confusion: Treating expat employees as residents saves money initially but triggers massive penalties during tax audits. The 30% flat rate applies from day one.
Festival timing mistakes: Eid bonuses must be paid before the festival, not after. Employees expect their bonus money for celebration expenses, and late payments really hurt team morale.
Setting up compliant payroll yourself
Running Bangladesh payroll in-house means juggling multiple systems and deadlines. Local accounting firms charge €300-500 monthly for payroll services, plus setup fees around €2,000.
You'll also need dedicated HR expertise to handle Provident Fund registrations, tax compliance, and bonus calculations. A qualified payroll manager in Dhaka costs €12,000-18,000 annually.
With Hire with Columbus: $179/month per employee handles everything. Tax calculations, Provident Fund submissions, bonus payments, and compliance monitoring. We guarantee accuracy and handle all government filings automatically, so you never miss a deadline or face penalties.
The math is simple: our EOR service costs less than hiring one part-time payroll person, and you get a full compliance team plus legal protection included.
Okay, that's a lot of legal jargon.
Here's the thing: you don't actually need to remember any of this. That's literally what we're here for. We'll handle the compliance while you focus on building your team in Bangladesh.
No lawyers required. Promise.
What benefits and leave are required?
You'll pay salary 14 times a year in Bangladesh, not 12. That's because employees get two festival bonuses annually – one before Eid-ul-Fitr and another before Eid-ul-Adha or Durga Puja. Beyond these bonuses, Bangladesh has specific leave entitlements and benefit requirements that you can't skip.
The good news? Most benefits are straightforward once you know the rules. The tricky part is tracking everything correctly and staying compliant with local labor laws.
Annual vacation
Bangladesh employees get 18 working days of annual leave after completing one year of service. During their first year, they earn 1.5 days per month worked.
Unused vacation days carry forward to the next year, but employees must use them within 18 months. If they don't use the days within this timeframe, you must pay them out at their current daily wage rate.
Here's how vacation accrual works:
- First year: 1.5 days per month (prorated)
- After one year: 18 days annually
- Accrual: Monthly throughout the year
- Carryover: Must be used within 18 months or paid out
Sick leave
Employees get 14 days of paid sick leave per year. They don't need a doctor's note for the first three days, but anything longer requires medical certification from a registered physician.
You pay 100% of their salary during sick leave – there's no social insurance system that covers this cost. Unused sick days don't carry over to the next year and aren't paid out when employment ends.
Sick leave breakdown:
- Days allowed: 14 per year
- Payment: 100% salary (employer pays)
- Doctor's note: Required after 3 consecutive days
- Carryover: No carryover allowed
Parental leave
Maternity leave
Female employees get 16 weeks of paid maternity leave at 100% salary. They can take up to 8 weeks before delivery and must take at least 8 weeks after delivery.
Employees become eligible for maternity leave after working for at least 6 months. The employer pays the full salary during this period.
Paternity leave
Male employees get 7 days of paid paternity leave when their child is born. This leave must be taken within one month of the birth.
Parental leave summary:
| Type | Duration | Payment | Eligibility |
|---|---|---|---|
| Maternity | 16 weeks | 100% salary | 6 months service |
| Paternity | 7 days | 100% salary | Immediate |
Public holidays 2025
Bangladesh has 11 official public holidays in 2025. Employees who work on these days get double pay, and most businesses close completely.
| Date | Holiday | Type |
|---|---|---|
| February 21 | International Mother Language Day | National |
| March 17 | Birthday of Sheikh Mujibur Rahman | National |
| March 26 | Independence Day | National |
| March 31 | Eid-ul-Fitr | Religious |
| April 14 | Bengali New Year | Cultural |
| May 1 | May Day | International |
| June 7 | Eid-ul-Adha | Religious |
| August 15 | National Mourning Day | National |
| October 6 | Durga Puja | Religious |
| December 16 | Victory Day | National |
| December 25 | Christmas Day | Religious |
Note: Religious holidays depend on lunar calendar observations and dates may shift by 1-2 days.
Mandatory benefits
Three benefits are mandatory in Bangladesh: festival bonuses, gratuity, and workers' compensation. Skip these and you're in real trouble.
Festival bonuses
You must pay two festival bonuses annually, each equal to one month's basic salary. These are typically paid before Eid-ul-Fitr and Eid-ul-Adha (or Durga Puja for Hindu employees).
Gratuity
Employees who complete 5 years of service get gratuity equal to 30 days' wages for each completed year. This applies to companies with 10 or more employees.
Workers' compensation
You must provide compensation for workplace injuries or death. The amount varies based on injury severity and salary level, ranging from 3 months to 5 years of wages.
Mandatory benefit costs:
| Benefit | Cost | When Paid |
|---|---|---|
| Festival bonuses | 2 months salary/year | Before religious festivals |
| Gratuity | 30 days wages/year of service | After 5 years or termination |
| Workers' compensation | 3 months - 5 years wages | Upon workplace injury/death |
Optional competitive benefits
Most international companies offer additional benefits to attract talent:
Health insurance
While not legally required, most companies provide health insurance. Private health insurance costs around $200-500 per employee annually, depending on coverage.
Life insurance
Group life insurance is common, typically costing 0.5-1% of annual salary.
Transportation allowance
Many companies provide transportation allowances or company transport, especially in Dhaka where commuting is challenging.
Mobile and internet allowances
Tech companies often provide monthly allowances of $20-50 for mobile and internet expenses.
Common benefit mistakes
Forgetting festival bonuses
This is the biggest mistake international companies make. You must pay festival bonuses even if employees haven't completed a full year – it's prorated based on service length.
Miscalculating gratuity
Gratuity applies to basic salary plus dearness allowance, not total compensation. Many companies calculate this incorrectly and face disputes during termination.
Missing workers' compensation coverage
Some companies assume their general insurance covers workplace injuries. You need specific workers' compensation coverage or face personal liability.
Penalties for non-compliance:
- Missing festival bonuses: 25% penalty plus interest
- Unpaid gratuity: Up to 1 year imprisonment or fine
- No workers' compensation: Personal liability for full compensation amount
Getting these benefits right requires local HR expertise, compliance tracking, and understanding Bengali cultural practices around religious holidays. Most international companies underestimate how specific the timing and calculations need to be.
Hire with Columbus handles all benefit administration, from festival bonus calculations to gratuity tracking, for $179/month per employee. We ensure you never miss a payment deadline or miscalculate entitlements, plus we handle the cultural specifics around religious observances that trip up most international companies.
What are the compliance requirements?
Written contracts are mandatory in Bangladesh within 120 days of employment start date. Skip this and you're looking at contract nullification plus back payments for any benefits the employee should have received.
The Bangladesh Labour Act 2006 doesn't give you wiggle room here. Every employment relationship needs a formal, written agreement in Bengali or English, signed by both parties, with specific mandatory clauses that can't be waived.
Employment contract requirements
Your employment contracts must include these non-negotiable elements:
- Employee's full name, address, and national ID number
- Job title, duties, and reporting structure
- Salary amount, payment schedule, and currency
- Working hours, overtime rates, and rest day designation
- Probation period length (if applicable)
- Notice period for termination by either party
- Leave entitlements and calculation methods
- Disciplinary procedures and grounds for termination
Missing any of these? The contract gets deemed invalid, you owe back payments for all statutory benefits, and the employee can claim unfair treatment. Hire with Columbus builds every contract with all mandatory clauses included, so you're covered from day one.
Contracts don't need government registration, but they must comply with the Labour Act's minimum standards. You can't contract out of statutory rights - any clause that reduces legal minimums gets struck down.
Probation periods
Standard probation in Bangladesh runs 6 months for most roles, but you can set it shorter. The maximum allowed is 6 months for any position - go longer and it's not legally enforceable.
During probation, either party can terminate with just 14 days' written notice. No severance required, but you still owe any accrued salary, overtime, and unused leave days.
After probation ends, full employment protections kick in immediately. That means longer notice periods, severance obligations, and just-cause requirements for termination.
Working time regulations
The standard work week is 48 hours across 6 days, typically 8 hours Monday through Saturday. You can structure it as 5 days with longer hours, but 48 hours weekly is the legal maximum.
Overtime kicks in after 8 hours daily or 48 hours weekly, whichever comes first. The rate is double the regular hourly wage - no exceptions or negotiations allowed.
Required breaks:
- 30-minute meal break for shifts over 5 hours
- One full rest day per week (usually Friday or Sunday)
- 15-minute breaks for every 4 hours worked
You must maintain detailed working time records for every employee. Labor inspectors can request these anytime, and missing records result in 50,000 BDT fines per violation.
Notice periods
Notice periods depend on length of service and who's initiating the termination:
| Years of Service | Employee Notice | Employer Notice |
|---|---|---|
| Under 1 year | 14 days | 30 days |
| 1-5 years | 30 days | 60 days |
| 5-10 years | 60 days | 90 days |
| Over 10 years | 90 days | 120 days |
Payment in lieu of notice is allowed, but you can't force it on employees - they can insist on working their notice period if they want.
During notice periods, employees keep all rights and benefits. Trying to reduce their responsibilities or exclude them from meetings can trigger wrongful termination claims.
Termination process
You can't fire someone in Bangladesh without documented just cause or proper redundancy procedures. "At-will" employment doesn't exist here.
Valid grounds for immediate dismissal:
- Serious misconduct (theft, violence, fraud)
- Repeated policy violations after written warnings
- Prolonged unauthorized absence (over 10 consecutive days)
- Conviction of criminal offense affecting work
For performance issues, you need a formal improvement process with written warnings, specific improvement targets, and reasonable timeframes. Skip this and the termination gets ruled unfair.
Redundancy terminations require 60 days' advance notice to employees and the Department of Labour. You must prove the position is genuinely redundant and follow last-in-first-out principles unless you can justify exceptions.
Severance pay
Severance is mandatory for most terminations, calculated as one month's salary per year of service:
| Years of Service | Severance Payment |
|---|---|
| Under 1 year | 1 month's salary |
| 1-5 years | 1 month per year |
| 5-10 years | 1 month per year + gratuity |
| Over 10 years | 1 month per year + gratuity + bonus |
Gratuity adds another month's salary for every year over 5 years of service. For employees with 10+ years, you also owe any contractual bonus payments.
No severance required for:
- Resignation by employee
- Termination during probation
- Dismissal for serious misconduct (theft, fraud, violence)
Payment is due within 30 days of termination. Late payments incur 15% annual interest charges.
Data protection
Bangladesh follows its own Digital Security Act 2018, not GDPR, but employee privacy rules are still strict. You need explicit written consent to collect, process, or transfer personal data.
Required for all employees:
- Written data processing consent in employment contracts
- Secure storage of personnel files and payroll data
- Access restrictions - only HR and direct managers
- Data retention limits (7 years for payroll, 3 years for applications)
Cross-border data transfers need additional consent and security measures. Hire with Columbus handles all data processing compliance, including secure international transfers for payroll and HR management.
Violations can result in 500,000 BDT fines plus civil liability for any damages to affected employees.
Common compliance mistakes
Invalid employment contracts: Missing mandatory clauses, wrong language, or terms below statutory minimums void the entire agreement. You'll owe back payments and face potential discrimination claims.
Improper termination process: Firing someone without proper cause, notice, or procedure triggers wrongful dismissal claims. Expect reinstatement orders plus compensation for lost wages.
Overtime violations: Not paying double-time rates or miscalculating hours leads to back-pay claims plus penalties. Labor inspectors love these cases because the math is straightforward.
Missing working time records: 50,000 BDT fine per employee per violation, plus you lose any disputes about hours worked or overtime owed.
Penalties for violations
Common compliance failures in Bangladesh cost real money:
- Invalid employment contract: 100,000 BDT fine + contract void + back payments owed
- Wrong termination process: 6-12 months' salary compensation + legal fees + potential reinstatement order
- Overtime violations: Double back-pay owed + 25,000 BDT penalty per affected employee
- Missing mandatory clauses: Contract deemed invalid, full statutory benefits owed retroactively
- Improper dismissal: 200,000-500,000 BDT compensation + reinstatement + legal costs
Labor court cases take 12-18 months and almost always favor employees when employers can't prove compliance. Hire with Columbus ensures every contract, termination, and HR process follows Bangladesh law exactly, so you avoid these costly mistakes entirely.
What has changed recently?
Bangladesh rolled out some significant employment law updates in 2025 that'll definitely impact your hiring plans. The minimum wage jumped to BDT 15,000 per month (about $140 USD) for garment workers, with proportional increases across other sectors. That's a 25% bump from 2024 levels.
The government also tightened up foreign worker visa requirements starting January 2025. You now need to prove local recruitment efforts for 60 days before applying for work permits, up from the previous 30-day requirement. Processing times stretched to 8-12 weeks as a result.
New digital compliance requirements
Bangladesh launched its Digital Employment Registry in March 2025. Every employer must now register all employees (local and foreign) in this online system within 30 days of hiring. Miss the deadline and you're looking at BDT 50,000 fines per unregistered employee.
The system tracks everything from salary payments to leave balances. Your payroll processes need to integrate with government databases. It's actually pretty slick once you get it running, but the initial setup is a pain if you're managing it yourself.
Updated leave and benefits
Maternity leave expanded to 18 weeks in 2025 (up from 16 weeks). The first 6 weeks are now fully paid by the government instead of employers. Paternity leave also increased to 10 days, though that's still employer-funded.
The National Provident Fund contribution rates stayed at 10% employee and 10% employer. But the salary ceiling increased to BDT 50,000 per month. Anyone earning above that amount gets capped contributions, which affects your total compensation calculations.
Banking and payment changes
Bangladesh Bank introduced new foreign currency regulations in June 2025 that make international salary payments more complex. You need pre-approval for any monthly transfers above $5,000 per employee. The documentation requirements are pretty extensive.
Most companies are switching to local payroll processing to avoid these hassles. But that means setting up proper banking relationships and dealing with the new digital reporting requirements. An EOR like Hire with Columbus handles all this backend complexity, including the Digital Employment Registry integration and banking compliance, for $179/month per employee.