Hire employees in Bangladesh using an Employer of Record

You've been interviewing for weeks. Finally found the right person in Bangladesh, someone who actually gets your product and can start contributing on day one. Now you need to hire them legally, and this is where a lot of companies hit a wall they didn't see coming.

Bangladesh doesn't have a simple "just put them on payroll" option if you don't already have a legal entity there. You're looking at three real paths forward, and picking wrong costs you either time, money, or legal exposure. Here's the breakdown.

Your three options

Option 1: Set up your own entity

• Cost: Often $10k-$50k+ upfront depending on structure, plus ongoing annual maintenance
• Timeline: 3-6 months minimum to get registered, licensed, and payroll-ready
• Complexity: Tax registration, local payroll setup, labor law compliance, HR infrastructure from scratch
• Makes sense when: You're planning to hire 20+ people in Bangladesh long-term and want a permanent local presence

Option 2: Hire contractors

• Cost: No entity costs, but you lose control over how the work relationship is structured
• Timeline: Immediate, you can start today
• Risks: Misclassification is a real problem if the person works full-time hours under your direction, since Bangladeshi labor law can reclassify that as employment, triggering back pay and penalties
• Makes sense when: You need someone for a short project (under 6 months) or a specific specialized skill
• Note: Hire with Columbus also handles compliant contractor agreements and payments if this route fits your situation

Option 3: Use an employer of record (recommended for most companies)

• Cost: $179/month per employee (USD)
• Timeline: 2-3 days to get someone hired and onboarded
• Complexity: None on your end, we handle contracts, payroll, taxes, and compliance
• Makes sense when: You're hiring 1-50 people, testing the Bangladesh market, or building a team across multiple countries

Why EOR wins for most companies

If you're hiring 1-10 people in Bangladesh, entity setup costs more than 3-4 years of EOR fees combined. At $179/month per employee, that's $2,148 a year, compared to $10k-$50k upfront just to get an entity running, plus annual maintenance costs on top.

Hiring across multiple countries makes this math worse, not better. Each new market means another entity, another local accountant, another set of compliance headaches, all before you've hired a single person.

An EOR like Hire with Columbus handles the employment contract, payroll, statutory contributions, and ongoing compliance updates so you don't have to track Bangladeshi labor law changes yourself. Say you need 3 people in Dhaka this quarter: that's $537/month through an EOR versus $20k+ in entity setup costs and another $5k a year just to keep the lights on legally.

Ready to hire in Bangladesh without setting up a company you don't need yet? Get started with Hire with Columbus.

What employment types can you use?

Entity setup in Bangladesh: often $10,000 to $25,000 and 2 to 4 months of paperwork before you can pay anyone. An EOR for 5 employees: $895/month, and you're paid by Friday. Do the math before you commit to either one.

Part 1: How can you legally employ someone in Bangladesh?

You've got three real options. Each one works, but they fit different situations, so let's break down the actual costs and timelines.

Option 1: Set up your own entity

• Upfront cost: roughly $10,000 to $25,000 depending on entity type and legal fees
• Timeline: 2 to 4 months to register with RJSC, get a TIN, open corporate bank accounts, and set up payroll
• Ongoing costs: annual audits, accounting, corporate tax filings at Bangladesh's 22.5% corporate rate, and local HR staff
• Complexity: full tax registration, a local payroll system, compliance with the Bangladesh Labour Act, and someone on the ground to manage it all
• When it makes sense: you're planning 20+ employees and a permanent, long-term presence in Bangladesh

Option 2: Hire contractors/freelancers

• Speed: you can have someone working this week
• Risk: misclassification penalties, back taxes, and potential legal disputes if the person is really functioning as an employee
• Limitation: you can't dictate hours, tools, or day-to-day work like you would with an employee, and there's limited team integration
• When it makes sense: short projects under 6 months, or specialized one-off skills
• Hire with Columbus also handles compliant contractor agreements and payment processing, so you're covered even here

Option 3: Use an employer of record (recommended for most companies)

• Hire with Columbus becomes the legal employer in Bangladesh, on paper
• You keep full control over the person's daily work, projects, and performance
• Cost: $179/month per employee, flat, no surprise fees
• Timeline: 2 to 3 days to onboard, compared to months with an entity
• We handle the employment contract, payroll, tax withholding, statutory benefits, and Labour Act compliance
• When it makes sense: 1 to 50 employees, testing the Bangladesh market, or building a multi-country team without opening entities everywhere

For 5 employees, that's $895/month with an EOR versus $25,000+ just to open the door with an entity. The entity math only starts working once you're well past 20 hires.

Part 2: Employment contract types in Bangladesh

Once you've picked your hiring approach, you still need the right contract type. Bangladesh's Labour Act recognizes a few distinct categories, and picking the wrong one creates real legal exposure.

Permanent contracts are the default for core, ongoing roles. Most companies hiring in Bangladesh use permanent contracts because they match how local courts and labour inspectors expect full-time work to look. Notice requirements run around 4.3 weeks, and severance can reach roughly 22.9 weeks of pay depending on tenure, so these aren't casual arrangements.

Fixed-term contracts work for project-based or seasonal roles with a clear end date. Bangladesh labour law doesn't let you stack indefinite fixed-term renewals just to avoid permanent status. If the role keeps getting renewed year after year, expect it to be treated as permanent employment regardless of what the paper says.

Part-time contracts exist and part-time employees retain proportional rights to leave, notice, and other statutory protections. They're less common in Bangladesh's formal labour market but are fully legal for roles under standard full-time hours.

Here's how Hire with Columbus handles each type:

• Permanent hires: we draft compliant contracts covering notice periods, severance formulas, and the mandatory 16-week maternity leave entitlement
• Fixed-term hires: we make sure the contract language and renewal terms don't accidentally trigger permanent status
• Part-time hires: we calculate pro-rated leave and benefits so nothing gets missed

Whichever contract type fits, we draft it, file it, and keep it compliant with Bangladesh Labour Act requirements, so you're not the one figuring out severance math at 11pm before a termination.

How does payroll and taxation work?

Your €60k employee in Bangladesh doesn't actually cost you €60k. Add festival bonuses, provident fund contributions, and gratuity accruals, and you're looking at €75,000-78,000 a year. Here's where that extra money actually goes.

Income tax brackets in Bangladesh

Bangladesh runs a progressive income tax system through the National Board of Revenue (NBR). Rates apply to annual taxable income in BDT.

Women, senior citizens, and people with disabilities get a higher tax-free threshold. You're responsible for withholding this tax monthly through the salary system, known as Tax Deducted at Source (TDS).

The good news on social security

Bangladesh skips mandatory social security contributions entirely. Employer SSC rate: 0%. Employee SSC rate: 0%.

No separate pension, health, or unemployment insurance line items to calculate on every payslip. Sounds too good to be true, and in a way it is, because Bangladesh just moves that cost somewhere else.

What replaces it (customary but expected):

• Provident fund: Most employers match employee contributions, usually around 10% of basic salary. It's not legally required for everyone, but skip it and mid-size or larger companies will notice.
• Gratuity: Under the Bangladesh Labour Act, employees who hit a set service period get a gratuity payment when they leave, roughly one month's basic salary per year worked. It's not a monthly cost, but you need to plan for it as an accrual.
• Workers' Welfare Fund: Larger companies kick in a small percentage of net profit annually, separate from individual payroll.

The payment schedule (and the bonus reality)

Employees get paid monthly, usually by the 7th working day of the following month under the Labour Act's wage rules.

The real budgeting surprise is festival bonuses. Paying two festival bonuses a year, tied to Eid-ul-Fitr and Eid-ul-Adha, isn't strictly required by law, but it's close to universal. Each one typically equals a month's basic salary, so think of it as a 14th-month salary split into two payments instead of one 13th-month bonus.

Skip these and you'll have a retention problem within weeks. This "customary" practice functions like a legal requirement in every way that matters.

What a base salary actually costs

Here's what happens once you add the real extras, assuming basic salary runs about 60% of gross pay (a common structure in Bangladesh):

That's roughly 21-25% on top of base salary, mostly from bonuses and provident fund contributions rather than government-mandated social contributions like you'd see in Europe or Latin America.

For reference, Bangladesh's minimum wage sits at BDT 12,500/month (about €95), though this varies a lot by sector. Garment industry roles run much higher under sector-specific wage boards.

Payroll cycle and filing deadlines

1. Monthly: Salaries paid by early the following month, TDS withheld and deposited with the tax authority.
2. Monthly TDS deposit: You need to deposit withheld tax within NBR's timeframe, typically by the 15th of the following month.
3. Annual tax return: Companies file annual withholding tax statements, and employees file individual returns by the NBR deadline (usually November 30th for the assessment year).
4. Provident fund deposits: If you're running a provident fund, contributions typically need to go in monthly to keep the fund's status intact.

Miss the TDS deposit deadline and you're facing interest charges plus potential penalties from NBR. Miss festival bonus payments before Eid and you'll likely see resignations right after the holiday, since job-hopping post-Eid bonus is practically a tradition in Bangladesh.

Common payroll mistakes

• Treating festival bonuses as optional. They're not written into every contract as mandatory, but skip them and watch your retention numbers tank.
• Getting the basic vs. gross salary split wrong. Since bonuses and gratuity are usually based on basic salary, one wrong ratio throws off every downstream calculation.
• Assuming no SSC means no extra cost. Companies budget for salary only, then get blindsided by provident fund expectations and gratuity liabilities when someone leaves.
• Missing TDS deadlines. With payments due around the 15th of each month, this one's easy to miss if you're running payroll manually across multiple countries.
• Ignoring gratuity accrual until someone quits. Then you're hit with a lump sum nobody budgeted for.

Cost comparison: DIY vs. EOR

Setting up payroll in Bangladesh yourself:

• Local accounting firm: BDT 40,000-80,000/month (roughly €300-600)
• Payroll software and compliance tools: €150-300/month
• Compliance risk: NBR penalties and interest on late TDS deposits, plus back-payment liabilities on missed gratuity
• HR expertise needed: A local payroll specialist who knows NBR filing inside out, typically BDT 600,000+/year (~€4,500+)

With Hire with Columbus: $179/month per employee (USD). We handle all TDS filings, festival bonuses, and gratuity accruals, fully compliant, zero setup cost, and no local entity required.

What benefits and leave are required?

Maternity leave in Bangladesh runs 16 weeks at full pay, but paternity leave doesn't legally exist here. That's not a typo. Bangladesh's Labour Act has zero statutory paternity leave, which surprises a lot of foreign employers used to at least a token few days off for new dads.

Annual vacation

Bangladesh's Labour Act ties earned leave to days actually worked, not a flat annual number. Factory and industrial workers earn 1 day of leave for every 18 days worked. Commercial and office staff typically earn leave on a similar sliding scale, and most professional employers just simplify this to a flat 15 working days per year.

Leave usually kicks in after an employee completes one year of continuous service. Unused leave can typically carry forward and, in many cases, gets paid out if it accumulates beyond a cap or when the employee leaves the company. If you're not tracking accrual correctly from day one, you'll end up guessing at payout amounts later, which is exactly the kind of math an EOR handles automatically.

Sick leave

Employees get 14 days of paid sick leave per year, and it's paid at full wages by the employer, not through any government scheme. Bangladesh has no state-run sickness insurance, so this cost sits entirely on you.

A medical certificate is generally required if the absence runs more than a few consecutive days. Separately, employees also get 10 days of casual leave per year for short personal matters, no medical proof needed, but it doesn't roll over or get paid out if unused.

Parental leave

Maternity leave is 16 weeks, typically split as 8 weeks before the expected delivery date and 8 weeks after, paid in full. This applies as long as the employee has worked for the company for a minimum period before the leave starts (commonly at least 6 months).

Paternity leave isn't mandated at all under Bangladesh labor law. Some multinational employers offer a few informal days anyway to stay competitive for talent, but there's no legal floor here. There's also no shared parental leave scheme, so the 16 weeks belongs entirely to the birthing parent.

Public holidays 2026

Bangladesh mandates 7 official public holidays a year. Here's how they land in 2026:

On top of these 7, most employers also grant paid days off for religious festivals like Eid-ul-Fitr and Eid-ul-Adha, since their dates shift each year based on the lunar calendar. These aren't part of the mandated 7, but skipping them will make you an outlier fast in a country where these holidays matter deeply to staff.

If someone works on a public holiday, standard practice is compensatory leave or extra pay, even though the exact multiplier isn't rigidly fixed in law the way it is in some other countries.

Mandatory benefits

Here's the part that trips people up: Bangladesh has no mandatory payroll-based social security contributions. Employer SSC is 0%. Employee SSC is 0%. There's no state pension scheme or unemployment insurance system funded through payroll taxes the way you'd see in the EU or many parts of Asia.

That doesn't mean there's nothing to pay. Your real mandatory obligations are:

• Full salary during the 14 days of sick leave and 10 days of casual leave
• Full pay during the 16-week maternity leave
• Paid time off for all 7 gazetted public holidays
• Gratuity or end-of-service payments for longer-tenured employees (covered in detail in the compliance section)

Since there's no government scheme collecting these contributions for you, every bit of this liability sits with the employer directly. Miss it, and there's no social insurance office to blame later.

Optional but competitive benefits

Because the legal minimums are pretty thin, competitive employers in Bangladesh add benefits to actually retain talent. The most common ones:

• Festival bonus (Eid bonus): technically not legally required, but customary. Most employers pay one month's basic salary as a bonus before major Eid festivals, sometimes twice a year. Skip this and you'll struggle to keep good people.
• Provident fund: a contributory retirement fund, often 8-10% matched by employer and employee, though not universally mandated by law.
• Private health insurance: rare as a legal requirement, common as a retention tool, especially for office-based hires.
• Transport and meal allowances: widely offered in Dhaka and Chittagong given commute costs and inflation.
• Mobile/phone allowance: standard for client-facing or remote roles.

Common benefit mistakes

The biggest mistake we see: companies assume Bangladesh has a social security payroll tax like most countries and budget for it, then get confused when there's nothing to remit. The flip side mistake is worse, assuming "no mandatory SSC" means benefits are cheap overall. They're not, once you add the customary Eid bonus and provident fund matching that talent expects.

Another common miss is treating the 14 sick days and 10 casual days as interchangeable. They're legally distinct, and mixing them up on payroll records can cause real problems in a labor inspection.

The real cost of getting this right

Handling Bangladesh's leave accrual, maternity pay, festival bonus timing, and holiday tracking correctly usually means:

• A local HR resource who understands the Labour Act's leave accrual math: often $15,000-$25,000/year for a qualified local HR hire
• Payroll software configured for non-standard leave accrual: $50-150/month
• Annual legal review to stay current with amendments: $2,000-$5,000/year
• Risk of miscalculated maternity pay or missed festival bonus expectations: intangible, but it shows up fast in turnover

Hire with Columbus handles all of this for $179/month per employee. That includes accurate leave tracking, maternity pay calculations, festival bonus timing, and public holiday compliance, without you needing to become a Bangladesh Labour Act expert first.

What are the compliance requirements?

Most companies don't realize Bangladesh requires written contracts, specific termination procedures, and calculated severance until they're already mid-hire and scrambling. The Bangladesh Labour Act 2006 (amended through subsequent updates) governs almost every part of the employment relationship. Skip a step and it gets expensive fast.

Employment contract requirements

Written contracts aren't optional in Bangladesh. Every employee needs an "appointment letter" that spells out the terms, and verbal agreements leave you exposed if a dispute ever reaches the Labour Court.

Your contract needs to include:

• Job title and description
• Salary and payment schedule
• Working hours and rest days
• Probation period length
• Notice period terms
• Leave entitlements
• Termination conditions

Contracts should be in Bengali or include a Bengali translation. English-only contracts can create enforcement problems if a case goes to court, since Bengali is the language of the Labour Court.

There's no central government registration for individual contracts, but employers with 10 or more workers need to maintain formal service records (service books) for each employee. Skip this and you'll struggle to prove compliance during a labor inspection.

Probation periods

Standard probation in Bangladesh runs 3 to 6 months, depending on the role. Confirmed permanent staff can have probation up to 6 months, and it's common to extend once if performance is borderline, though extensions should be documented in writing.

During probation, you have more flexibility to terminate without the full severance obligations that apply to confirmed employees. You still need to give notice, typically 14 days, and you can't terminate based on discrimination or in bad faith.

Once someone passes probation and becomes a confirmed employee, full termination protections kick in. That includes notice periods and severance calculations.

Working time regulations

Standard working hours are 8 hours a day, 48 hours a week. Anything beyond that counts as overtime and must be paid at double the normal hourly rate.

Employees get at least one rest day per week, usually Friday. You also can't schedule more than 10 hours of work in a single day, including overtime, without violating the Act.

Employers need to keep time and attendance records for every worker. Labour inspectors can request these during a workplace inspection, and missing records create real problems if a wage or overtime dispute comes up later.

Notice periods

Notice requirements depend on tenure and whether you're the one giving notice or the employee is resigning. Bangladesh's average statutory notice period sits at 4.3 weeks, but the exact number scales with length of service.

Employers can pay salary in lieu of notice instead of having the employee work through the notice period. Just make sure the payment matches what they'd have earned during that time, or you're looking at an underpayment claim.

Termination process

You need just cause to terminate a confirmed employee in Bangladesh. Acceptable grounds include misconduct, poor performance (documented), redundancy, or company closure.

For misconduct terminations, you need to follow a formal process:

1. Issue a written show-cause notice explaining the alleged misconduct
2. Give the employee a chance to respond (usually within 7 days)
3. Hold an inquiry if the response doesn't resolve things
4. Issue a final termination letter with reasons, if misconduct is confirmed

Skip the show-cause notice or the inquiry step and any termination can get challenged as unlawful, even if the underlying reason was legitimate. For redundancy, you don't need government approval, but you do need to follow "last in, first out" principles where possible and pay full severance.

Severance pay

Bangladesh requires severance for most terminations that aren't for proven misconduct. The formula is based on tenure, and the average severance obligation works out to around 22.9 weeks of pay.

Severance is calculated on the employee's last drawn basic salary. It's owed on top of any notice pay and unused leave payout, so the total cost of letting someone go is almost always higher than founders initially budget for.

Data protection

Bangladesh doesn't have a dedicated data protection law like GDPR yet, but the Digital Security Act and ICT Act impose obligations around how you collect, store, and use employee data. Employee records, especially national ID numbers, bank details, and health information, need to be stored securely and only accessed by authorized staff.

If you're processing data for employees who are EU nationals or handling data that touches EU systems, GDPR obligations can still apply. Fines under GDPR run up to €20 million or 4% of global annual revenue, whichever is higher, so this isn't a small consideration if your Bangladesh team touches European client data.

Common compliance mistakes

The mistakes we see most often:

• Using English-only contracts with no Bengali translation, which weakens enforceability in local courts
• Skipping the show-cause notice before misconduct termination
• Underpaying severance by calculating it on gross salary instead of basic salary (or vice versa, depending on contract terms)
• Failing to maintain service books for companies with 10+ employees
• Misclassifying long-term contractors as employees to avoid severance and benefits obligations

Penalties for violations

Common compliance failures in Bangladesh:

• Invalid or missing employment contract: exposes you to full back-pay claims and the contract can be deemed unenforceable in a dispute
• Wrong termination process (no show-cause notice): risk of reinstatement order plus back wages for the period the employee was out of work
• Missing mandatory clauses: contract can be challenged as invalid, triggering back payments for entitlements the employee should have received
• Improper dismissal without cause: compensation awards typically equal to several months' salary, on top of the severance already owed

Hire with Columbus handles contracts, notice periods, and termination processes according to Bangladesh's Labour Act, so you're not the one figuring out show-cause procedures at 11pm before a difficult conversation. Every termination we process follows the legally required steps, with documentation built in from day one.

What has changed recently?

If you last looked at Bangladesh employment rules a couple years ago, a few things have shifted enough to matter for anyone hiring in 2026. Here's what's actually new.

Corporate tax rate ticked up

As of December 2025, the corporate tax rate sits at 22.5%. If you're setting up an entity and budgeting for the year, plug in that number, not whatever older figure you had saved.

Notice periods and severance got more defined

Bangladesh updated its notice and severance guidance effective January 2026. Notice periods now work out to roughly 4.3 weeks, and severance calculations land around 22.9 weeks depending on tenure and circumstances of termination.

The practical takeaway: budget more generously for offboarding than you might have a couple years back. If you're winding down a role or restructuring, these numbers change your exit cost math.

Maternity leave confirmed at 16 weeks

As of February 2026, maternity leave stands firmly at 16 weeks. This isn't new in spirit (Bangladesh has long provided paid maternity leave), but the 2026 update reaffirms the entitlement and gives employers a clean, current benchmark to plan around. Paternity leave, worth noting, remains at 0 weeks statutorily, so any paternity benefit you offer is a policy choice, not a legal requirement.

Still no mandatory social security contributions

This one surprises a lot of companies coming from markets with heavy payroll tax structures. Bangladesh still has no mandatory employer or employee social security contribution scheme as of 2024's baseline, and that hasn't changed heading into 2026. Employer and employee contribution rates for things like sickness, maternity, and old-age insurance all sit at 0%. That keeps payroll math simpler than in most countries, but it also means you can't lean on a national scheme to cover benefits, so anything beyond statutory minimums is on you to provide.

What this means if you're hiring now

None of these changes are dramatic on their own, but stacked together they mean your 2026 cost and compliance assumptions need a refresh if you were working off older data. This is exactly the kind of shifting detail an EOR tracks for you automatically. With Hire with Columbus at $179/month per employee, you're not the one who has to notice when a notice-period rule quietly updates.