Doing Business With Bangladesh PEO/EOR

Bangladesh, a country officially known as the People’s Republic of Bangladesh situated in South Asia, is the eight-most populous country globally, with a population that exceeds 163 million people. 

A country known to be populous in the number of permanent citizens, the country covers an area of 148,560 square kilometers, making it one of the most densely populated countries in the world. Along with 89% of the population being Bengalis, the country ranks as the third-largest Muslim-majority country globally.

With Dhaka leading, Chittagong is the second-largest city in the economy. Chittagong is the largest seaport of Bangladesh that carries out overseas trades like imports and export via the sea.

Bangladesh is a country known to be one of the emerging and growth-leading economies in the world. The economy has a GDP of $365 billion (2021 estimate –  Nominal GDP) and is also one of the Next Eleven countries with Asia’s fastest GDP growth rate. With a growing nominal GDP, Bangladesh is ranked the 40th-largest economy globally based on nominal GDP with $966.485 billion as PPP GDP (2021 estimate), making it the 31st largest economy.

Significant industries in Bangladesh that contribute to Bangladesh’s GDP include textile and ready-made garment industries, the manufacturing sector, pharmaceutical industry, shipbuilding, and the ceramics industry. The employees and workers in these industries are highly skilled and educated, helping the industries multiply.

As of Article 17 of the Bangladesh Constitution, all children are entitled to receive compulsory and free education. Significant areas of education in Bangladesh are in the fields of science, technology, engineering, and other specialized areas such as medicine, finance, business, and economics. 

Students are also encouraged to enroll to study for Chartered Accounting (CA). Bangladesh’s top colleges include Bangladesh Sweden Polytechnic Institute, Barisal Polytechnic Institute, BCMC College of Engineering & Technology, Chittagong Polytechnic Institute, Bangladesh Academy for Rural Development, and Dhaka Polytechnic Institute.

Although it is relatively easy to grow your business and hire talent in  Bangladesh, considering a relatively skilled and educated population in different sectors, employers must be aware of the local tax compliances, benefits, and payroll aspects in New Zealand.

Here is where Bangladesh PEO or an Employer of Record can help. Multiplier’s PEO solution acts as your co-employers. We assume responsibility for all your HR operations in Bangladesh PEO – onboarding, payroll, compliance management, employment contracts – while you focus on business matters in the country. As a PEO partner, Multiplier ensures HR services, tax, and compliance management matters while keeping local employment laws in Bangladesh in check.

With Bangladesh being the world’s 40th largest economy regarding market exchange rates, the country is also the 31st largest regarding purchasing power parity. This makes Bangladesh rank second in South Asia after India. 

Since the country is a mixed economy, Bangladesh is one of the following 11 emerging markets with the second-highest foreign-exchange reserves in South Asia, contributing $12.31 billion in remittances in 2015.

Suppose a company or a business is looking at growing its companies in Bangladesh. In that case, an industry that significantly contributes to the Bangladeshi GDP is the textile and ready-made garment industry, the country’s largest manufacturing industry, with exports of $34.1 billion in 2017. Following the garment industry are leather goods, especially leather footwear manufacturing is the second-largest export sector, following the pharmaceutical industry which meets 97% of the domestic demand. 

The Bangladeshi private sector has rapidly expanded with several companies and a skilled workforce, driving the industry towards positive growth. With the government initiatives, major industries that have shown growth include steel, electronics, energy, leather goods, food processing, chemicals, ceramics, construction materials, and energy. The manufacturing and pharmaceutical industries continue to dominate the Bangladeshi market and continuously contribute to the GDP.

Being one of Bangladesh’s developing countries and with the number of skilled and educated workforces in specific sectors that the country exhibits, the labor codes and employment laws effectively protect employees’ and workers’ rights while preserving employers’ rights and legitimate interests of business expansion. 

Therefore, the employment law applies to all companies – national or foreign, and all the employees regardless of their citizenship (foreign or Bangladeshi citizens).

Though understanding the labor laws are relatively straightforward, compliance is an area that requires assistance when looking for international talent, especially in Bangladesh. 

Suppose you are starting your business or are looking to hire talent to expand your business. In that case, there is a need to understand all the details of taxes, employment contracts, compliance, and matters related to the labor code.

Usually, PEOs charge based on two pricing models – fixed and variable. A PEO based on the fixed pricing model charges a transparent fee ranging from $200 – $1000 per employee per month.

Multiplier is one such PEO solution. Our costs for Bangladesh start from $200 per employee per month. The final price depends on the complexity of the employment laws of the employee’s jurisdiction.

Our prices ensure that you get the most out of your employee spending. Every employee hired through our PEO also receives HR support, benefits management, and a live dashboard to track workforce spending in real-time.

With several sectors growing and simultaneously contributing to creating employment and growth in the economy, Bangladesh’s largest trading partners are India, the United States, the European Union, China, Australia, and ASEAN. You would find expat workers in Southeast Asia and the Middle East who send many remittances each year. With the various sectors growing, the Bangladeshi economy is driven by strong domestic demand.

A new emerging sector that has Bangladesh ranked the seventh-largest producer is the Natural-gas industry. Businesses and companies entering the market for natural gas would find growth and business opportunities in Bangladesh for the same.

While entering Bangladesh to expand your business and your global team is reasonably straightforward, a gray area would be aspects like the hiring process and where to hire from, the local labor law requirements, payroll, taxation, and compliance. 

Partnering with a Bangladesh PEO like Multiplier can help navigate these gray areas that require professional assistance. Multiplier is one of the leading global PEO and EOR platforms that help brands across the globe gain a competitive edge in the region. Book a demo to understand how Multiplier efficiently handles your global HR operations while you focus on the growth aspect of your business.

However, if you are looking at conducting the process of generating employment contracts, payroll, and other HR responsibilities in-house, below are a few tips and tiny details you may want to keep in mind while expanding your business in Bangladesh and complying with local laws.

A signed employment contract protects the interests of the employers and the employees. The terms of employment set out in the contract help mitigate any risks to the employer when hiring a new employee.

As per Section 5 of the Labour Act, the employer shall issue an appointment letter/employment contract to the employee upon hiring. In continuation, rule 19 of the Labour Rules states that the employment contract shall contain the following information – 

• Name of the employee
• Details of employee’s parents and spouse (if applicable)
• Current and permanent addresses of the employee, 
• The designation, key responsibilities, and the type of work to be undertaken
• Date of joining the company
• Location of work
• Class of worker (full-time, part-time, freelancer)
• Wages or pay scale that includes bonuses
• Other financial benefits (which includes house rent, medical expenses, gratuity, education, food, and conveyance), 
• A condition that states that the Labour Act governs the contract.
• Leaves and other benefits like insurance
• Termination Clauses

This is assuming that the employee hired is a full-time or a part-time employee. However, the employment contracts would be similar for freelancers and contract workers; additional details would be specified for such employees. Though the Labour Law does not distinguish between an independent contractor and a full-time/part-time employee, factors such as remuneration, work hours, and place of work would differentiate each employee.

In such scenarios where the employment contracts differ from role to role and class of employee, a Bangladeshi PEO like Multiplier can help you generate compliant agreements as soon as you hire and onboard your talent from the economy.

Working Hours

As stated under Section 100 of the Labour Act, the working hours in Bangladesh are 8 hours on a working day with an additional 2 hours with overtime pay. 

As stated under Section 102 of the Labour Act, an employee shall be working 48 hours a week with an additional 12 hours with overtime pay. This makes it a maximum of 56 hours per week as an annual average.

However, there is no provision in the Labour Act allowing the employees to opt-out of the restrictions or limitations.

Any shift exceeding 6 hours a day should be coupled with a 1-hour lunch break, while a 5-hour shift must include a 30 minutes lunch break. 

Each worker must be given a 24-hour break between each night shift in a night shift.

A typical workweek is for five days with Fridays and Saturdays off.

Each employee in Bangladesh shall be paid before the end of the 7th day or the last day of the month. This applies to an employee who has been terminated or an employee who has retired.

All employees are entitled to overtime pay.

The approximate minimum annual wage in Bangladesh is 18,000 Taka, and on average, 1,500 Taka per month for all economic sectors (which does not cover industry-specific wages). The garment industry has a minimum wage of 5,300 Taka per month. 

The minimum wages in Bangladesh are reviewed and reset every five years by the National Minimum Wage Board.

Overtime pay is calculated at twice the ordinary rate of basic wage and dearness allowance and ad hoc or interim wage.

Employment benefits are key if, as an employer, you are looking to retain your employees with your organization for an extended period. This also acts as an attractive feature to motivate employees to give better outputs and give in better quality service while at work.

These may include benefits such as leaves, vacation policies, maternity leaves, sick leaves, healthcare insurance, and any additional benefits you may want to provide to appreciate the time and hard work.

You can now have all the benefits for your employees in just one click with the PEO and EOR platform – Multiplier.

As per Section 117 of the Labour Act, any employee who has completed one year of continuous service is entitled to annual and paid leave. The paid annual leave post 12 months are below:

• If the employee is working for a shop, commercial, industrial, factory, or road transport establishment, the employee is entitled to one day for every 18 days of work.
• In the case of an employee working at a tea plantation, one day for every 22 days of work. 
• If the  employee is working for a newspaper agency, one day every 11 days of work.

Keeping the annual leaves aside, the employees are entitled to 11 days of festival holidays with salary in a year. 

All employees are entitled to 10 days’ leave as a part of casual leave each calendar year that does not extend to tea plantation workers. Casual leaves cannot be carried over to the next calendar year.

The employee can carry all the unused annual leave with a maximum of 40 days for a factory or a road transport worker. Employees can carry unused leave for 60 days at the tea plantation, commercial, and industrial areas.

Public Holidays

There are 21 public holidays in Bangladesh in a calendar year. The dates are as of 2021 —

The employees must be given the public holidays as a part of their leaves. They must be paid for the days off. 

However, if the employers require the employees to work due to business requirements, they must be paid for the work done on the days off on public holidays, or the employees may claim an alternate day off if not compensation.

Maternity and Parental Leave

All female employees and workers who have worked with an organization for at least six months are entitled to 8 weeks of paid maternity leave before the birth of the child and eight weeks of paid leave after the birth of the child. If the female employee has served the organization for less than six months, they are entitled to maternity leave; however, they would be eligible for unpaid leave. 

During maternity leave, the employees are forbidden to work for eight weeks after the child’s birth. 

There is no statutory compliance for the employers to provide paternity leave and parental leave in Bangladesh. However, this can be discussed between the employer and the employee and agreed upon in writing.

Sick Leave

As per Section 116 of the Labour Act, each employee is entitled to paid sick leave for 14 days in a calendar year. However, a newspaper employee is entitled to sick leave with half salary with a minimum of one-eighteenth (1/18) of the period of their service with the company.

The employees must present a medical certificate to avail the entitled sick leave for the year. The sick leave cannot be carried forward to the following calendar year.

Insurance and Social Security

Healthcare insurance are provided in Bangladesh, wherein there is a public and a private healthcare system catering to employees in the government and the private sector. NGOs and other international organizations ensure rural care facilities are available to all. 

There are no legal compliances for the employer to provide the employee with social security benefits as there is no concept of social security. However, suppose an organization has employees over a certain size. In that case, the employer has to pay 5% of their profits into a fund called Workers Profit Participation Funds, wherein the employees do not have to contribute from their salary. 

Additional Benefits

Additional benefits that the employer has to pay to the employees are solely at the employer’s discretion. Some employers and companies provide housing assistance, education subsidy, transportation allowance, and private insurance.

Some employers also provide additional benefits like extra leaves and bonuses to motivate and increase productivity and contribute to a better work culture of the organization.

The probationary period and termination constitute a significant concern of hassle and compliance for most employers who look to hire employees to expand their team. The probationary period and termination clauses to keep in mind when hiring Bangladesh employees are as follows:

Probationary Period

Clerical employees can have a probationary period of a maximum of six months, while other workers may have a probation period of a maximum of three months.

Termination

While terminating an employee with an experience of at least one year (or 12 months) with the organization is entitled to one month’s notice by the employer or pay in lieu of notice.

If the employee is resigning from the post of the organization, they shall give one month’s notice in writing or pay in lieu of notice.

Termination of employment by the employer in Bangladesh requires the employer to provide written notice of 120 days for monthly workers and 60 days for other employees. 

Employees may be terminated for 

• Physical or mental incapacity
• Continued ill-health
• Gross misconduct
• Inability to deliver quality work. 

Keeping the gross misconduct aside, if the employee has served at least one year (or 12 months with the organization), they are entitled to 30 days of salary for each year of service.

A Bangladeshi PEO like Multiplier can help you with an easy termination and also allows you to track the probation period of your new employees while being compliant with the economy.

Taxes in Bangladesh

As per Section 49(1)(a) and Section 50 of the Income Tax Ordinance, the salary paid to the employees is subject to the income tax deduction at source at a rate per salary slab on the employee/worker. Any pay, compensation, or wages; annuity, pension or gratuity; fees, commissions, allowances, perquisites/profits; salary advance, and/or leave encashments are subject to income tax deductions.

The personal income taxes in Bangladesh is progressive, which is 10% – 30% depending on the salary slab you fall into. This is for Bangladeshi residents. However, non-residents of Bangladesh have to pay a flat 30% income tax.

Every taxpayer in Bangladesh must file an annual income tax return that must be filed by November 30, following the end of the tax year, which is set on June 30. However, the filing date may be extended up to 2 months by the Deputy Commissioner of Taxes upon application. A delayed tax return application would attract interest at 2% per month. 

Understanding that being compliant with employment law in Bangladesh can be challenging because the rules and being compliant are complex and subject to frequent change.

Consequently, this may place a significant burden on admin and payroll staff when they have enough to deal with in helping a company’s Bangladeshi operation be established. 

The process is why a global PEO managed services provider can be a tremendous asset in making sense of all the regulations and ensuring seamless compliance right from the start.

With Multiplier’s PEO/EOR solution, treading into a new market is as seamless as confidently ice-skating. 

We can help you onboard your preferred candidate, handle HR issues and payroll, and ensure compliance with local laws. By partnering with our EOR in Bangladesh, you avoid the hassle of setting up a foreign branch or subsidiary.

Once you have chosen your desired talent, start generating and customizing employment contracts for them in a few clicks and manage the workforce from a single platform. You can also pay thousands of employees in Canadian Dollars with a single click. 

Hire and expand using the best SaaS-based PEO service in Bangladesh. Contact us to grow your business today.