Understanding Payroll in Bangladesh: What Global Companies Need to Know About Bangladesh’s Payroll

Jun 13, 2018  | Topic: Country Payroll

Whether strolling along the ocean at Cox's Bazaar or visiting the world's largest mangrove, visitors are sure to recognize Bangladesh as a treasure chest of natural beauty. Although more than half of the country’s population works in agriculture, garments remain the dominant export of Bangladesh. In recent years, the economy has started to boom in a dramatic way and now produces a GDP of more than $221 billion for the country’s 163 million residents. As the export business has grown, so too has the need for local services, including pharmacies and banks. 

While there is undoubtedly opportunity in Bangladesh, there is also some upheaval as people struggle to settle into the country's new role in the global landscape. To further complicate matters, in-country financial systems have been slow to keep up with technology and automation. Payroll, taxes, and banking can be difficult to maneuver for outside entities, partially because foreigners weren't always welcome in Bangladesh and partially because financial systems aren’t equipped to handle new changes. A global payroll solution can go a long way toward providing larger businesses the support they need to conduct their affairs. 

Business Basics 

The website for the Registrar of Joint Stock Companies and Firms is the first stop for businesses to verify their name and print out a clearance certificate. It's possible to register under a sole proprietorship, private limited company, company, or partnership, each of which has different requirements for owners. Companies also need a Memorandum of Association and Articles of Association. 

Companies will need to open a bank account in Bangladesh to get the encashment certificates required to officially complete registration. These certificates prove that foreign money has been exchanged for the local currency, the Bangladeshi taka. Foreign business entities may find it difficult to handle the banking system in Bangladesh, as it wasn't necessarily designed to handle outside entities. However, it should be noted that Bangladesh is modernizing their systems, with online bank services offered by the major banks. 

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Employment Law & Employment Rights

Non-government organizations typically work 48-hour, 6-day weeks with Friday being the national weekend day. Overtime is generally calculated by dividing the total salary (including medical and housing benefits) by 208. Employers then double this number and multiply the result by the number of overtime hours worked. Employee contracts must be in the local language and specify compensation, benefits, and termination expectations. Probation periods are available to employers, although the duration is determined by industry. Collective bargaining is the oldest form of employee negotiation in Bangladesh, but in practice, it's not used very often. However, as the garment industry continues to grow, employers may start to see greater involvement from unions. 

Compensation & Severance

Factory workers in Bangladesh receive a minimum wage of $68 a month, with employers often offering additional perks to workers, such as housing assistance, education subsidies, and transportation allowance. Employees who have been with a company for at least one year also receive two festival bonuses annually, set at or below the basic salary. Employees can be terminated for either physical or mental ailments (including chronic health issues) but must be paid 30 days of wages for each year worked at the company. If they are terminated without notice, workers typically receive one month’s salary in addition to 30 days of wages for every year worked. Workers found guilty of misconduct are not entitled to severance pay. 

Tax Requirements & Withholding

Income in Bangladesh is taxed on a progressive scale from 10% to 30%, and there are no social security taxes. The corporate tax rate is 35% for non-listed entities and 25% for publicly listed entities. Readymade garment manufacturers enjoy additional reductions in taxes and may pay as little as 14% if they meet certain environmental requirements. Other industries are taxed at varying rates, such as cigarette and cell phone manufacturers. Taxation and payroll regulations can become very complicated due to both federal and local rules. Even the tax schedule itself can change based on whether the tax day is before or after September 15. 

Time Off & Unpaid Leave

The nation of Bangladesh recognizes 21 national holidays, and Bangladeshi employees are entitled to 11 of those as paid days off—with their employers deciding which ones. If an employee is required to work on one of their national holidays, they must be given a substitute holiday in addition to extra pay.

Standard vacation allowances vary by industry. For example, general industrial workers receive one day off for every 18 worked, and plantation workers receive one day off for every 22 worked. Annual sick leave is capped at 14 days, and new mothers receive eight weeks of maternity leave. If the mother has worked at the company for at least six months, she is entitled to paid maternity leave; otherwise, it is unpaid. 

Understanding the Economy

Expanding your business into Bangladesh now could be an excellent way to get established during the early growth stages of a burgeoning economy. However, the tax system, banking structure, and international payroll requirements can be a tough challenge for outside companies. The right payroll solution can make all the difference when it comes to managing and distributing finances, and getting your business off to a strong start in Bangladesh.