Bangladesh Labour Act: What Foreign Employers Must Know (Contracts, Hiring & Termination)
The Bangladesh Labour Act 2006 applies to almost every foreign-owned company that hires staff in Bangladesh. That includes subsidiaries, branch offices and liaison offices. It sets mandatory rules on appointment letters, working hours, leave, wages and termination, and those rules override anything less favourable in your employment contract. The Act was significantly amended in late 2025 and again in April 2026, so policies copied from head office or written before then are likely out of date.
This guide explains what foreign employers need to know to hire, manage and part ways with employees in Bangladesh lawfully.
Key takeaways
- Every worker must receive a written appointment letter when they are hired.
- Standard hours are 8 a day and 48 a week. Overtime is paid at twice the basic wage plus dearness allowance.
- Maternity leave is now 120 days and festival holidays are 13 days a year, after the 2025–26 amendments.
- Terminating a permanent worker without cause requires up to 120 days' notice plus 30 days' wages for each year of service.
- Staff employed mainly in managerial or administrative roles fall outside the Act's definition of "worker", so their contracts carry more weight.
Overview of the Bangladesh Labour Act 2006
The Bangladesh Labour Act 2006 is the country’s main employment law. It brought together more than 25 earlier labour laws into a single code covering employment conditions, wages, health and safety, welfare, trade unions, disputes and labour courts. The Bangladesh Labour Rules 2015 add the practical detail, such as what an appointment letter must contain.
Recent amendments you need to know about:
| When | Change | What it means for employers |
|---|---|---|
|
November 2025 |
Bangladesh Labour (Amendment) Ordinance 2025 issued |
Major reforms took effect immediately |
|
9 April 2026 |
Parliament passed the Bangladesh Labour (Amendment) Bill 2026 |
Confirms the reforms in statute |
Key changes from the 2025–26 reforms:
- Maternity leave increased from 112 to 120 days.
- Festival holidays increased from 11 to 13 days a year.
- Workers become eligible for layoff compensation after three months of service.
- Establishments with 100 or more workers must set up a provident fund, or join the national pension scheme, if two-thirds of workers request it in writing.
- Sexual harassment is clearly defined, with mandatory complaint committees.
- Discrimination based on race, gender, religion, disability, political opinion or social status is prohibited.
- Blacklisting workers is now a criminal offence.
- Trade unions can be formed with as few as 20 workers, with higher thresholds for larger establishments.
- Coverage now extends to domestic workers, agricultural workers and seafarers.
If your HR policies were written before November 2025, review them against the amended Act.
Who the Labour Act Covers: Workers vs Managerial Staff
The Act protects “workers”. Its definition is broad and covers skilled, unskilled, manual, technical, clerical and sales staff in factories, shops and commercial or industrial establishments. Foreign-owned companies are covered in the same way as local ones.
People employed mainly in a managerial or administrative capacity fall outside the definition of “worker”. For them, the employment contract and general contract law carry far more weight than the Act’s protections.
Why this matters for foreign employers:
- Job titles don’t decide it; actual duties do. Calling someone a “manager” does not take them out of the Act if they mainly do operational or clerical work. Labour courts look at what the person actually does.
- Contracts must do more work for managers. Because statutory protections may not apply, notice periods, termination terms, confidentiality and non-compete clauses need to be clearly written.
- Categories of worker matter. The Act distinguishes permanent, probationary, temporary, casual, apprentice, substitute and seasonal workers. Each category carries different notice and benefit rights.
Special zones: Companies in Export Processing Zones (EPZs) are governed by the separate Bangladesh EPZ Labour Act, administered by BEPZA. Check which regime applies before drafting contracts.
Employment Contracts and Appointment Letters
Under the Labour Act and Rule 19 of the Labour Rules 2015, every employer must issue a written appointment letter to each worker at the time of hiring. Workers must also receive an identity card. Hiring without a written appointment letter is one of the most common compliance gaps.
An appointment letter should state at least:
- The worker’s name and designation
- Date of joining
- Category of employment (for example, probationary or permanent)
- Wages and wage structure (basic, house rent, medical and other allowances)
- Other financial benefits the worker is entitled to
Probation: probationary periods are typically 3 months for clerical workers and 6 months for skilled workers. A worker who completes probation is treated as permanent, even without a formal confirmation letter.
Contract best practices for foreign employers:
- Use Bangladesh-specific contracts. A head-office template may conflict with mandatory local terms. Where it gives less than the Act, the Act prevails.
- Write in Bangla or provide a Bangla version when staff are more comfortable in Bangla, so terms are clearly understood.
- Spell out the wage structure. Overtime and many benefits are calculated on basic wage, so how you split the salary matters.
- Cover confidentiality, IP and data protection. These are not covered by the Act and must be written into the contract.
- Keep signed copies in the personnel file, along with the ID card record and leave and attendance registers.
Need contracts that fit both your group policies and local law? Our legal documentation and contract services can help.
Working Hours, Overtime and Leave
Working hours. An adult worker’s normal working time is 8 hours a day and 48 hours a week. With overtime, a worker may work up to 10 hours a day, within weekly averages set by the Act. Workers are entitled to rest breaks during the day and at least one weekly holiday.
Overtime. Hours beyond the legal limit must be paid at twice the ordinary rate of basic wage plus dearness allowance.
Leave entitlements:
| Leave type | Entitlement | Notes |
|---|---|---|
|
Weekly holiday
|
At least 1 day per week
|
1.5 days in shops and commercial establishments
|
|
Casual leave
|
10 days per year, full pay
|
Cannot be carried forward
|
|
Sick leave
|
14 days per year, full pay
|
Medical certificate may be required
|
|
Annual (earned) leave
|
1 day for every 18 days worked
|
After one year of continuous service
|
|
Festival holidays
|
13 days per year, full pay
|
Increased from 11 days by the 2025–26 amendments
|
|
Maternity leave
|
120 days, full pay
|
Increased from 112 days by the 2025–26 amendments
|
Keep attendance, leave and overtime registers. Labour inspectors from the Department of Inspection for Factories and Establishments (DIFE) can ask to see them.
Wages, Festival Bonus and Benefits
Minimum wages. Bangladesh has no single national minimum wage. The Minimum Wages Board sets minimum wages sector by sector (garments being the best known). The 2025–26 reforms require sector wages to be reviewed every three years instead of five. Check whether a minimum wage notification covers your sector.
Wage payment. Wages must be paid on time, usually within seven working days after the end of the wage period, and with lawful deductions only. Paying salaries through bank transfer is best practice and supports your tax position.
Festival bonus. Under the Labour Rules 2015, workers with at least one year of continuous service are entitled to up to two festival bonuses a year. Each bonus can be up to one month’s basic wage. Most employers pay them before Eid or the employee’s main religious festival.
Workers’ Participation in Profits Fund (WPPF). Companies above certain size thresholds (based on paid-up capital or fixed assets) must set aside 5% of net profit each year for the WPPF and related welfare funds. Foreign-owned companies often miss this obligation. Check the thresholds with your auditor.
Provident fund and gratuity. After the 2025–26 reforms, establishments with 100 or more workers must set up a provident fund, or join the national pension scheme, if two-thirds of workers request it in writing. Where a company has a gratuity scheme, it must be paid in line with the Act on retirement or separation.
Group insurance. Establishments above a minimum headcount must provide group insurance for permanent workers.
Termination, Dismissal and Notice Periods
Ending employment is where foreign employers face the most disputes. The Act recognises several distinct ways employment can end, each with its own notice and payment rules:
| How employment ends | Notice required | Payment due (for permanent workers) |
|---|---|---|
|
Termination by employer without cause (“termination simpliciter”)
|
120 days for monthly-rated workers; 60 days for others (or wages in lieu)
|
30 days’ wages for every completed year of service, plus dues
|
|
Retrenchment (redundancy)
|
30 days’ written notice (or wages in lieu), with notice to the labour inspector
|
30 days’ wages for every completed year of service, plus dues
|
|
Dismissal for proven misconduct
|
None, if due process is followed
|
Earned dues; no termination compensation
|
|
Resignation by worker
|
60 days for monthly-rated workers; 30 days for others
|
Service-based compensation after a qualifying period (rates were revised in 2025–26; confirm current rates)
|
|
Layoff (temporary, e.g. lack of raw materials)
|
N/A
|
Layoff compensation; eligibility now starts after 3 months of service
|
Due process for misconduct dismissals. Before dismissing someone for misconduct, you must:
- Issue a written charge sheet setting out the allegations.
- Give the worker at least seven days to reply in writing.
- Hold an inquiry, with the worker able to present a defence.
- Issue a written decision. The worker may be suspended during the inquiry on subsistence allowance.
Skipping these steps is the most common reason labour courts reinstate workers or award compensation.
Final settlement. All dues, including unpaid wages, leave encashment and compensation, must usually be paid within 30 working days of the employment ending. Issue a service certificate on request.
Hiring Foreign Nationals vs Local Staff
Hiring local employees and bringing in foreign staff follow very different processes.
Local staff: covered by the Labour Act as described above. You need an appointment letter, payroll registration, tax withholding on salaries and compliance with leave and termination rules.
Foreign nationals: need permission to work in Bangladesh before they start. The usual sequence is:
- Employment visa (E visa) from a Bangladesh mission abroad, sponsored by your company.
- Work permit from the relevant authority. This is BIDA for most companies, BEPZA for EPZ companies and BEZA for economic zone companies.
- Security clearance and registration for tax.
Points to plan for:
- Ratio limits. Authorities expect companies to employ mostly local staff and apply limits on the share of foreign employees.
- Local hiring first. Work permits are generally granted for roles where suitable local expertise is not available.
- Tax. Foreign employees’ salaries are taxable in Bangladesh and must be paid through proper banking channels.
- Employment terms. Foreign managers usually fall outside the Act’s “worker” definition, so their contracts must clearly cover notice, termination, benefits and repatriation.
For step-by-step help, see our employment and immigration services.
Common Compliance Mistakes by Foreign Employers
- No written appointment letters. This is the single most common gap, and the first thing an inspector checks.
- Using head-office contracts unchanged. Global templates often have shorter notice periods or fewer leave days than Bangladesh law requires.
- Treating everyone as “management”. Labelling staff as managers does not remove Labour Act protections if their real duties are operational.
- Ignoring the 2025–26 amendments. Old policies still showing 112 days of maternity leave or 11 festival holidays are now non-compliant.
- Missing WPPF contributions. Companies that meet the size thresholds must set aside 5% of net profit.
- Dismissing without due process. Firing someone for misconduct without a charge sheet, reply period and inquiry invites reinstatement claims.
- No registers. Missing attendance, leave, wage and overtime records make it hard to defend any claim.
- Late final settlements. Delayed final payments are a frequent trigger for complaints to the labour court.
How IncorpLegal Helps
IncorpLegal helps foreign companies build a compliant workforce in Bangladesh from day one:
- Employment documentation: appointment letters, employment contracts and HR policies that comply with the amended Labour Act.
- Policy reviews: checking existing handbooks and head-office templates against the 2025–26 amendments.
- Foreign staff: E visas, BIDA work permits, renewals and expatriate tax registration through our employment and immigration services.
- Terminations and restructuring: notices, inquiries and final settlement calculations that stand up to scrutiny.
- Ongoing compliance: registers, WPPF and statutory filings as part of your annual compliance cycle.
Need compliant employment contracts? Talk to our employment team.
Frequently Asked Questions
Does the Bangladesh Labour Act apply to foreign-owned companies?
Yes. The Act applies to any establishment in Bangladesh that employs workers, regardless of who owns it. Subsidiaries, branch offices and liaison offices of foreign companies are all covered. Companies inside EPZs follow the separate Bangladesh EPZ Labour Act instead.
Is a written appointment letter mandatory in Bangladesh?
Yes. Every worker must receive a written appointment letter at the time of hiring, along with an identity card. The letter must state the worker’s designation, joining date, employment category, wages and other benefits.
What notice period applies when terminating an employee?
To terminate a permanent worker without cause, an employer must give 120 days’ written notice for monthly-rated workers or 60 days for others, or pay wages in lieu. The employer must also pay compensation of 30 days’ wages for each completed year of service.
Are managerial employees covered by the Labour Act?
Not fully. People employed mainly in managerial or administrative roles fall outside the Act’s definition of “worker”. Their rights depend mostly on their employment contract. Labour courts look at actual duties, not job titles.
Are festival bonuses mandatory in Bangladesh?
Yes, for eligible workers. Under the Labour Rules 2015, workers with at least one year of continuous service are entitled to up to two festival bonuses a year, each up to one month’s basic wage.
Md. Akber Hossain Khan, FCA
A Fellow Chartered Accountant (Bangladesh) and alumnus of the National University of Singapore (NUS), Khan's practice focuses on inbound foreign investment and supporting businesses in global expansion. He is deeply experienced in FDI, cross-border accounting BPO, audit, taxation, and corporate financial advisory.
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