Payroll Outsourcing in Bangladesh
Fully managed Bangladeshi payroll – income tax withheld at the Finance Act 2026 rates, two festival bonuses a year and the provident fund rules of the 2026 Labour Act amendment, with a named specialist a phone call away.
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What Bangladeshi payroll actually involves
Bangladesh has no social security contributions for private employers. Payroll cost comes from two festival bonuses a year and, for larger employers, a provident fund, group insurance and a share of profits for workers, while income tax is withheld from every salary. The Labour Act was amended in April 2026 and the tax bands in June.
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Employer Costs in Bangladesh Explained
A Bangladeshi employee costs little on top of salary in statutory terms. There are no social security contributions, so the main addition is the two festival bonuses, about 10% of gross pay when basic pay is 60% of the salary. Larger employers add a provident fund, group insurance and a 5% share of net profits for workers. Income tax is withheld from the employee’s pay rather than added to the employer’s cost. Here’s the breakdown.
The Finance Act 2026, published on 30 June 2026, sets the tax-free threshold at Tk 400,000 for the 2026-27 and 2027-28 tax years, or Tk 450,000 for women and taxpayers aged 65 or over. Above it, the next Tk 300,000 is taxed at 10%, the next Tk 400,000 at 15%, the next Tk 500,000 at 20%, the next Tk 2,000,000 at 25% and the rest at 30%. Anyone whose income exceeds the threshold pays at least Tk 5,000, or Tk 1,000 as a new taxpayer. The threshold is already set to rise to Tk 450,000 for 2028-29 and 2029-30.
A third of employment income, up to Tk 450,000 a year, is exempt before the bands apply. The employer deducts tax from each salary payment at the average rate on the employee’s estimated annual income and gives each employee a certificate of tax deducted. Companies and firms file a monthly return of tax withheld by the 25th of the following month, and employees file their own return by Tax Day, 30 November.
Under rule 111(5) of the Bangladesh Labour Rules 2015, every worker with a year of continuous service receives two festival bonuses a year, each of up to one month’s basic wage. They are paid around the employee’s religious festivals, such as the two Eids, Durga Puja or Christmas. Overtime is paid at twice the ordinary rate of basic wage and dearness allowance.
Companies with paid-up capital of at least Tk 1 crore or fixed assets of at least Tk 2 crore pay 5% of net profit each year into the Workers’ Profit Participation Fund, the workers’ welfare fund and the Bangladesh Workers’ Welfare Foundation, split 80:10:10, within nine months of the year end. Employers with at least 100 permanent workers must also take out group insurance.
Bangladesh has no social security contributions for private employers. The Bangladesh Labour (Amendment) Act 2026, in force since 10 April 2026, requires an employer with at least 100 permanent workers to set up a provident fund when at least two-thirds of its workers ask for one in writing. The employer is exempt if it enrols the staff who want to join in Progoti, the universal pension scheme run by the National Pension Authority, with the employer and the worker each paying 50% of the contribution.
Employer contributions to a recognised provident fund are not taxed as a benefit for the employee. A gratuity scheme is not compulsory, but where an employer has one, the gratuity replaces the statutory termination compensation when it is higher.
For an employee on Tk 100,000 a month with a basic wage of Tk 60,000, the two festival bonuses add Tk 120,000 a year, or Tk 10,000 a month: a total cost of Tk 110,000 a month, 10% on top of salary. A provident fund, group insurance and profit participation apply only to larger employers.
The share of basic pay in the salary drives the bonus cost, because each bonus is capped at one month’s basic wage. Salaries are paid within seven working days of the end of the wage period, and final dues within 30 working days of the end of employment.
The working day is 8 hours and the week 48, with overtime allowed up to 10 hours a day and 60 a week, averaging no more than 56 hours a week over a year. Workers receive 10 days of casual leave and 14 days of sick leave a year on full pay, 13 days of paid festival holidays and, after a year of service, one day of annual leave for every 18 days worked. Maternity leave is 120 days, 60 before and 60 after birth, for women with six months of service.
An employer can end a monthly-paid permanent worker’s employment without cause with 120 days’ written notice or pay in lieu, plus compensation of 30 days’ wages for each completed year of service, or the gratuity if higher. A permanent worker who resigns gives 60 days’ notice and receives compensation for each completed year: 7 days’ wages with up to three years of service, 15 days with three to ten years and 30 days after ten years.
Bangladeshi payroll costs and contributions, 2026
| Item | Employer | Employee | Applies to |
|---|---|---|---|
| Social security | None | None | No national scheme for private employers |
| Festival bonuses | Two a year, up to one month’s basic each | — | After a year of continuous service |
| Provident fund | Required on request | By fund rules | 100+ permanent workers, if two-thirds ask in writing |
| Progoti pension (alternative) | 50% of the contribution | 50% of the contribution | Staff who opt in |
| Group insurance | Premium | — | 100+ permanent workers |
| Workers’ Profit Participation Fund | 5% of net profit | — | Paid-up capital from Tk 1 crore or fixed assets from Tk 2 crore |
| Income tax | — | 0% to 30% | Withheld monthly; Tk 400,000 tax-free |
Bangladeshi income tax bands for individuals, 2026-27 and 2027-28
| Taxable income | Rate |
|---|---|
| First Tk 400,000 (Tk 450,000 for women and taxpayers aged 65 or over) | 0% |
| Next Tk 300,000 | 10% |
| Next Tk 400,000 | 15% |
| Next Tk 500,000 | 20% |
| Next Tk 2,000,000 | 25% |
| The rest | 30% |
| Minimum tax once income exceeds the threshold | Tk 5,000 (Tk 1,000 for new taxpayers) |
Income tax withheld from monthly salaries in Bangladesh, 2026-27
| Monthly salary | Annual salary | Exempt third (up to Tk 450,000) | Taxable income | Annual tax | Monthly withholding |
|---|---|---|---|---|---|
| Tk 50,000 | Tk 600,000 | Tk 200,000 | Tk 400,000 | Tk 0 | Tk 0 |
| Tk 100,000 | Tk 1,200,000 | Tk 400,000 | Tk 800,000 | Tk 45,000 | Tk 3,750 |
| Tk 200,000 | Tk 2,400,000 | Tk 450,000 | Tk 1,950,000 | Tk 277,500 | Tk 23,125 |
| Tk 400,000 | Tk 4,800,000 | Tk 450,000 | Tk 4,350,000 | Tk 915,000 | Tk 76,250 |
Tax figures assume twelve monthly salaries, the standard Tk 400,000 threshold, no festival bonuses in income and no investment rebate. Cost figures value each festival bonus at one month’s basic pay, with basic pay at 60% of gross. These are TopSource calculations from the verified 2026 rates.
Rates, thresholds and entitlements shown were verified on 1 October 2026 against the Finance Act 2026, the Income Tax Act 2023, the Bangladesh Labour Act 2006 as amended in April 2026 and published sources on the Labour Rules 2015. This page is general information, not tax or legal advice.
How our Bangladeshi payroll service works
Why Outsource Your Bangladesh Payroll to TopSource
TopSource for payroll, Employer of Record or any other of our services represents a simpler, more reliable and transparent option.
We don’t hide fees or sneak price increases. We run Bangladeshi payroll in-house and file under your own registration rather than a bureau’s, so the same team that files your withholding returns answers your calls. You get a named account manager, one consolidated monthly invoice covering salaries, taxes and fees, and one live Portico view of Bangladesh beside every other country we run for you. Portico syncs with your time-tracking, leave and HR systems via API – set up by our onboarding team, not left to yours. GDPR, SOC 2 and ISO 27001 certified.
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Accelerating your growth in Bangladesh and beyond
TopSource goes far beyond payroll, acting as your end-to-end partner in global workforce management. From Employer of Record (EOR) services and seamless entity setup to localized accountancy and fractional HR support, we cover every aspect of international employment.
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Whether you’re entering the market or scaling operations, our specialists provide the insight and guidance you need to succeed in one of the world’s most dynamic and regulated employment landscapes. With TopSource, you’re backed by real experts, every step of the way.
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Bangladeshi payroll FAQs
Private employers in Bangladesh pay no social security contributions or payroll tax. Their statutory costs are two festival bonuses a year, overtime at double rates and, for larger employers, a provident fund, group insurance and 5% of net profit for the Workers’ Profit Participation Fund. Income tax is withheld from employees’ salaries.
The first Tk 400,000 of taxable income is tax-free, or Tk 450,000 for women and taxpayers aged 65 or over. The next Tk 300,000 is taxed at 10%, the next Tk 400,000 at 15%, the next Tk 500,000 at 20%, the next Tk 2,000,000 at 25% and the rest at 30%, with a minimum tax of Tk 5,000 once income exceeds the threshold.
A third of income from employment is exempt, up to Tk 450,000 a year, before the tax bands apply. The first Tk 400,000 of the remaining taxable income is then taxed at 0% in 2026-27 and 2027-28.
Every worker with a year of continuous service is entitled to two festival bonuses a year, each of up to one month’s basic wage, under rule 111(5) of the Labour Rules 2015. They are paid around the employee’s religious festivals, such as the two Eids, Durga Puja or Christmas.
Since the Labour Act amendment of April 2026, an employer with at least 100 permanent workers must set up a provident fund if at least two-thirds of its workers request one in writing. It can instead enrol interested staff in the Progoti universal pension scheme, paying half of each contribution.
The Bangladesh Labour (Amendment) Act 2026, in force since 10 April 2026, raised maternity leave from 112 to 120 days and festival holidays from 11 to 13 days, set the provident fund rule for employers with 100 or more permanent workers, and changed the compensation paid to permanent workers who resign.
Employers deduct tax from each salary payment and deposit it with the government. Companies and firms file a monthly return of tax withheld by the 25th of the following month and give each employee a certificate of tax deducted. Employees file their own annual return by 30 November.
After a year of service, workers earn one day of paid annual leave for every 18 days worked. They also receive 10 days of casual leave, 14 days of sick leave on full pay and 13 days of paid festival holidays each year.
An employer ending a monthly-paid permanent worker’s employment without cause gives 120 days’ written notice or pay in lieu, plus 30 days’ wages for each completed year of service, or the gratuity if higher. Permanent workers who resign give 60 days’ notice and receive 7, 15 or 30 days’ wages per year depending on their length of service.
Employing staff directly requires a registered presence in Bangladesh, such as a local company or a branch office approved by the Bangladesh Investment Development Authority. Without one, the usual route is an Employer of Record. TopSource can run payroll for your Bangladeshi entity or employ your team through our Employer of Record service.
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