Payroll Compliance in Bangladesh: Important Local Laws And Practices You Need To Know About
Expanding your business to Bangladesh provides you with the opportunity to take advantage of low production costs and gain a massive consumer base owing to the country’s rapidly growing population. Bangladesh is strategically located near India, China, and the ASEAN markets, making further expansion convenient.
Payroll compliance in Bangladesh involves several aspects, with the payroll frequency in the country being monthly. The Government of Bangladesh has introduced an ‘open door’ policy to attract foreign investment in order to facilitate economic growth. This includes ease of utility connections and tax holidays and exemptions.
Business Setup in Bangladesh
Here is what you need to know about launching your business in the country:
Registering a Company
Like other countries, there is a series of original and continuous compliance requirements in order to establish a business in Bangladesh. Most businesses that expand or relocate to Bangladesh are registered as private limited liability companies (more commonly known as private limited companies).
This implies that the company is a separate legal entity in the country and the shareholders are not liable to pay debt of an amount higher than that of the share capital they put in. If you are an individual above 18, you are eligible for registering a business in Bangladesh.
Legal Business Setup Requirements
A minimum of two shareholders is needed to register a company in Bangladesh. No local director or shareholder is required. Here are the legal measures included in the company configuration procedure:
- Name clearance
- Drafting legal documents, such as the Memorandum of Association and Articles of Association
- Launching the paid-up investment bank account
- Submission of documents to the Office of the Registrar of Joint Stock Companies (RJSC)
- Business Identification Number (BIN) and Tax Identification Number (TIN)
- Obtain the certificate of incorporation
- Renting office premises in a non-residential area
- Copy of import or export license
- Obtaining permission from the relevant authority in the industry, for instance, a telecommunication company requires approval from the Bangladesh Telecommunications Company Limited (BTCL).
- Map of the premises if you require factory setup permission
- Post-registration protocols
Payroll Compliance in Bangladesh
It is vital to conduct thorough research regarding payroll compliance when you plan to expand your business to a new country. Here are the key aspects you need to know:
The maximum working week in Bangladesh is 48 hours, which is ordinarily divided into six eight-hour days.
Full-time workers are allowed a one-hour break per day, which can be either be availed in one go or split into two half-hour breaks. Probation periods differ between industries.
Working overtime is a common practice in Bangladesh, particularly in the garment industry. However, workers are not allowed to work for more than 60 hours in a single work week, and their average weekly hours per year should not exceed 56.
The overtime rate is typically double the total income rate while considering extras, such as medical payments and housing. To figure out the hourly rate, simply divide the total monthly income by 208 (that is, 26 eight-hour days).
Payroll compliance in Bangladesh includes these major payroll options you can choose from:
- Remote: In this option, you include your employees in the parent company’s payroll. Nevertheless, employees would have to adhere to the various laws, tax codes, and regulations.
- Internal: This option is most suitable for larger businesses committed to the country. It entails more HR staff, a higher budget, and extra resources to acquire a good understanding of the employment laws and tax codes in the country.
- Work with a Bangladeshi payroll processing company: You can hire a local payroll processing firm to handle payroll for your business. Remember that your company would still be held accountable for any errors that occur.
- Payroll outsourcing: For payroll compliance in Bangladesh, you can outsource your payroll to a foreign company.
Compensation and Severance
A significant aspect of payroll compliance in Bangladesh is the minimum wage, which is relatively low, and varies according to industry. Minimum wages in Bangladesh generally refer to the minimum monthly salary of employees in the garment industry. They are entitled to at least 8,100 Bangladeshi Taka (BDT) per month.
Wages typically consist of a basic salary along with allowances for food, rent, healthcare, and transport. Employees working for a firm for a minimum of a year are eligible for two festive bonuses annually.
Workers can be terminated for either physical or mental issues, including chronic conditions, but they must be given 30 days of salary for each year spent working for the company. If a worker is fired without prior notice, they are entitled to one month’s salary along with 30 days of salary for each year worked.
Payroll Taxation Rules
As a business owner, make sure you are updated on all the payroll taxation rules in Bangladesh. According to law, employers are required to incur a 35% corporate tax as a non-listed entity or a tax of 25% as a publicly listed entity.
Different industries adhere to different taxation rules. For instance, ready-made garment manufacturers may incur a corporate income tax of only 14% if they are found eligible according to certain criteria. Cigarette producers, cell phone manufacturers, and other industries often stick to differing tax rates due to various local and federal laws in place.
Holidays and Leave
Paid leave days are typically on an accrual basis, where employees earn a single day of leave for every 18 working days. Like other employment considerations in the country, this also varies according to industry. For example, tea plantation workers earn one day of leave for every 22 days of work.
Bangladesh has 21 national holidays per year, but employees are only allowed to avail themselves of 11 as paid holidays, with the selection of the particular ones being the employer’s prerogative. Workers who are required to work during a designated holiday must be compensated in terms of two days off another time.
Bangladesh’s fast and consistent economic growth makes it an attractive market for foreign investors. However, it is important to remember that payroll compliance in Bangladesh may not be a straightforward one as the banking structure, tax system, and payroll requirements largely differ among areas and industries.
Nevertheless, expansion to Bangladesh can be highly profitable due to the low production costs and a large potential market for your goods and services. The government policies are formulated to facilitate foreign investment to further boost the country’s economy. For further insight about expanding to different markets around the globe, including Bangladesh, click here to explore our website.