Employer of Record in Bangladesh

Bangladesh is one of the top destinations for global employers to hire candidates from the country. The country has a massive talent pool from diverse industries and domains that international employers prefer to hire candidates. If you have a similar plan, you’re on the right page as we will discuss an Employer of Record (EOR) in Bangladesh for global employers like you.

To hire candidates from Bangladesh, you need to set up your business entity in Bangladesh. Further, you need to know about the local labor laws and regulations before hiring. The process is lengthy and costly.

Alternatively, you can partner with an EOR in Bangladesh so that you can hire employees without setting up any entity in the country. The best Employer of Record partner in Bangladesh will provide you many benefits.

Before hiring, you must know about Bangladesh’s compliance, local rules, and many more related to local hiring.

Let’s understand!

What is an EOR?

Employer of Record is a service that can provide hiring and payroll management solutions for a remote workforce. EOR is also considered a legal entity that helps businesses to hire employees from any country without setting up a business entity.

When should you use Employer of Record (EOR) services?

Employer of Record is valuable for multiple circumstances, including:

• Hire employees globally
• Business entity setup will take time
• Cost-saving option with easy operation
• Risk-free compliance and better manage local employees with local labor laws
• Hiring and payroll process to work faster, smoother, and more accurate

What are the benefits of using Employer of Record (EOR) services in Bangladesh?

Using an Employer of Record (EOR) in Bangladesh can offer several benefits for your business, including:

Reduced administrative burden

• Compliance management: EORs handle complex labor laws, tax regulations, and social security contributions, allow you to focus on core business activities.
• Payroll processing: EORs manage payroll processing, including salary payments, deductions, and tax filings.

Faster market entry

• Simplified setup: EORs helps you in the setup process, allowing you to quickly hire and deploy talent in Bangladesh without establishing a legal entity.
• Flexibility and scalability: EORs offer flexible hiring arrangements, allowing you to quickly scale your workforce up or down as needed.
• Reduced risk: EORs take on the legal and financial risks of employing staff, minimizing exposure.

Cost-effectiveness

• Potential cost savings: EORs offer cost-effective solutions compared to setting up your own legal entity, especially for smaller or medium businesses
• Transparency and predictability: EORs have transparent fee structures, allowing you to budget accordingly.
• Access to specialized talent: EORs have access to a broader pool of qualified talent, helping you find the right people for your needs.

Additional benefits

• Improved employee experience
• Enhanced compliance
• Reduced language and cultural barriers

Employers of Record services are helpful in many cases. And if you want to expand your business and hire people from several countries, you must be aware of the local labor laws and other legal aspects. Let’s begin!

Hire in Bangladesh

Bangladeshi employees are skilled, dedicated, and responsible in their job roles. They can add value to organizational growth. However, there are a few factors you must check. Below are the primary measures you must consider before starting the hiring process:

Employment contracts or agreements in Bangladesh

In Bangladesh, a written employment contract and agreement is not legally mandatory, but it can be safe for both parties to have a written document. The documents display the expectations and employee rights and minimize misunderstanding.

Here’s a list of key points

Types of agreements/contract documents

• Appointment letter: This document is used for blue-collar professionals and mentions basic terms like position, salary, and probation period.
• Formal employment contract: This document displays more detail, used for managerial or higher positions, specifying benefits, termination clauses, intellectual property rights, etc.

Contents of a contract

• Basic information: Employer and employee details, position, start date.
• Compensation detail: Salary, allowances, bonuses, and payment methods.
• Working hours and leave: Daily/weekly working hours, overtime policies, annual leave, sick leave, etc.
• Probation period: Period and conditions for performance assessment.
• Benefits: Health insurance, provident fund contributions, and others
• Termination clauses: Notice periods, grounds for termination, severance pay.
• Confidentiality: Protection of the company’s internal information and intellectual property.
• Dispute resolution: Process to address disagreements.

Legal requirements

• Minimum wage: Must comply with government-mandated minimum salary based on industry and location.
• Notice period: Reasonable notice duration should be allowed for termination (approx 1 week for initial months, increasing with service duration).
• Severance pay: Applicable in case of termination without just cause (usually 3 months + 12 days’ salary per year of service, covered twice the minimum wage).
• Labor law compliance: Aligned with Bangladesh labor act 2006 and relevant regulations.

Labor law compliance in Bangladesh

Labor law compliance is an essential issue in hiring employees from global countries. The detailed guidelines of labor law compliance in Bangladesh can avoid many disputes further.
Here are key points for your consideration:

Major labor laws

• Bangladesh labor act 2006: Sets the fundamental framework for labor relations, covering working hours, leave, wages, termination, etc.
• Factories act 1965: Governs safety and health standards in workplaces, mainly factories.
• Industrial relations ordinance 1982: Deals with unionization, collective bargaining, and dispute resolution.
• Minimum wage board orders: Specify minimum wage rates for different sectors and locations.

Key compliance areas

• Minimum wage: Adherence to government-mandated minimum wages based on industry and location.
• Working hours: Standard working hours are 8 per day and 48 per week, with overtime regulations and mandatory rest periods.
• Leave: Annual leave, sick leave, casual leave, and other entitlements as per the law.
• Social security: Contributions to provident fund, social security schemes, and health insurance (where applicable).
• Termination: Following proper procedures for termination with notice periods and severance pay (when applicable).
• Workplace safety: Maintaining safe and healthy working conditions as per Factories Act regulations.
• Recordkeeping: Maintaining accurate records of employee attendance, wages, overtime, and leave.

Payroll and payroll taxes in Bangladesh

Navigating payroll and payroll taxes in Bangladesh can be complex. You need to understand the basics for businesses operating there. Here’s a series of key points below

Payroll components

• Basic salary: Employee’s fixed monthly wage.
• Allowances: Additional payments for housing, transport, food, etc.
• Bonuses: Performance-based or other extra costs.
• Deductions: Income tax, provident fund contributions, etc.

Payroll taxes

• Income tax: Employees pay income tax based on a progressive tax bracket system. Employers withhold income tax at source and submit it to the government.
• Provident fund: Both employers and employees contribute a percentage of the basic salary to the provident fund, a retirement savings scheme.

Key points to remember

• Register for employee social security
• Withhold and submit income tax and provident fund contributions
• Maintain accurate payroll records
• File and pay taxes on time
• No mandatory social security: Unlike some countries, Bangladesh doesn’t have mandatory social security contributions for employees beyond the provident fund
• Tax-free threshold: There’s a tax-free threshold for individual taxpayers
• Currency: All payroll calculations and payments are done in Bangladeshi Taka (BDT)

Employee benefits and compensation in Bangladesh

Employee benefits and compensation are essential in attracting and retaining talent in Bangladesh. Below are the key points to consider:

Compensation

• Minimum wage: Varies by industry and location but currently ranges from BDT 8,100 to BDT 9,300 per month.
• Average wages: Higher than minimum wage, depending on experience, skills, and industry.
• Salary structure: Typically includes basic salary, allowances (housing, transport, etc.), and sometimes bonuses.
• Payment frequency: Usually monthly.

Benefits

Mandatory benefits

• Provident fund: Employers and employees contribute 10% of each basic salary.
• Paid leave: Annual leave (10-20 days), sick leave (14 days), and festival holidays (11 days).
• Maternity leave: 16 weeks (8 weeks before and 8 weeks after childbirth).

Common voluntary benefits

• Health insurance: Employer-sponsored or employee-paid options available.
• Gratuity: Payment upon retirement or termination (not mandatory).
• Performance-based bonuses: Based on performance and productivity index, employees receive rewards.

Severance pay and employee termination in Bangladesh

Termination of Employment in Bangladesh can occur under various circumstances, and understanding severance pay regulations is mandatory for both employers and employees.

Here’s a breakdown of key points

Grounds for termination by employer

• Misconduct or indiscipline
• Incompetence or poor performance
• Redundancy or closure of business
• Continuous absence without leave
• Violation of company rules or policies

Notice period

Required by law based on length of service

• 1 week for the initial months
• 1 month after 1 year
• 3 months after 3 years
• Can be replaced by pay instead of notice

Severance pay

• Not mandatory for all terminations, but required in some cases:
• Termination without just cause (3 months’ salary + 12 days’ salary per year of service, capped at twice the minimum wage)
• Redundancy due to closure or downsizing (30 days’ salary per year of service)

Additional points

• Provident fund contributions must be paid to the employee upon termination.
• Unused leave encashment may be applicable as per company policy.

The risk of employees misclassifications in Bangladesh

Employee misclassification, where workers are incorrectly categorized as independent contractors instead of employees, is a significant issue in Bangladesh with various risks. Here are some risks involved with employers:

• Financial penalties: Misclassification can lead to hefty fines and back taxes from government authorities for unpaid social security contributions, provident fund contributions, and income tax.
• Legal disputes: Misclassified employees can file lawsuits for unpaid benefits, overtime pay, and other employee rights, potentially resulting in high legal costs and reputational damage.
• Compliance issues: Non-compliance with labor laws can hinder business licenses, permits, and future operations.
• Reduced employee morale: Misclassified workers may feel undervalued and lack job security, impacting morale and productivity.

Cost to use an EOR in Bangladesh

The cost of using an Employer of Record (EOR) in Bangladesh can vary depending on several factors, including:

EOR provider: Different EORs have different pricing models and service packages. Some may charge a fixed monthly fee per employee, while others may have a base fee plus a percentage of payroll.

Number of employees: The more you need to onboard through the EOR, the higher the overall cost.

Industry and location: The complexity of regulations and compliance requirements can vary depending on the industry and location of your employees. It can affect the cost of the EOR’s services.

Here’s a general range of costs you can expect for using an EOR in Bangladesh

• Fixed monthly fee per employee: $50 – $200+
• Percentage of payroll: 5% – 15%

Additional costs to consider

• Setup fees: Some EORs charge a one-time setup fee.
• Compliance fees: Some EORs may charge additional fees for specific compliance requirements, such as obtaining work permits.
• Insurance: You may need to purchase additional insurance coverage for your employees, depending on the EOR’s service package.

The entire process is associated with hefty charges. If you want a cost-effective platform to reduce the monetary burden, consider Global Squirrels.

How to hire employees in Bangladesh with Global Squirrels?

Global Squirrels is a one-stop solution that helps you to find the best talent for your organization. The platform also assists you in managing your employees’ payroll faster and more accurately.

The platform charges flat license fees of $199/employee/month. If you want EOR services in Bangladesh, talk to our expert.

Conclusion

Employer of Records (EOR) services can simplify the global hiring process. The service would perfectly play its role when you want to hire international employees for your remote team without setting up a local entity. Global Squirrels can provide the best solution to complete the hiring, including payroll and many others.