FAQ

Yes. There are three routes. You can register a local entity through the RJSC, with BIDA approval where foreign investment is involved. You can engage independent contractors. Or you can use an employer of record, which lets you hire without registering a company. Each route carries different obligations, and the right one depends on headcount, timeline and how much administration you want to own.

We are. Payroll2Bangladesh holds the employment contract, appears on the payroll register, files the tax and administers statutory benefits. You direct the day-to-day work, set priorities and manage performance. The employee works for you in practice; the paperwork sits with us.

The dividing line is whether you already have a Bangladeshi entity. If you do, PEO co-employment fits: you remain the legal employer and we take the HR and payroll burden. If you do not, and do not want to incorporate yet, EOR is the route — we become the legal employer. Companies commonly start on EOR and move to PEO once the entity exists.

Provident fund is a shared contribution — the employee contributes a percentage of basic salary and the employer matches it. Gratuity is funded entirely by the employer and becomes payable after a qualifying period of continuous service, calculated on the last drawn basic salary and years served. Under an EOR arrangement we administer both and bill them to you as part of the employment cost.

The company that engaged them. A reclassification claim lands on you, not on the contractor, and typically brings back taxes, unpaid leave, gratuity and provident fund arrears. This is the single most common exposure we see among foreign companies operating in Bangladesh without local advice.

Bangladeshi law looks at substance, not the label on the invoice. Fixed hours, an exclusive relationship, integration into your team and day-to-day direction all point towards employment. When a contractor behaves like an employee, a labour court or the tax authority can recharacterise the relationship — and back taxes, unpaid leave, gratuity and provident fund arrears follow. Contractors work well for genuine short-term or specialist projects. They are not a substitute for a core team member.

If a foreign company maintains a meaningful presence in Bangladesh — people performing core functions, a fixed place of business, or contractors representing the company — the tax authority may treat it as a permanent establishment. That brings local corporate tax obligations you did not plan for. The risk is sharpest with long-running contractor arrangements, precisely because they feel informal.

Speed and reversibility. Entity formation takes months, needs ongoing legal and accounting support, and locks you into administrative obligations even if hiring slows. An EOR lets you hire in weeks and stop just as easily. The common pattern is to use an EOR to validate the market, then incorporate once headcount justifies the overhead — often somewhere around fifteen to twenty people.

For expatriate staff, authorities review at renewal whether salary, reporting and tax treatment match the employer and role named in the approved permit. A mismatch between what the permit says and what the payroll shows can complicate an extension. This is why we keep recruitment, permit filing and payroll under one roof rather than treating them as separate jobs.

The outsourcing fee is visible. The cost of in-house payroll is not — a salary, training as tax rules change, software licensing, and the penalties that follow a single missed deposit. For a small team on identical monthly salaries, a spreadsheet holds up. Once overtime, mid-month joiners, expatriates or festival bonuses enter the cycle, the arithmetic stops being the hard part and the deadlines start being the risk.

Through an employer of record. You select the candidate; we issue a compliant employment contract, register the employee for payroll and tax, administer provident fund and gratuity, and invoice you monthly for salary plus our fee. You keep full control of the work. No RJSC registration, no BIDA approval, no local bank account required.

Payroll in Bangladesh runs monthly. The cycle starts at an agreed attendance cut-off, when hours, leave and overtime are closed off. We then run the gross-to-net calculation — basic pay plus allowances to reach gross, then tax deducted at source, provident fund and any advances subtracted to reach net. You review and approve the summary, we prepare the bank transfer file, salaries are disbursed, payslips are issued and TDS is deposited with the NBR.

Tax is withheld at source each month against the progressive slabs in force for the assessment year, with a tax-free threshold that varies by taxpayer category. We apply the current slabs at the time of processing, deposit the withheld amount on schedule and file the annual salary return. Non-residents are taxed on Bangladesh-source income under the same TDS framework, and treaty relief may apply where a double taxation agreement covers their country.

Expatriate hiring runs through BIDA. In outline: confirm the hiring entity is eligible, publish the local recruitment advertisement, prepare the board resolution and manpower statement, obtain the employment visa recommendation, and file the work permit application within fifteen days of the expatriate’s arrival. Payroll is then set up to match the approved permit.

Employees are transferred from our payroll to yours once your entity is registered, with continuity of service preserved so accrued leave and gratuity entitlements carry across. We hand over payroll registers, tax filings and employment records in a usable format. Many clients keep us on as their PEO or payroll processor afterwards, which is a smaller engagement than full EOR.

Gross salary alone understates the liability. Budget for the provident fund employer share, gratuity accruing against years of service, two statutory festival bonuses a year, leave encashment on separation, and WPPF where your company falls within scope. Our quotations state the employment cost and our service fee separately, so you can see which is which.

Under a PEO, co-employment applies: you remain the legal employer and we share the administration. Under an EOR, we are the legal employer and carry the compliance liability. PEO requires you to have a Bangladeshi entity; EOR does not. Everything else — payroll, tax, provident fund, HR support — looks similar day to day.

The Workers’ Profit Participation Fund requires eligible companies to contribute a share of profits for the benefit of employees. There is no employee contribution — it is funded entirely by the employer. Whether it applies depends on your sector and scale, and it is worth confirming early because it is a profit-linked cost rather than a payroll-linked one.

A written contract stating job title, salary, working hours, leave entitlement, probation period and termination terms. Issuing it in both Bengali and English is strongly advisable — it removes ambiguity if the terms are ever tested. Probation is commonly three to six months.

Termination follows the procedure and notice period in the Labour Act and the contract. Employees with qualifying service are entitled to severance calculated on years of service, or gratuity where that is higher. Final settlement — outstanding wages, leave encashment and the provident fund balance — must be paid promptly after separation. We prepare the calculation and the documentation so the exit is defensible if questioned later.

Signed payroll registers, wage records, attendance data, TDS evidence and provident fund records. Retention periods are set by the Labour Act and by tax rules, and the tax retention period is the longer of the two. Missing registers are a compliance failure in their own right during an inspection — not merely an inconvenience.