Labour Law and Provident Fund Compliance in Bangladesh
PayrollBD runs the statutory side of employment for companies operating in Bangladesh: labour law compliance, provident fund administration, gratuity calculation and VAT return filing. You keep the commercial decisions. We hold the registers, the calculations and the filing calendar, and produce the record when an inspector asks for it.
What does statutory compliance cover?
Statutory compliance is the set of obligations an employer owes the state rather than its customers. In Bangladesh those obligations sit in two separate statutes with two separate calendars, which is the reason most companies discover a gap in one while the other is fully in order. The four blocks below name what each covers.
Registers and records
Registers, appointment letters and identity cards kept current under the Bangladesh Labour Act 2006. Section 5 requires both a letter of appointment and a photograph identity card for every worker, and the register has to survive an inspection, not merely exist.
A worker on site whose letter or card was never issued is a breach on the day it happens, not a paperwork delay. The obligation starts on the day of engagement, not at the end of probation.
Provident fund
Provident fund administration for private sector establishments under section 264 of the Act. We hold the member records, the contribution schedule and the reconciliation, so the fund position is answerable on any date rather than at year end only. Deductions themselves are run on the same cycle as payroll processing, so the two records never diverge.
Whether the obligation applies at all depends on establishment type and workforce position, which we read first.
Gratuity
Gratuity computed on the statutory basis rather than on custom. Section 2(x) defines it as wages payable on termination equivalent to not less than thirty days wages for every completed year of service, and for any part of a year in excess of six months.
That figure is a floor rather than a ceiling, so we compute on the statutory basis first and then apply whatever your own contract or scheme adds to it. The working is handed back with the record.
VAT returns
VAT registration and monthly return filing under the Value Added Tax and Supplementary Duty Act 2012. We prepare the return against your sales and purchase records and file it inside the statutory window each month. Registration is triggered by turnover rather than by a decision, so the threshold is checked against your figures rather than assumed.
Where the books themselves need work first, that sits under accounting and taxation services.
Which obligations fall on you?
Five obligations repeat for an employer in Bangladesh, and they run on two different calendars. The table sets out what each one is, what triggers it, and which statute it comes from. Read the rows that apply to your headcount and turnover before assuming a provider already covers them.
| Obligation | What triggers it | Source |
|---|---|---|
| Appointment letter and photo identity card | Every worker, from the day of engagement | Labour Act 2006, section 5 |
| Provident fund for private sector workers | Establishment type and workforce position | Labour Act 2006, section 264 |
| Gratuity on termination | Thirty days wages per completed year of service | Labour Act 2006, section 2(x) |
| Participation and welfare fund | Companies within the scope of the profit participation chapter | Labour Act 2006, section 234 |
| VAT registration and monthly return | Turnover above BDT 5 million, return within 15 days | VAT and Supplementary Duty Act 2012 |
The figures above come from the Value Added Tax and Supplementary Duty Act 2012 and from the Bangladesh Labour Act 2006, and the section numbers are given so each can be checked against the statute rather than taken on trust. Where a row does not apply to your company we say so at the review rather than billing for it. VAT notices are published by the National Board of Revenue. Reviewed by Eicra Binte Islam, HR Admin, PayrollBD.
How does an engagement start?
Five stages, and the first is a read rather than a filing. We establish what already exists before anything is submitted, because a correction filed on top of an unknown position creates a second problem instead of closing the first.
- Read the current position. Registers, appointment letters, fund records and past VAT returns. This establishes what exists before anything is added to it.
- Map obligations to your company. Headcount decides the labour rows, turnover decides the VAT rows. Anything that does not apply is named and dropped.
- Close the open items. Missing letters, identity cards, register entries or unfiled returns are prepared first, with the date each arose recorded.
- Run the two calendars. The labour cycle and the VAT cycle run side by side against your own dates rather than against the calendar year.
- Hand back the record. Registers, fund reconciliation, gratuity working and filed returns, in the form an inspector expects to receive them.
What does VAT compliance involve?
VAT is the obligation companies most often reach us late on, because registration is triggered by turnover rather than by a decision. Three numbers decide your position, and all three sit in the Value Added Tax and Supplementary Duty Act 2012.
- Standard rate 15 percent on the majority of goods and services.
- Registration at BDT 5 million turnover. Above that figure VAT registration is required.
- Turnover tax at 4 percent where turnover runs between BDT 3 million and BDT 5 million.
- Monthly return within 15 days of the end of each tax period, moving to the next working day where the fifteenth is a government holiday.
Where does compliance slip?
Compliance fails on the register far more often than on the payment. Three failures account for almost everything we are asked to unwind.
- No letter or identity card. A worker on site without either is a section 5 breach on the day it happens, not a paperwork delay.
- A fund that exists only on paper. Member records that have never been reconciled mean the position cannot be stated on demand.
- VAT registration after the threshold. A company crossing BDT 5 million and registering months later already has late returns.
All three are cheap to prevent and expensive to unwind, because the remedy runs back to the date the obligation arose.
Why work with PayrollBD?
Four conditions define how the work is run. None of them is a claim about size or reputation, and each is checkable against the file rather than against a description of it. Read them as terms of the engagement rather than as selling points, because that is how they are written into it.
- Two calendars, one owner. Labour and VAT obligations are held on a single schedule so neither drifts while the other is attended to.
- Section numbers, not summaries. Every obligation we name is tied to the provision it comes from, so you can check it.
- Inspection-ready output. The record is produced in the form it will be asked for, not reassembled when a notice arrives.
- Scope stated before fee. Rows that do not apply to your headcount or turnover are dropped at the review.
What do employers ask first?
These four questions come up before nearly every engagement. Each answer states the position first, then names the provision it rests on so the point can be checked against the statute.
Which establishments must run a provident fund?
Section 264 of the Bangladesh Labour Act 2006 governs provident funds for workers in private sector establishments. Whether the obligation is triggered for your company depends on the establishment type and the workforce position, so we read the current register and the existing fund documents before answering rather than applying a general rule.
Where a fund already exists we reconcile the member records and the contribution schedule so the position can be stated on any date.
How is gratuity calculated in Bangladesh?
Section 2(x) of the Bangladesh Labour Act 2006 defines gratuity as wages payable on termination of employment equivalent to not less than thirty days wages for every completed year of service, or for any part of a year in excess of six months.
The statutory figure is a floor rather than a ceiling, so a contract or a scheme may provide more. We compute on the statutory basis first and then apply whatever your own terms add to it.
When is the monthly VAT return due?
The monthly VAT return is submitted within fifteen days after the end of each tax period under the Value Added Tax and Supplementary Duty Act 2012. Where the fifteenth falls on a government holiday the return moves to the next working day.
Registration itself is required once turnover passes BDT 5 million, and businesses between BDT 3 million and BDT 5 million pay turnover tax at 4 percent instead.
What does a labour inspection actually check?
It tests the record rather than the intention. The appointment letter and photograph identity card required by section 5 of the Bangladesh Labour Act 2006 for every worker, the registers, the wage records, and the fund documents where a provident fund exists.
An inspection is answered from the file, which is why we keep it current rather than assembling it after a notice arrives.
Put both calendars in one place
Send your headcount, your turnover band and whatever registers you already hold. We establish the position, name which obligations actually apply to your company, and set the two calendars in writing before any fee is agreed. Return filing for income tax sits separately under our income tax filing consultancy, and the wider inspection scope under labour compliance services.