Payroll in Bangladesh

Shraddha Saxena
Discover payroll regulations and policies in Bangladesh. Manage payroll processing, compliance, and salary structures efficiently with Gloroots.

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Payroll in Bangladesh
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Bangladesh, with its prime location near China and India and an inviting "open door" policy for foreign investments, offers substantial growth potential. Expanding into Bangladesh requires adept payroll management to navigate complex regulations. Gloroots simplifies this process, ensuring compliance and efficiency. Employers hiring from Bangladesh or managing payroll, whether through an Employer of Record (EOR) or direct hiring, must be well-versed in these regulations.

How is payroll calculated in Bangladesh?

Salary Computation Formula: Net Salary = Gross Salary – Deductions

Gross Salary Components:

  • Basic salary
  • House rent allowances
  • Medical allowances
  • All other allowances
  • Reimbursements
  • Bonuses

Deductions Include:

  • Professional tax
  • Provident fund
  • Income tax
  • Insurances
  • Entertainment allowance
  • Other standard deductions
  • Average Standard Employer Tax: 32.5%
  • Payroll Taxes Range: 10% to 30%

Steps to Begin Payroll:

  • Obtain business identification and local tax ID number
  • Create a payroll policy detailing basic pay, benefits, leave policies, etc.
  • Collect payroll tax from employees and gather their bank details
  • Decide a payroll date for the company
  • Establish an overall tracking system
  • Update payroll records regularly

How to set up payroll in Bangladesh

Setting up payroll in Bangladesh as a foreign company requires first establishing a subsidiary. Follow these steps:

  • Establish a company subsidiary and implement your employee hiring process.
  • Open a bank account to obtain an encashment certificate.
  • Submit the encashment certificate to the Register of Joint Stock Companies and Firms (RJSC) for approval.
  • Obtain a Business Identification Number (BIN).
  • Establish processes for state and local tax IDs and acquire a Tax Identification Number (TIN).
  • Set up a payroll schedule (monthly, semimonthly, biweekly, or weekly).
  • Calculate gross pay, determine deductions, and calculate net salary.
  • Keep records of the entire payroll process, transactions, and compliance.

A bank account in Bangladesh is essential for registration and obtaining encashment certificates, proving foreign money exchange in Bangladeshi taka.

Discover the latest insights on Global Payroll Trends for 2024.

Payroll Process in Bangladesh

The payroll process in Bangladesh is designed for compliance and efficiency and involves several key steps and stakeholders.

Onboarding New Employees:

Collect and verify essential data such as working hours, sick pay, and benefits. Accurate data collection is crucial for seamless payroll management.

Initial Setup Phase:

Establish a business profile, specify work locations, and define leave and attendance policies. These steps ensure smooth operations and compliance with the Bangladesh Labor Act.

Salary Calculation:

Determine employees' salaries based on collected data, considering all relevant deductions and allowances and adhering to local labor laws and regulations.

Salary Disbursement:

Disburse salaries, typically on a monthly schedule, ensuring employee satisfaction and compliance with legal requirements.

Involved Departments and Providers:

The HR department handles data collection and onboarding, the finance department oversees salary calculations and disbursements, and payroll service providers ensure compliance and efficient processing.

Explore our  A Complete Guide to Payroll Management | Gloroots for in-depth insights

Payroll Cycle

Payroll in Bangladesh operates on a weekly or monthly cycle, varying by employer and sector. Salaries must be paid within seven days of the last working period, with employees also receiving annual bonuses.

Payroll Processing

Efficient payroll processing in Bangladesh involves advanced tools and software to streamline operations and ensure compliance with local laws. Managing payroll schedules is crucial for timely salary disbursements. Ensuring accuracy in payroll calculations minimizes errors and legal issues. 

Handling deductions and allowances, including accurate tax deductions and managing provident fund contributions, is vital. Overseeing health insurance and other benefits enhances employee welfare, job satisfaction, and retention. 

Partnering with a global payroll provider simplifies payroll complexities, ensuring compliance and allowing businesses to focus on growth. Accurate and compliant payroll for employees helps maintain a productive and legally sound workplace.

Payroll Management

Strategies for Effective Payroll Management:

  • Automating Payroll Processes: Utilize payroll software to streamline calculations and disbursements.
  • Maintaining Payroll Records: Keep detailed and accurate records of all payroll transactions.
  • Ensuring Compliance with Labor Laws: Stay updated with local and national labor laws to avoid legal issues.

Common Challenges and Solutions:

  • Dealing with Payroll Errors: Implement robust auditing procedures to detect and correct errors promptly.
  • Managing Payroll for Remote Employees: Use cloud-based payroll systems to manage remote employees effectively, ensuring timely payments and compliance.

Outsourcing payroll is the most efficient option, offering reliability and compliance. Internal payroll, remote payroll, and local payroll processing companies are alternatives, each with unique benefits and challenges.

Explore our  A Complete Guide to Payroll Management | Gloroots for in-depth insights

Payroll Components

Breakdown of Payroll Components:

Managing payroll in a country involves various elements to ensure accurate and compliant compensation for employees.

  • Basic Salary: The fixed monthly payment agreed upon in the employment contract.
  • Overtime Payments: Additional pay for hours worked beyond the standard workweek.
  • Bonuses and Incentives: Performance-based payments to motivate and reward employees.
  • Leave Encashments: Payment for unused leave days as per company policy or labor laws.
  • Severance Pay: Compensation provided to employees upon termination of employment.

Taxation and Contributions:

Income Tax:

Income Range (Tk.) Tax Rate
Up to 350,000 0%
350,001 – 450,000 5%
450,001 – 750,000 10%
750,001 – 1,150,000 15%
1,150,001 – 1,650,000 20%
1,650,000 and above 25%

Tax-Free Limits by Category:

Taxpayers’ Category Tax-Free Limit (Tk.)
Female taxpayers 400,000
Senior male taxpayers (65 years and above) 400,000
Individuals with disability 475,000
Gazetted war-wounded freedom fighters 500,000


A new exemption allows the lower of Tk. 450,000 or 1/3 of the total taxable income to be exempt from income tax.

  • Social Security Contributions: In Bangladesh, there are no mandatory social insurance contributions required from either employers or employees. This means that both parties are not obligated to contribute to any social security insurance schemes as part of payroll.

Efficient management of these components ensures compliant and accurate payroll for employees in Bangladesh.

Find the Best Bangladeshi Talent for Your Business Today

To find the best Bangladeshi talent, focus on areas where Bangladesh excels, such as data analysis, programming, and customer service. Gloroots simplifies this process by ensuring compliance with local labor laws and offering comprehensive payroll management services. Our expertise in risk mitigation, streamlined onboarding, and payroll integration allows you to focus on business growth while we manage the complexities of payroll and talent acquisition seamlessly.

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