Hiring in Bangladesh: A Complete Guide for US Companies

Bangladesh is rapidly emerging as a top destination in the global talent market. Its robust workforce, competitive labor costs, and growing digital infrastructure make it an attractive choice for international hiring. The country’s young population, strong STEM education, and English proficiency provide a deep pool of skilled professionals for technology, finance, and service industries.

For foreign companies, Bangladesh offers several strategic benefits:

• Access to a large, skilled, and cost-effective talent pool.
• A business environment that is increasingly open to foreign investment.
• Time zone advantages for US and European companies seeking global coverage.
• Government incentives for sectors like IT, manufacturing, and business process outsourcing.

With the right approach, hiring in Bangladesh can drive business growth, operational efficiency, and global competitiveness.

How to Hire Employees in Bangladesh

Assess Your Hiring Needs

Before entering the Bangladesh market, clarify your workforce strategy:

• Full-time vs. project-based support: Decide if you need permanent employees for ongoing roles or contractors for short-term projects. Full-time hires suit long-term growth, while contractors offer flexibility for specific tasks.
• Local compliance requirements: Bangladesh has strict labor laws covering contracts, benefits, and payroll. Ensure your hiring model aligns with these regulations to avoid penalties.
• Onboarding speed vs. long-term control: Using an Employer of Record (EOR) can accelerate onboarding, while setting up a local entity provides more direct control over operations and culture.

Hiring Options in Bangladesh

You have two primary options for hiring in Bangladesh:

• Set Up a Legal Entity: Establish a local subsidiary or branch. This gives you full control but requires significant time, capital, and compliance management.
• Partner with an Employer of Record (EOR): An EOR acts as the legal employer for your Bangladesh workforce, managing payroll, taxes, and compliance. This is the fastest way to hire without establishing a local entity.

EOR vs. Legal Entity: Side-by-Side Comparison

Feature	Employer of Record (EOR)	Set Up a Legal Entity
Setup Time	Fast (weeks)	Slow (months)
Upfront Cost	Low	High (registration, office, staff)
Compliance Management	Handled by EOR	Your responsibility
Payroll & Tax Filing	EOR manages all	You must set up and manage
Control Over Operations	Limited	Full
Scalability	Easy to scale up/down	More rigid
Best For	Market entry, pilot teams, speed	Long-term investment, full autonomy

For more details on EOR solutions, see Employer of Record: Complete Guide for Global Employers and Top 10 Reasons to Consider an Employer of Record (EOR).

Understanding Worker Classification

Employees vs. Contractors in Bangladesh

Correct classification is crucial for compliance and risk management. Here’s how employees and contractors differ:

Aspect	Employee	Contractor
Control	High (company directs work, hours, tools)	Low (self-directed, flexible)
Commitment	Long-term, ongoing	Short-term, project-based
Benefits	Entitled to statutory benefits, leave, etc.	No statutory benefits
Cost to Employer	Higher (salary + benefits + taxes)	Lower (service fee only)
Compliance	Employer responsible for all obligations	Contractor responsible for taxes
Setup Time	Longer (contracts, onboarding)	Faster (service agreement)

Legal Implications and Risks of Misclassification

Misclassifying employees as contractors can lead to severe legal and financial penalties in Bangladesh. Authorities assess the degree of control, integration into the business, and economic dependence. If a worker is found to be an employee in practice, your company may face:

• Back payment of wages, benefits, and taxes.
• Fines and possible jail time for non-compliance.
• Reputational damage and loss of operating licenses.

For a deeper dive into global classification risks, read W-2 and 1099 Forms: Differences, Usage, and Classification Regulations and Freelancers, Independent Contractors, Consultants: Exploring Opportunities & Challenges.

Hiring Costs and Payroll

Hiring Costs Overview

• Minimum wage: 12,500 BDT/month (sector-specific rates may be higher).
• Additional costs: Employer contributions to the Workers’ Profit Participation Fund (for qualifying companies), annual leave, sick leave, and festival holidays.
• Competitive packages: To attract skilled talent, offer above-minimum salaries, private health insurance, bonuses, and allowances.

Payroll Setup Steps

1. Register your business or EOR with local tax authorities.
2. Collect employee data and issue compliant appointment letters.
3. Calculate gross-to-net pay, including overtime, leave, and statutory deductions.
4. Withhold and remit income tax to the National Board of Revenue.
5. Pay salaries in BDT and provide payslips in Bengali and English.

Income Tax Rates

• Bangladesh uses a progressive income tax system.
• Employers must withhold taxes based on salary brackets and remit to the government.
• Companies with paid-up capital of BDT 10 million or more must contribute 5% of profits to the Workers’ Profit Participation Fund.

Payment Methods

• Direct deposit (EFT): Most common, secure, and traceable.
• Mobile financial services: Platforms like bKash and Nagad are growing in popularity.
• Cash: Rare, mainly for rural or temporary workers.
• International wire transfer: Used only in special cases due to currency controls.

Learn more about global payroll best practices in How to Pay International Employees.

Using Global Payroll Services

Global payroll providers or EORs handle:

• Local compliance and tax filings.
• Automated salary disbursement.
• Record-keeping and reporting.
• Integration with your HR systems.

For a comprehensive overview, check How Employer of Record Services Can Ease Management of Payroll and Benefits.

How to Properly Hire and Pay Contractors

• Draft a clear, project-based service agreement.
• Specify deliverables, payment terms, and IP ownership.
• Pay via bank transfer or approved digital platforms.
• Ensure contractors handle their own tax filings.
• Avoid treating contractors like employees to prevent misclassification.

Check out the Best Ways to Pay International Independent Contractors: Challenges and Solutions.

Compliance Risks

Incorrect Payroll Contributions

Errors in tax withholding, leave calculation, or minimum wage can result in fines and back payments. Use automated payroll systems or EOR services to reduce risk.

Permanent Establishment Risk

Hiring employees or long-term contractors may trigger “permanent establishment” status, leading to local corporate tax obligations. Assess your business presence and consult experts.

Check out the Compliance Challenges in Establishing an Entity Overseas: Tips to Overcome.

Statutory Benefits

Failing to provide statutory leave, maternity benefits (16 weeks paid), or overtime pay (2x regular rate) can lead to penalties and labor disputes.

Misclassification Risks

Improperly classifying employees as contractors is illegal and strictly enforced. Regular audits and clear contracts help mitigate this risk.

Provincial/Regional Law Variances

Most labor laws are national, but Export Processing Zones (EPZs) have unique wage and compliance rules. Always check for sector-specific regulations.

Intellectual Property Rights

Employers should secure:

• Copyright: For creative works produced by employees.
• Patents: For inventions developed during employment.
• Trade secrets: Protect confidential business information.
• NDAs: Ensure all employees and contractors sign robust non-disclosure agreements.

Learn about Managing Intellectual Property (IP) Through EOR: Key Considerations for Businesses.

Onboarding Process

Before Their First Day

• Prepare bilingual (Bengali/English) contracts with all statutory terms.
• Register employees with tax authorities.
• Ensure work permits for foreign hires are approved.
• Set up payroll and benefits administration.

On Day 1

• Conduct orientation on company policies and Bangladesh labor laws.
• Provide access to necessary equipment and IT systems.
• Introduce team members and assign a mentor or supervisor.

During Their First 90 Days

• Monitor performance and provide regular feedback.
• Confirm understanding of job duties and workplace safety.
• Review leave entitlements and benefits.
• Schedule check-ins to address questions or concerns.

Offer Letter Essentials

• Job title and description.
• Salary, allowances, and benefits.
• Working hours, overtime, and leave policies.
• Probation period and termination terms.
• Confidentiality and IP clauses.

NDAs and Confidentiality

• Require all employees and contractors to sign NDAs.
• Clearly define confidential information and data handling procedures.

Running Background Checks

• Verify identity, education, and previous employment.
• Check references and, if applicable, criminal records.
• Ensure compliance with local privacy laws.

Learn about the Top Eight Best Practices for Onboarding International Employees: How EOR Can Help.

Remote Employee Management

Managing remote teams in Bangladesh requires clear processes and robust security:

• Computer access: Provide secure laptops and require use of company-approved software.
• App access: Use VPNs and multi-factor authentication for sensitive systems.
• IP protection: Implement strict controls on data sharing and storage. Use NDAs and define IP ownership in contracts.

For actionable tips, read How to Manage Employees Remotely and Globally and Building Organizational Culture in Remote Teams: Employee Well-Being & Productivity.

Labor Law Compliance

Key Working Condition Requirements

• Hours: Max 8 hours/day, 48 hours/week. Overtime up to 10 hours/day, 60 hours/week (with 2x pay).
• Leave: Annual, sick, casual, festival, and 16 weeks paid maternity leave.
• Rest: At least one full day off per week (usually Friday).
• Equal pay: Required for equal work.

Working Conditions by Employment Type

• Permanent: Full statutory benefits, job security.
• Temporary/Contract: Limited benefits, defined project scope.
• Probationary: Evaluation period (3-6 months), can be terminated with shorter notice.

No At-Will Employment

Bangladesh does not allow at-will termination. All dismissals must follow due process and legal grounds.

Trade Unions and Collective Bargaining

Strong labor unions exist, especially in manufacturing. Be prepared for collective bargaining and sector-specific wage negotiations.

Explore Employment Compliance and Its Importance.

Termination Guidelines

Acceptable Termination Reasons

• Performance issues: After documented warnings and performance management.
• Redundancy or restructuring: Must follow statutory procedures.
• Misconduct: Requires investigation and proof.
• End of fixed-term contract: Automatically terminates at project end.

All terminations must be documented and justified under the Bangladesh Labor Act.

Notice Periods and Legal Protections

• Notice: Typically 30 days for permanent employees; shorter for probationary staff.
• Severance: May be required based on tenure and reason for termination.
• Protections: Pregnant employees, union members, and those on leave have additional protections.

For more on global severance rules, read Severance Regulations Across Countries.

Benefits of Hiring in Bangladesh

• Large, skilled talent pool: Young, educated, and English-proficient workforce.
• Cost efficiency: Lower labor costs compared to many Asian markets.
• Time zone advantage: Enables 24/7 operations for US and EU companies.
• Growing infrastructure: Expanding digital and physical infrastructure.
• Business incentives: Government support for IT, manufacturing, and BPO sectors.
• Strong work ethic: High motivation and adaptability among Bangladeshi professionals.

Unlock Growth Opportunities by Hiring in Bangladesh

Hiring in Bangladesh offers significant advantages for US-based companies seeking global growth. The country’s skilled workforce, cost benefits, and improving business climate make it a compelling choice for international expansion. 

However, success depends on understanding local labor laws, choosing the right hiring model, and maintaining strict compliance. Whether you set up a local entity or use an EOR, a well-structured approach will help you build a strong, compliant, and productive team in Bangladesh.

Ready to expand your team in Bangladesh? Contact Tarmack today to learn how our platform can simplify your global hiring, payroll, and compliance.