Bangladesh Labour Act Summary 2026 — HR Compliance Guide

The Bangladesh Labour Act 2006, with its 2018 amendments, forms the bedrock of employment law in Bangladesh. Understanding and adhering to its provisions is crucial for every employer to ensure fair labour practices, avoid legal penalties, and foster a healthy work environment. This guide outlines the essential compliance requirements.

Quick compliance summary (2024-2026)

Download the free printable compliance checklist to tick off every requirement section by section.

Key takeaways

• The standard workweek is 48 hours, with overtime paid at double the basic rate.
• Mandatory leave entitlements include annual, sick, and casual leave, along with festival holidays.
• Wages must be paid by the 7th of the following month, accompanied by a detailed payslip.
• Termination requires specific notice periods and calculation of severance pay and gratuity.
• Maintaining meticulous, auditable records for at least five years is essential for compliance.

Understanding the Bangladesh Labour Act

The Bangladesh Labour Act 2006 (amended 2018) is the primary legislation governing employment and industrial relations in Bangladesh. It consolidates and amends laws related to employee service conditions, wage payment, trade unions, and industrial dispute resolution. Compliance with this Act is mandatory for all employers operating in Bangladesh.

Working hours and overtime

The Act specifies clear guidelines regarding working hours to protect employee well-being and prevent exploitation.

Standard working hours

• Daily: A worker generally cannot be required to work more than 8 hours in a day.
• Weekly: The total working hours in a week should not exceed 48 hours.
• Rest: Every worker is entitled to at least one full day of rest (typically 24 consecutive hours) each week.

Overtime provisions

When an employee works beyond the standard 8 hours a day or 48 hours a week, they are entitled to overtime pay.

• Overtime rate: Overtime is calculated at twice the basic rate of wages for the additional hours worked.
• Maximum overtime: A worker should not work more than 10 hours a day (including overtime) or more than 60 hours in a week, averaged over a significant period.

Important: Accurate tracking of working hours is vital for calculating overtime correctly. Many companies in Bangladesh use biometric attendance systems like ZKTeco or Hikvision to ensure precise timekeeping.

Leave entitlements

The Act provides for various types of leave to ensure employees have adequate rest and can address personal needs without financial penalty.

Types of leave

For a comprehensive guide on managing these entitlements, refer to our article on leave management best practices.

Wages and payment

The Act sets strict rules for wage payment to ensure fairness, transparency, and timely remittances.

Payment schedule and method

• Due date: Wages must be paid by the 7th day of the month following the month for which the wages are due.
• Payment method: While cash payment is common, digital payment methods like bKash or Nagad are increasingly used, especially for sectors with large workforces like the garment industry.
• Payslip: Every employee must receive a detailed payslip with each payment. This document should clearly outline basic pay, various allowances, deductions (e.g., NBR taxes, Provident Fund contributions), and the final net pay. This transparency is crucial for payroll compliance in Bangladesh.

Festival bonus

Permanent employees in Bangladesh are typically entitled to two festival bonuses per year. These are usually paid before major religious festivals like Eid-ul-Fitr and Eid-ul-Adha. The amount is generally equivalent to one month's basic salary for each bonus. For streamlined processing, refer to our guide on Eid payroll without the chaos.

Termination and gratuity

The Act outlines the procedures and employee entitlements related to the termination of employment, ensuring fair treatment and financial security.

Notice period

The required notice period varies based on the employment type and the reason for termination:

• Permanent employee (resignation): 30 days' notice.
• Permanent employee (termination by employer): 120 days' notice for monthly-rated workers or 60 days' notice for other workers.
• Temporary employee: 7 days' notice.

Instead of requiring the employee to serve the notice period, the employer can choose to pay wages in lieu of the notice period.

Severance pay

In cases of retrenchment (redundancy), a 'retrenchment benefit' is payable. This is typically calculated as 30 days' basic wages for every completed year of service.

Gratuity

Gratuity is a lump sum payment made to an employee as recognition for long and dedicated service upon their termination or retirement.

• Eligibility: Employees must have completed at least 1 year of continuous service with the employer to be eligible.
• Calculation: The standard gratuity calculation is 30 days' basic wages for every completed year of service.
• Payment: Gratuity is typically paid at the time of termination or retirement.

Pro-tip: Automating your payroll and HR processes with compliant software helps ensure accurate calculation of notice periods, severance, and gratuity, minimizing errors and legal risks.

Record keeping and audits

Maintaining accurate and comprehensive records is a fundamental requirement of the Bangladesh Labour Act. Employers must diligently keep records related to:

• Employee details (name, address, date of birth, joining date)
• Attendance and working hours, including overtime
• Leave taken and current balances
• All wages paid, including basic pay, allowances, bonuses, and itemized deductions
• Records pertaining to employee termination

These records must be readily accessible for inspection by labour authorities and should be preserved for a minimum of five years. An exportable audit log of attendance, leave, and payslips is invaluable during legal or compliance audits.

Related reading

Industry-wise HR compliance checklists Compliance obligations are the same Act, but the day-to-day evidence a labour inspector asks for differs by sector. Use the checklist that matches your establishment.

RMG and garment factories * Attendance captured on a biometric device (ZKTeco/Hikvision) with an exportable daily register, not a manual muster roll.

• Overtime register maintained separately, with OT paid at twice the basic rate and OT hours reconciled against the payroll run.
• Maternity benefit records: 16 weeks' entitlement, benefit calculation and payment proof.
• Group insurance, safety committee and participation committee records where the headcount threshold applies.
• Two festival bonuses per year, with the payment date recorded ahead of Eid.

Commercial establishments and offices * Annual leave accrued at 1 day per 11 days worked (not the 18-day factory rate) — check that your HR system uses the commercial rate.

• Appointment letter and ID card issued to every worker on joining.
• Payslips issued monthly with itemised basic, allowances, deductions and net pay.
• Wages disbursed on or before the 7th of the following month, with bank/bKash/Nagad transaction references retained.

Retail chains and multi-branch businesses * One weekly rest day per worker per branch, visible in the published roster.

• Branch-wise attendance and leave registers that can be produced individually during inspection.
• Consistent leave policy across branches; branch managers should not approve entitlements outside company policy.
• Transfer and posting records where staff move between branches mid-month, so salary allocation stays auditable.

Technology, BPO and service companies * Night-shift and on-call hours logged as working hours; compensatory rest documented.

• Remote and hybrid staff still need attendance evidence — geo-tagged or app-based punches are acceptable if they are consistent and exportable.
• Contractor versus employee classification reviewed annually; long-running contractors performing core duties are a common inspection finding.
• Confidentiality and non-compete clauses drafted so they do not restrict lawful termination entitlements.

Payroll tax and NBR touchpoints Labour Act compliance and tax compliance are separate but overlap in the payroll run. In practice you need: * Monthly TDS deduction on salary under the Income Tax Act, deposited to the government within the prescribed deadline and reflected as a deduction line on the payslip.

• Salary statement filing for employees, matched to the deductions your payroll actually made.
• Provident Fund contributions (where a recognised fund exists) shown separately as employee and employer contributions, with a per-employee ledger.
• Gratuity provisioning, so the 30 days' basic wages per completed year is funded rather than discovered at exit. Getting this wrong is the most common reason a clean Labour Act file still fails an audit. See our guide to payroll compliance in Bangladesh for the calculation detail.

Penalties and common inspection findings Non-compliance is enforced through inspection, fines and, for repeated or serious breaches, prosecution under the Act. The findings we see most often are avoidable record-keeping failures rather than deliberate underpayment: * Attendance registers that do not reconcile with paid overtime.

• Leave balances tracked in spreadsheets with no audit trail of approvals.
• Payslips issued without itemised deductions.
• Missing appointment letters or service books for older employees.
• Final settlement paid without a documented notice-period, severance and gratuity calculation. Because inspectors ask for records covering the last five years, the fix is systemic: keep attendance, leave, payroll and settlement data in one system that can export a date-ranged report on demand.

A 12-point annual compliance review Run this once a year, ideally before your financial year close: 1. Appointment letters and ID cards issued to 100% of active staff.

1. Working hours within 8/day and 48/week, with exceptions documented.
2. Overtime paid at 2x basic and capped at 10 hours/day.
3. One weekly rest day per worker, evidenced in the roster.
4. Annual leave accrued at the correct sector rate and carried forward up to 3 years.
5. Sick (14 days) and casual (10 days) leave granted at full pay.
6. Maternity benefit administered for eligible employees.
7. Wages paid by the 7th, with itemised payslips.
8. Two festival bonuses paid and recorded.
9. Notice periods, severance and gratuity calculated per the Act at every exit.
10. TDS, PF and other statutory deductions deposited and reconciled.
11. Five years of attendance, leave, payroll and settlement records exportable on demand.

• Payroll compliance in Bangladesh: What you need to know
• Salary Sheet Format for Bangladesh: A Practical Template (BDT)
• Festival bonus done right: Eid payroll without the chaos

Penalties for non-compliance

Labour inspectors can act on a complaint or a routine visit. The Act sets out fines and, for repeat or serious breaches, imprisonment. The figures below are the statutory maximums under the Labour Act 2006 (as amended in 2018) and are the ones most often applied to payroll and attendance failures.

Beyond the fine itself, the practical cost is usually the arrears: a wage or overtime claim under s.132 is settled for the full period claimed, not just the month inspected. Exportable attendance and payroll records are what limit that exposure.

2026 employer compliance calendar

Keeping this calendar inside your HR system rather than a spreadsheet is the difference between producing evidence on the day an inspector arrives and reconstructing it afterwards.

What the 2023 amendment changed

The Bangladesh Labour (Amendment) Act 2023 updated the 2006 Act rather than replacing it, so every duty in this checklist still applies. The changes employers ask about most often are:

• A lower worker-support threshold for trade union registration, making union formation easier in most establishments.
• Stiffer financial penalties for several offences, including failures around wages, leave and workplace safety.
• Clearer wording on service benefits, so retrenchment, discharge and termination payments are calculated more consistently.

Always confirm the exact clause you rely on against the official consolidated text at bdlaws.minlaw.gov.bd before writing it into a policy or contract.

Minimum wages: what to check

The Labour Act does not fix one national minimum wage. The Minimum Wages Board issues sector-specific gazettes, so your obligation depends on the industry you operate in.

• Ready-made garments: the 2023 wage board gazette set the lowest grade at BDT 12,500 gross per month, with defined grade-wise structures above it.
• Other gazetted sectors (tea, construction, tannery, shrimp, hotels and more) each have their own board rate and grade structure.
• Non-gazetted sectors: no board rate exists, so the contract wage and the Act's payment rules govern.

Check the current gazette for your sector on the Minimum Wages Board site each year, and re-run payroll grade mapping whenever a new gazette is published. Basic wage matters twice over: overtime is twice the basic rate and gratuity is calculated on basic, so an outdated grade quietly under-pays both.

Preparing for a DIFE inspection

Inspectors from the Department of Inspection for Factories and Establishments (DIFE) can arrive on a routine visit or after a worker complaint. Being able to produce records within minutes is most of the battle.

Keep these exportable for at least five years. If your records live in spreadsheets across branches, assemble a single consolidated export before an inspection rather than during one.

Frequently made mistakes that cost the most

• Paying overtime on gross salary instead of the basic rate — or paying a flat allowance instead of the statutory double rate.
• Treating a worker as "casual" or "contractual" for years while they do permanent work; status is judged on the nature of the work, not the label on the contract.
• Letting earned leave lapse without payment where encashment is due.
• Missing the 7th-of-the-month wage deadline, which is one of the most frequently cited findings.
• Filing final settlement late; dues are payable within 30 working days of the end of employment.