Capital City
Colombo & Sri Jayawardenepura Kotte
Currency
Sri Lankan Rupee
(
රු
)
Timezone
GMT +5:30
Payroll Frequency
weekly / semi-monthly / monthly
Tax Year
1 January - 31 December
Employer Tax
30%
Languages
Tamil
English
Capital City
Colombo & Sri Jayawardenepura Kotte
Currency
Sri Lankan Rupee
(
රු
)
Timezone
GMT +5:30
Payroll Frequency
weekly / semi-monthly / monthly
Tax Year
1 January - 31 December
Employer Tax
30%
Languages
Tamil
English
Positioned near burgeoning markets and boasting a skilled workforce, Sri Lanka offers numerous benefits and incentives for global investors. It has outpaced many South Asian counterparts in financial, human, and social development.
Over the past decade, Sri Lanka's economy has exhibited consistent growth, transitioning from a middle-income economy to a nation with an average economic growth exceeding 5%. The country is actively shifting from a predominantly rural economy to an urbanised one centred on manufacturing and services.
Despite the inherent investment risks in any location, Sri Lanka stands out as one of the leading economies in South Asia.
Tailored investment and export development policies align with national development goals, establishing Sri Lanka as an attractive destination for international buyers and investors.
Businesses can only operate smoothly in Sri Lanka if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Sri Lanka below, to avoid any compliance issues.
In Sri Lanka, employment contracts can be either verbal or in writing. However, opting for written contracts, duly signed by both the employee and employer, offers greater clarity and evidentiary value. These contracts must encompass key terms, including but not limited to:
We can help you get a new employee started in Sri Lanka quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.
For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.
In Sri Lanka, the standard work week consists of 8 hours per day, totaling 45 hours per week. However, industry-specific regulations, such as the Factories Ordinance, impose restrictions on certain employees, prohibiting them from working on specific days.
Overtime in Sri Lanka is compensated at 150.00% of the regular pay rate, and the maximum allowable overtime hours are 12 per week. Certain exemptions from these restrictions may apply to executive or professional positions.
Sri Lanka's labour laws do not explicitly specify the duration of probationary periods. However, it is customary for the probationary period to be around 6 months. For senior employees, the probation period cannot exceed a year, and for other employees, it is limited to 6 months. In specific instances, the maximum probation period is capped at 3 months.
Hiring in Sri Lanka means navigating local labor laws, mandatory employee benefits, payroll taxes, and strict employment regulations. These requirements aren’t always intuitive, especially if your team lacks in-country legal or HR expertise. An Employer of Record steps in as the legal employer for your hires, managing all compliance-related responsibilities. This includes issuing locally compliant contracts, registering employees with relevant authorities, processing payroll, and handling social security contributions and taxes in line with national laws.
By handing over these complexities to an EOR, your business avoids costly compliance errors and the time required to master local employment standards. You can focus on growing your team and operations while trusting that the legal and administrative foundation is solid. Whether you're making one strategic hire or building out an entire team, the EOR keeps you compliant, removes guesswork, and reduces the risk of legal or financial penalties, without requiring you to open a legal entity or maintain a local HR team.
With decades of experience in global compliance and deep local knowledge, we ensure smooth adherence to local laws and regulations across borders.
Unmatched coverage for employment across 180 countries.
An employee portal paired with dedicated, human support.
Reliable, cost-effective services with no annual commitments.
1 January - 31 December is the 12-month accounting period that businesses in Sri Lanka use for financial and tax reporting purposes.
The payroll cycle in Sri Lanka is usually weekly / semi-monthly / monthly, with employees being paid as specified in employment contracts.
The minimum wage for employees in Sri Lanka is typically 97.22 LKR per hour, amounting to ~17,500 LKR per month for a typical 45 hour work week.
There is no legal obligation to provide a 13th-month salary in Sri Lanka.
Employer payroll contributions are generally estimated at an additional 30% on top of the employee salary in Sri Lanka.
In Sri Lanka , the typical estimation for employee payroll contributions cost is around 8%.
Income tax in Sri Lanka is determined based on progressive rates, with various additional factors influencing the overall rates, including household status and the number of children.
As per the Minimum Retirement Age of Workers Act in Sri Lanka, the retirement age is set at 60 years. The old-age pension is managed through a Provident Fund and Trust Fund system. The employer contributes 12% of the monthly payroll to the Provident Fund and 3% of the monthly payroll to the Trust Fund.
Running payroll in Sri Lanka is complex, especially when you're hiring without a local entity. Local laws determine everything from tax withholdings and reporting deadlines to benefit contributions and currency requirements. Missteps can lead to fines, payment delays, or unhappy employees. An Employer of Record takes this burden off your plate by handling the full payroll process. Acting as the legal employer, the EOR ensures you remain compliant with all payroll-related obligations, while still allowing you to manage your team’s day-to-day work and performance.
Key Ways an EOR Supports Payroll in Sri Lanka:
In Sri Lanka, work permits and visas are critical for employers hiring foreign workers. The process involves obtaining an Entry Visa for initial entry, followed by a Residence Visa for long-term employment authorization. Employers must sponsor these applications and ensure compliance with local labor and immigration laws. Key visa types include the Entry Visa, used for short-term entry, and the Residence Visa, granting employment authorization for up to one year with the possibility of renewal.
The annual leave entitlement in Sri Lanka is 14 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.
Sri Lanka observes the following 24 public holidays, in addition to the paid annual leave entitlement for employees:
In Sri Lanka, employees are entitled to a minimum of 14 days of paid annual leave after completing one year of service as specified in the employment contract. During the initial 12 months, the leave starts at 4 days after the probation period and accumulates quarterly. The carryover of unused leave is subject to the company's policy.
In Sri Lanka, a female employee is entitled to 12 weeks of paid maternity leave, excluding weekly holidays, Poya days, and statutory holidays, for the birth of their 1st and 2nd children. Of this, 14 days must be taken before the birth, and the remaining 70 days after. However, for the birth of their 3rd child or any subsequent children, the maternity leave is reduced to 6 weeks.
In the state sector in Sri Lanka, fathers are entitled to mandatory paid paternity leave for a total of 3 days. This leave must be taken within 3 months of the birth of their child.
To be eligible for sick leave in Sri Lanka, employees need to provide a medical certificate issued by a registered medical practitioner. Typically, in both the public and private sectors, employees who have completed a year of continuous service are entitled to 100% paid sick leave, capped at a maximum of 7 days per year.
There are no legal provisions set out for parental leave in Sri Lanka.
In Sri Lanka, employees can be granted duty leave for various reasons, including participating in the reserve list of a volunteer unit of the armed forces, attending language proficiency exams, undergoing medical examinations, and exercising their right to vote in elections.
Administering employee benefits in Sri Lanka requires more than just offering a standard package. Local labor laws often mandate specific entitlements, from health insurance to paid leave, and the rules can change without warning. Sri Lanka also has unique standards for what an attractive, competitive benefits package looks like. For businesses without in-country expertise, meeting these obligations and expectations can quickly become risky and expensive. An Employer of Record acts as your compliance partner, ensuring all benefits are provided according to the latest legal requirements and without administrative strain on your internal team.
Beyond compliance, an EOR brings clarity and consistency to a process that’s often complex and fragmented. They handle enrollments, ensure accurate employer contributions, manage communications with local providers, and keep everything properly documented. This means employees get what they’re entitled to, and you avoid the headache of navigating benefits systems in a foreign market. Whether you're hiring one person or building a larger team, an EOR provides a clear, dependable structure that lets you offer competitive benefits without taking on unnecessary risk or workload.
In Sri Lanka, terminations may only occur through valid reasons such as:
The minimum statutory notice period in Sri Lanka varies based on the employee's job role and the terms outlined in the contract or agreement. However, the standard notice period typically extends up to 6 months.
Severance pay in Sri Lanka is applicable to employees with more than 5 years of service at the time of retirement, resignation, or dismissal. The employer is required to pay half a month's salary for each completed year of service.
Disclaimer
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.
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As of January 1, 2024, Sri Lanka's minimum wage rates are:
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