Payroll and Employment Taxes in Bangladesh

Overview of Payroll Taxes in Bangladesh

Managing payroll taxes in Bangladesh is crucial for businesses of all sizes. Employers must navigate various tax obligations, including income tax withholding and social security contributions, to ensure compliance and maintain positive employee relations. Understanding these requirements helps mitigate risks such as penalties and legal issues.

This guide aims to provide clarity on the key aspects of payroll taxes in Bangladesh, including tax calculations, deadlines, and filing procedures. By the end, you'll be equipped with the knowledge to manage payroll taxes compliantly.

Fiscal Year in Bangladesh

1 July - 30 June is the 12-month accounting period that businesses in Bangladesh use for financial and tax reporting purposes.

Payroll Cycle in Bangladesh

The payroll cycle in Bangladesh is usually monthly, with employees being paid on or before the last day of the month.

Bonus Payments in Bangladesh

Employees who have worked for at least one year are entitled to a Festive Bonus, twice per year. Each bonus should not be more than the basic salary.

Types of Payroll Taxes in Bangladesh

In Bangladesh, employers are responsible for several payroll-related taxes. Each type has specific regulations that businesses must adhere to.

Income Tax Withholding

Employers are required to withhold income tax from employees' salaries based on progressive tax rates. The tax brackets are as follows:

 
• 0% for income up to BDT 350,000
 
• 5% for income between BDT 350,001 and BDT 450,000
 
• 10% for income between BDT 450,001 and BDT 750,000
 
• 15% for income between BDT 750,001 and BDT 1,150,000
 
• 20% for income between BDT 1,150,001 and BDT 1,650,000
 
• 25% for income above BDT 1,650,000

Employers must deduct the appropriate amount each month and remit it to the National Board of Revenue (NBR) by the 15th of the following month.

Provident Fund Contributions

While not mandatory, many private sector establishments in Bangladesh establish provident funds for their employees. These funds are governed by the Bangladesh Labor Act, 2006. If at least three-fourths of the total number of workers employed in an establishment request it in writing, the employer is required to constitute a provident fund.

Both employees and employers contribute to the provident fund, with the employee's contribution ranging from 7% to 8% of their salary. The employer is required to make a matching contribution and deposit both amounts to the employee's provident fund account every month.

Workers Profit Participation Fund (WPPF)

Certain companies are required to contribute 5% of their profits to the Workers Profit Participation Fund. This fund is intended to share a portion of the company's profits with its employees. Notably, there is no employee contribution to this fund; it is solely the employer's responsibility.

Gratuity Fund

The Gratuity Fund provides a lump sum payment to employees upon termination or retirement after a certain period of service, typically five years or more. The calculation is usually based on the last drawn basic salary and years of service. Gratuity payments are tax-exempt up to a certain limit.

Workers' Welfare Foundation (BWF)

Employers are required to contribute a percentage of their employees' wages to the Workers' Welfare Foundation. The specific rates vary, but these contributions provide financial assistance to workers and their families in case of death, injury, or other hardships.

Group Insurance

Employers often provide group insurance coverage for employees, offering benefits in case of death or disability. The rates depend on the employer's insurance policy and the number of employees covered.

Maternity Benefit

Employers are responsible for paying maternity benefits to eligible employees. The specific amount and duration of the benefit are outlined in the Bangladesh Labor Act.

Other Benefits

Depending on the industry and company size, employers may provide additional benefits such as:​

• Automotive facilities
• Meal allowances
• Fringe benefits​

These benefits are typically offered to enhance employee satisfaction and retention.

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How To Set Up Payroll in Bangladesh

Setting up payroll correctly is essential for legal compliance and to maintain employee trust. Here's how you can establish a compliant payroll system in Bangladesh:

Example Calculation

Assume an employee earns a monthly salary of BDT 50,000. Based on the tax brackets:

 
• Income up to BDT 350,000: 0% tax
 
• Income between BDT 350,001 and BDT 450,000: 5% tax on BDT 100,000 = BDT 5,000
 
• Income between BDT 450,001 and BDT 750,000: 10% tax on BDT 300,000 = BDT 30,000

Total tax payable = BDT 5,000 + BDT 30,000 = BDT 35,000

Therefore, the employee's net salary after tax would be:

BDT 50,000 - BDT 35,000 = BDT 15,000

Submitting Payroll Tax in Bangladesh

Employers can submit payroll taxes through the following methods:

 
• Online Payment: Use the NBR's e-payment system to remit taxes electronically.
 
• Bank Payment: Deposit taxes at designated banks using the prescribed challan forms.
 
• Manual Submission: For smaller businesses, manual submission at local tax offices may be permitted.

Payroll Tax Due Dates in Bangladesh

Payroll Contributions in Bangladesh

Understanding the tax obligations for both employers and employees is crucial when operating in Bangladesh's business landscape. Both mandatory and optional contributions play a significant role in the overall compensation and welfare of employees. This section explains how taxes and statutory fees affect payroll and individual earnings in Bangladesh.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 0% - 5% on top of the employee salary in Bangladesh.

Employee Payroll Tax Contributions

In Bangladesh , the typical estimation for employee payroll contributions cost is around Employees in Bangladesh are not required to make compulsory contributions to social insurance.

Individual Income Tax Contributions

The individual income tax in Bangladesh follows a progressive rate structure, ranging from 0% to 30%. Overarching tax rates may vary according to different factors, including household status and the number of dependents. In addition, the lesser of 450,000 BDT or one-third of the total taxable income is exempt from Income tax. For foreign residents, a flat tax rate of 30% applies.

Pension in Bangladesh

There are no mandatory pension contributions in Bangladesh.

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Managing Common Payroll Challenges in Bangladesh

‍Global employers operating in Bangladesh often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Bangladesh.

Maintaining Accurate and Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date – including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping Up With Ever-Changing Tax Laws & Compliance Laws

In Bangladesh, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

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Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

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What Does a Global Payroll Management Platform Cover?

A global payroll management platform is a software solution designed to streamline and automate the payroll processes for organizations with employees across multiple countries. It helps ensure accurate and timely payment while maintaining compliance with legal and regulatory requirements in Bangladesh.

Key functions of a payroll management platform can include:

• Consolidate payroll data: Streamline fragmented payroll data into one source of truth when you’re operating in multiple regions.‍
• Analytics and reporting: Advanced capabilities to analyze payroll data and generate automated reports per region.
• Monitor and standardize payroll: Get an accurate view of employee costs, bonuses, and taxes per region, catch variances, and standardize payroll processes across regions to minimize errors.
• Compliance and record-keeping: Maintains accurate payroll records and ensures adherence to labor laws and regulations, reducing the risk of legal issues.
• Employee self-service: Provides portals where employees can access pay stubs, update personal information, and manage benefits selections.

How Playroll Can Streamline Payroll & Taxes in Bangladesh

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

• Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
• Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
• Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
• Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.