EOR vs Entity in Bangladesh: Employer of Record, Subsidiary, Branch or Liaison Office in 2026

EOR vs entity in Bangladesh: the choice in 2026

EOR vs entity in Bangladesh is the first structural decision a foreign company faces when it wants people on the ground in Dhaka, Chattogram or anywhere else in the country. An employer of record lets you hire within weeks without incorporating anything: a Bangladeshi employer signs the contracts, runs payroll and carries the statutory duties, while your managers direct the work. Your own entity, whether a private limited subsidiary, a branch office or a liaison office, gives you full control, a local balance sheet and the ability to trade, but it takes longer and costs more to open and to close.

This guide explains how an employer of record works in Bangladeshi law, when it beats a subsidiary, branch or liaison office, the Invest Bangladesh and RJSC steps, the costs and timelines, how to move staff to your own company without losing service or benefits, and the mistakes to avoid. The law is stated as at October 2026, after the Bangladesh Labour (Amendment) Act 2026 and the creation of Invest Bangladesh.

Summary: An employer of record in Bangladesh is the legal employer of your staff under the Bangladesh Labour Act 2006: it issues the appointment letters, pays wages, withholds tax and answers to the labour inspectorate, while you direct the day-to-day work under a services agreement. It suits small teams, fast entry, market tests and businesses that do not need to invoice Bangladeshi customers. A subsidiary, branch or liaison office suits larger or revenue-earning operations, but needs Invest Bangladesh or RJSC approvals, minimum inward remittances in some cases and a longer exit.

Key point: Section 3A of the Labour Act treats workers supplied by a contractor organisation as workers of that contractor, covered by the Act. That is the legal foundation of the employer of record model. The flip side is that the model does not erase your own exposure: if your Bangladesh team concludes sales or provides services for you on a continuing basis, the Income Tax Act 2023 may still treat your foreign company as having a permanent establishment in Bangladesh.

At a glance

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Table of Contents

What an employer of record is under Bangladesh law

An employer of record is a Bangladeshi employer that hires people on behalf of a client that has no local entity, or does not want to use the one it has. The provider issues the appointment letter, enrols the employee on its payroll, deducts income tax, keeps the statutory registers and handles leave, discipline and termination. The client chooses the candidate, sets objectives and supervises the work, and pays the provider a service fee on top of the employment cost. Nothing about that split is unusual internationally, but in Bangladesh it has a specific statutory footing that every client should understand before signing.

The provider is the employer under the Labour Act

Section 3A of the Bangladesh Labour Act 2006, inserted by the Bangladesh Labour (Amendment) Act 2013, provides that a contractor organisation, by whatever name called, that supplies staff to other organisations under contract may not carry on that activity without registration from the Government. It then states that workers supplied by such an organisation are treated as workers of that contractor and remain covered by the Labour Act. The explanation to the section makes clear that "staff" includes workers as well as security guards, drivers and similar personnel, and the registration procedure is left to rules.[2]

The definition of "worker" points the same way. Since the 2026 amendments, section 2(65) covers any person, including a trainee, employed in an establishment directly or through a contractor, in skilled, unskilled, manual, technical, business development or clerical work, whether the terms are express or implied. The only exclusion is a person given managerial, chief executive, administrative or supervisory responsibility in writing under section 2(49)(b).[1] [3] An employee placed with you is therefore a worker of the provider, with the full protection of the Act.

What the client directs and what it does not

The client directs the work: tasks, priorities, working methods within the law, performance feedback and access to its systems. The provider owns the employment relationship: the contract, wages, statutory leave, workplace policies, the disciplinary process and any termination. A client manager who emails a dismissal or cuts pay unilaterally acts outside the structure and can draw the client into the dispute, so the services agreement should route every employment decision through the provider.

Because the "owner" under section 2(49) includes every director and manager of the establishment, the provider's own officers carry statutory responsibility for compliance.[1]

Choosing a compliant employer of record

The quality of an employer of record in Bangladesh depends on its own legal standing, not on its software. Ask for its RJSC incorporation documents, trade licence, tax and VAT registrations, its position on section 3A registration, its service rules and the template appointment letter it will use. Ask how it handles work permits, and who answers a Labour Court claim.

The entity options: subsidiary, branch or liaison office

The alternative is your own presence, in one of three forms, each with its own approval route, scope and exit. The choice between them is as important as the EOR vs entity in Bangladesh question itself, because a liaison office that later needs to invoice customers has to be replaced, not upgraded.

Private limited subsidiary

A private limited company incorporated with the Registrar of Joint Stock Companies and Firms (RJSC) under the Companies Act 1994 is a separate legal person. It can hire directly, contract and invoice locally, hold assets, borrow and remit dividends. Invest Bangladesh registration is not required for commercial and trading activities.[6]

Branch office

A branch is not a separate company. It is a place of business of the foreign parent, operating within the activities its permission allows. Branches are taxed at the rate applicable to an unlisted company on net income, and when profit is remitted a branch profit tax of 20 per cent of the remittance applies; the authorised dealer bank will not release the remittance until that tax has been paid.[10] Every liability of the branch is, in the end, a liability of the parent.

Liaison or representative office

A liaison or representative office suits market research, supplier coordination and representation of the parent, but it may not earn local income, and its costs must be met from remittances from abroad. Our detailed guide to the liaison office in Bangladesh covers permitted activities and closure. For an EOR vs entity in Bangladesh comparison, the point is that a liaison office carries fixed set-up and reporting costs yet still cannot do commercial work; if you only need to employ a handful of people, an employer of record usually does that with less friction.

EOR vs entity in Bangladesh: when an employer of record wins

An employer of record wins when the business case for Bangladesh is still being proved, when the team is small, or when the people you need are support, engineering or sales-development staff who do not need to contract with Bangladeshi customers. Six factors usually decide it.

Headcount

For a small team, the fixed cost of a company or branch, including accounts, audit, tax returns and licence renewals, is spread over very few people, and some Labour Act duties scale with headcount. Since April 2026, for example, an establishment with at least 100 permanent workers must set up a provident fund if two-thirds of them demand one in writing, unless it enrols interested workers in the state Progoti pension scheme and pays half the contribution.[3] A small team rarely triggers obligations of that kind, which makes an employer of record easier to justify at that scale.

Speed

An employer of record can usually issue an offer once the role is agreed and checks are complete. A branch or liaison office cannot begin until Invest Bangladesh grants permission, which carries a published service time of 16 working days subject to an inter-ministerial committee, before the bank account, remittance, RJSC filing and tax registrations follow.[7] A subsidiary needs name clearance, capital remittance and RJSC incorporation before it can hire.

Market test

Where the plan is to test demand, build a pilot team or support a single customer contract, an employer of record keeps the option open without committing capital. If the test fails, the team is wound down through the provider under the Labour Act, and there is no company to liquidate, no office permission to surrender and no closing tax clearance to obtain.

Permanent establishment risk

An employer of record reduces but does not remove permanent establishment risk. Section 2(92) of the Income Tax Act 2023 defines a permanent establishment to include a branch or office, services furnished through manpower engaged for the purpose where the activity continues in Bangladesh, and any commercially dependent person carrying on activity connected with the non-resident's sales in Bangladesh.[8] Staff who only support your offshore operations present a different profile from staff who negotiate and close local sales on your behalf.

Cost

An employer of record converts set-up and compliance cost into a predictable monthly fee. An entity has front-loaded costs, including RJSC fees, stamp duty on the memorandum and articles, professional fees and, for a branch or liaison office, a minimum inward remittance of US$50,000 within two months of permission.[6] [11] Above a certain headcount the monthly fee outweighs the entity overhead, and the comparison flips.

Exit

Closing an entity in Bangladesh takes months. For a branch or liaison office, the closure application to Invest Bangladesh requires a public notice in a national newspaper at least three months before closure.[7] Liquidating a subsidiary adds the Companies Act process and tax clearance. Ending an employer of record arrangement means ending contracts lawfully and paying final dues within 30 working days under section 30 of the Labour Act.[1]

When to convert from an employer of record to your own entity

The decision is rarely permanent. The triggers for moving to your own entity that we see most often are these.

• Local revenue. You need to invoice Bangladeshi customers, bid for local tenders or hold Taka receivables. An employer of record cannot do this for you.
• Headcount and cost. The service fee on a growing team now exceeds the running cost of a company with its own HR and payroll function.
• Tax exposure. Your team's activity has moved from support into sales or service delivery that looks like a permanent establishment, so it is better to have a taxable entity you control than an unplanned one.
• Control. You want your own service rules, benefit schemes or equity plans; our guide to ESOP in Bangladesh explains why awards are cleaner in your own entity.

Plan the conversion before you hit the trigger. A subsidiary takes time to incorporate and register for tax, and the employee transfer has to be timed around payroll cut-offs, festival bonuses and leave years.

Setting up the entity: Invest Bangladesh and RJSC at a high level

Since 23 August 2026, the Bangladesh Investment Development Authority, the Bangladesh Economic Zones Authority and the Public-Private Partnership Authority have operated as a single body, Invest Bangladesh, under the Prime Minister's Office.[5] The Invest Bangladesh Act 2026 is Act No 104 of 2026, dated 16 July 2026.[4] Units in export processing zones still deal with the Bangladesh Export Processing Zones Authority, which was not part of the merger. Our analysis of the Invest Bangladesh Act 2026 covers the institutional change.

Branch and liaison office approval

The Invest Bangladesh FAQ describes the route. Apply through the One Stop Service, upload the documents and later submit them physically, with initial approval for three years. Rent an office, open a bank account and bring in foreign exchange of at least US$50,000 within two months of approval. Notify Bangladesh Bank under section 18B of the Foreign Exchange Regulation Act 1947 through the office's bank within 30 days, obtain a TIN, apply to RJSC within 30 days for a certificate of filing under section 379 of the Companies Act 1994, and obtain a trade licence and VAT registration.[6]

The published fee is BDT 25,000, paid online, and documents must be attested by the relevant Bangladesh mission, the mission of the parent's country in Bangladesh or that country's apex business chamber. An extension costs BDT 10,000 and must be applied for at least two months before the existing permission expires.[7]

RJSC incorporation of a subsidiary

For a subsidiary, the RJSC process starts with name clearance, for which foreign companies pay BDT 230 including VAT.[6] Capital is then deposited in a temporary bank account and an encashment certificate obtained. The memorandum and articles, Form IX, Form I and the subscription page are filed through the One Stop Service, the registration fee and stamp duty are paid, and on approval RJSC issues the certificate of incorporation, certified memorandum and articles, and Form XII listing the directors.[6] Our guide to company registration in Bangladesh walks through each form.

Registrations after incorporation

Before hiring, the entity needs an e-TIN, a trade licence, VAT registration, a payroll bank account, its own appointment letter and the Labour Act registers. Section 3 allows an establishment to adopt its own service rules, which must be submitted to the Inspector General for approval; since 2026 the Inspector General has 120 days to decide.[3] Where foreign nationals will be employed, the work permit application must be made within 15 days of arrival.[6]

A typical conversion from an employer of record to your own subsidiary follows the sequence below.

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Costs and timelines to compare

Costs on the two sides of the EOR vs entity in Bangladesh decision are not like for like. An employer of record costs the employment cost plus a fee, hire by hire; an entity costs a block of fees and capital up front, then recurring compliance. The table below sets out the official figures we can cite, alongside the United Kingdom and Singapore for context.

The Bangladeshi government fees are modest; the real cost of an entity is professional time, premises, capital and the months before the first hire. Groups used to incorporating in a day in the United Kingdom or Singapore often underestimate that timetable.[13] [14] RJSC registration fees also scale with authorised capital, which we break down in our guide to company registration fees in Bangladesh.

Recurring tax costs also differ. A non-listed company pays corporate income tax at 27.5 per cent, or 25 per cent where all transactions are made through bank transfer, for the assessment years from 2026-27.[9] A branch pays the same rate on net income and 20 per cent branch profit tax on remittances.[10] Under an employer of record, the provider pays tax on its own fee income and the client deals with its home-country position and any Bangladeshi permanent establishment exposure.

Transferring employees from an employer of record to your own entity

Bangladesh has no transfer-of-undertakings rule that moves employees automatically from an employer of record to a client's new company. The Labour Act's definition of "owner" includes a successor by transfer of the establishment, but an employer of record is not transferring its establishment; it is releasing individual employees to a different employer.[1] Unless the parties agree otherwise in writing, the move is a resignation or termination from the provider followed by a new appointment with your entity. That has three consequences that need planning.

Continuity of service

Continuous service drives most Labour Act entitlements. Since the 2026 amendments, section 14 treats a worker as having one year of continuous service if he or she actually worked at least 240 days in the preceding 12 calendar months, and six months if at least 120 days in six calendar months.[3] A break in employer resets that count for the new employer unless the new employer agrees to recognise prior service. Recognition matters for annual leave, the resignation compensation scale and, where a scheme exists, gratuity.

The cleanest approach is a tripartite agreement between the provider, the new entity and each employee, under which the employee resigns from the provider, the new entity appoints him or her on terms no less favourable, and the new entity expressly recognises the start date with the provider for all service-related purposes. Our guide to employment contracts in Bangladesh covers the drafting.

Gratuity, compensation and provident fund

Gratuity under section 2(10) is at least 30 days' last wages for each completed year of service, or 45 days' wages for service of more than ten years, where a contract or scheme provides for it.[1] Resignation compensation under the amended section 27(4) is 7 days' wages per completed year up to three years, 15 days for more than three and under ten, and 30 days or gratuity, whichever is higher, from ten years.[3] Since 2026 these figures are calculated on the last monthly basic wage plus dearness allowance and any ad hoc or interim wage.[3]

There are two lawful ways to handle accrued entitlements on transfer. The provider can pay everything out as final dues within 30 working days, so that the employee starts afresh with the new entity.[1] Or the provider and the new entity can agree that the new entity assumes the liability, with service recognised and an agreed transfer of funds; this works only if each employee consents in writing. Provident fund balances follow the rules of the fund concerned. Our guide to provident fund and gratuity in Bangladesh deals with those rules, and our severance pay guide sets out every exit formula.

Leave, bonuses and statutory holidays

Accrued but unused annual leave must either be paid out or carried across by agreement. Time the transfer away from the weeks before the two main festivals, so that festival bonuses are paid by one employer for the full period. Holiday calendars do not change: since 2026 workers are entitled to 13 days of festival holidays a year, and maternity benefit runs for 60 days before and 60 days after delivery, whoever the employer is.[3] A woman on maternity leave at the transfer date should not be moved without specific advice, because the Labour Act restricts terminating a woman's employment in that period and the restriction binds the provider as employer.[1]

Expatriate employees

Work permits are tied to the employer. A foreign national employed through an employer of record will need a new work permit in the name of your entity. This is more than paperwork: Bangladesh Bank allows banks to remit up to 80 per cent of a foreign national's net income after tax during the year and the remaining 20 per cent after the tax assessment, and the employer's certificate supporting remittances must reflect the benefits specified in the work permit.[12] A gap between permits interrupts both payroll and remittances. Our guide to employment law for expatriates in Bangladesh covers the permit and tax steps in detail.

Tax and payroll compliance on both routes

Whichever route you choose, the Bangladeshi employer must deduct tax from salaries. Section 86 of the Income Tax Act 2023 requires any person responsible for paying income from employment to deduct tax at the time of payment at the average rate applicable to the payee's estimated total income under that head.[8] Under an employer of record, that duty sits with the provider. In your own entity, it sits with you from the first payroll.

For the foreign client, the open question is permanent establishment under section 2(92), discussed above; a tax treaty with the home country may narrow it, so check the treaty before the team's role is fixed.[8] The client pays the provider's invoice from abroad through the banking channel, and the provider pays salaries in Taka. Paying Bangladeshi staff directly from abroad, with no local employer, avoids neither the Labour Act nor tax.

Decision table: EOR vs entity in Bangladesh

The table compares the four structures on the factors that usually decide the question.

If two or more factors in the right-hand columns apply to you, an entity is likely to be the better long-term answer, even if you start with an employer of record while it is being set up. For the wider governance of remote and cross-border teams, see our international remote work and employer of record governance practice.

Mistakes to avoid in the EOR vs entity in Bangladesh decision

Most problems come from running one structure as if it were the other.

• Treating EOR staff as your own employees. Client managers who hire, fire or change pay directly undermine the arrangement and invite claims against the client.
• Letting EOR staff sign customer contracts. A Bangladesh-based employee who negotiates and concludes sales for the foreign parent is the clearest route to a permanent establishment.
• Ignoring the 2026 Labour Act changes. Contracts drafted on the pre-2026 text get maternity benefit, festival holidays, the wage base for compensation and resignation pay wrong.[3]
• Relying on the managerial label. The section 2(49)(b) exclusion requires managerial or supervisory responsibility conferred in writing; a title alone does not take someone outside the Act.[1]
• Missing post-approval deadlines. The 30-day Bangladesh Bank and RJSC filings and the two-month remittance window for a branch or liaison office are conditions, not formalities.[6]
• Transferring staff without consent. Moving employees from an employer of record to a new entity without signed tripartite documents leaves service, leave and gratuity open to dispute.
• Citing BIDA. Board resolutions, powers of attorney and covering letters should now be addressed to Invest Bangladesh, not BIDA.[5]

For the general employer obligations that apply under either route, see our guides to hiring and firing laws in Bangladesh and labour law compliance in Bangladesh, and our briefing on the Labour Act amendment 2025.

How TRW's employer of record service works

TRW offers an employer of record service for foreign companies that want to hire in Bangladesh without first setting up an entity. TRW employs the staff in Bangladesh on the client's behalf, issues appointment letters that comply with the Labour Act as amended in 2026, runs payroll, deducts and deposits income tax and makes the statutory filings. TRW handles employment documentation, leave and benefits, work permits for foreign nationals where the role qualifies, and any termination under Bangladesh law.

The client selects the candidates, directs their work and sets their objectives under a services agreement that defines the boundary between client direction and TRW's role as employer. Because TRW is a law firm, the same team can advise on permanent establishment risk, the timing of a move to a subsidiary or branch, and transfers with service intact. TRW also runs payroll for clients' own entities and handles contractor engagement, misclassification reviews and visa and relocation support.

When the client is ready to convert, TRW can incorporate the subsidiary or obtain the branch or liaison permission, register it for tax and labour purposes, and run the employee transfer. More detail is on our employment and labour practice page.

Frequently asked questions

Is an employer of record legal in Bangladesh?

Yes. Section 3A of the Bangladesh Labour Act 2006 recognises contractor organisations that supply staff to other organisations, requires them to be registered, and treats the staff they supply as their own workers covered by the Act.[2]

Who is the legal employer under an employer of record arrangement?

The provider. It issues the appointment letter, pays wages, withholds tax and carries the Labour Act duties. The client directs the day-to-day work under a services agreement but does not become the employer.[2]

Does using an employer of record avoid permanent establishment risk?

Not entirely. The Income Tax Act 2023 treats services furnished through engaged manpower on a continuing basis, and commercially dependent persons connected with sales, as permanent establishments. What the team actually does matters more than who employs it.[8]

How long does it take to open a branch or liaison office?

Invest Bangladesh publishes a service time of 16 working days for permission, subject to the inter-ministerial committee. The bank account, US$50,000 remittance, Bangladesh Bank notice, RJSC filing and tax registrations follow after that.[6] [7]

Can a liaison office employ staff in Bangladesh?

Yes, but it may not earn local income, so salaries and running costs must be met from remittances from abroad. If you only need to employ people, compare the cost of a liaison office with an employer of record before applying.

Is BIDA still the authority for branch offices and work permits?

No. Since 23 August 2026, BIDA, BEZA and the PPP Authority have operated as Invest Bangladesh under the Invest Bangladesh Act 2026. BEPZA remains separate for export processing zones.[4] [5]

Does an employee's service with the employer of record count when they join our entity?

Only if you agree to it. There is no automatic transfer, so the new entity should recognise prior service in a signed tripartite agreement; otherwise the continuous service count under section 14 starts again.[3]

What happens to gratuity when staff move from an employer of record?

Either the provider pays accrued entitlements as final dues within 30 working days, or the new entity assumes them with service recognised and each employee's written consent.[1]

Can an employer of record sponsor a foreign national's work permit?

The work permit is issued to the employer, so a properly registered provider can apply where the role qualifies. When the employee later moves to your entity, a new permit in the entity's name is needed first.[6]

What is the main deciding factor in EOR vs entity in Bangladesh?

Whether you need to earn revenue in Bangladesh. If you must invoice local customers or hold local assets, you need an entity; if the team supports operations run from abroad, an employer of record is usually faster and cheaper to start with.