Employee Benefits in Bangladesh 2026: Mandatory and Customary Benefits, Tax and Cost Planning

Employee benefits Bangladesh employers must budget for in 2026

Employee benefits Bangladesh employers must provide are set less by the payslip than by statutory triggers: one year's service for festival bonuses, 100 permanent workers for group insurance, 40 women workers for a childcare room, Tk 1 crore of paid-up capital for the workers' participation fund. The Bangladesh Labour (Amendment) Act 2026, Act No 43 of 2026, dated 10 April 2026, raised festival holidays to 13 days and maternity benefit to 120 days, and the 2025 and 2026 budgets changed how several benefits are taxed.[2] [9] [10]

This guide is written for employers, finance teams and HR leads. It treats each mandatory benefit as a cost line, covers the customary benefits the market expects, the welfare facilities that switch on with headcount and the tax treatment of perquisites under the Income Tax Act 2023. Workers' rights, minimum wage rates, compliance registers and provident fund mechanics have their own TRW guides, linked rather than repeated.

Summary: Mandatory benefits under the Bangladesh Labour Act 2006 include two festival bonuses a year after one year's service, casual, sick, annual and 13 days' festival leave, 120 days' maternity benefit, overtime at twice the basic wage, injury and death compensation, group insurance where 100 or more permanent workers are employed, the 5 per cent workers' participation fund for larger companies, and welfare facilities that depend on headcount. Housing, medical and transport allowances, provident funds and gratuity are customary or contractual in most workplaces. Most benefits are taxable salary for the employee, and from 2026 the employer's deduction for perquisites is capped at Tk 25 lakh per employee.

Key point: The basic wage drives almost every statutory cost. Festival bonuses, overtime, provident fund contributions, gratuity and termination compensation are calculated on basic wage, not gross pay, so the basic and allowance split in the appointment letter is the most important benefits decision an employer makes. Maternity benefit is the exception: since April 2026 it is calculated on gross wage divided by 26.[1] [6]

At a glance

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Table of Contents

How the employee benefits Bangladesh framework is built

Benefits come from four layers: the Bangladesh Labour Act 2006, as amended most recently by Act No 43 of 2026; the Bangladesh Labour Rules 2015, which fill in festival bonuses, leave encashment, canteens and group insurance; the wage board gazette for the sector; and the employer's own contract, service rules and practice.[1] [2] [6] The first three are floors; the fourth can be designed, but a benefit paid consistently or written into service rules is hard to withdraw without consent.

Statutory benefits attach to the "worker", which after 2026 covers anyone employed for wages in skilled, unskilled, manual, technical, business development or clerical work, directly or through a contractor, other than a person appointed in writing to a managerial or administrative role.[1] Most employers extend the statutory package to managers too, because two benefit systems breed disputes. Our guide to workers rights in Bangladesh explains the definition.

Export processing zones

Zone enterprises apply the Bangladesh EPZ Labour Act 2019, which provides eleven festival holidays, eight weeks' maternity benefit on each side of delivery, a festival bonus of two months' basic wages a year for permanent workers, annual encashment of earned leave and group insurance from 25 permanent workers.[7] The 2026 amending Act amends only the 2006 Act, so its figures do not reach the zones.[2]

The employee benefits Bangladesh matrix for 2026

The table below is the matrix we use when auditing a package: each statutory benefit, its legal basis, its trigger, the wage base and the employee's tax position. On a phone, scroll it sideways.

Three features drive cost planning. Headcount triggers switch on group insurance, canteens, childcare, medical rooms and welfare officers at fixed numbers. Service triggers delay festival bonuses, annual leave and provident fund contributions until a year's service, and maternity benefit until six months. The wage base varies: most items use basic wage, maternity uses gross wage and the participation fund uses net profit.[1] [6]

Festival bonus: the rule and the market practice

The festival bonus is not in the Labour Act. Rule 111(5) of the Labour Rules 2015 requires that workers who have completed one year of continuous employment receive two festival bonuses each year; each may not be more than the monthly basic wage and is additional to wages.[6]

The wording sets a ceiling, not a floor, but the market treats one month's basic as the standard for each bonus, and in the garment sector that is the benchmark unions, buyers and the authorities apply. Employers that want to pay more, such as a bonus on gross pay, do so by contract. Because the festival bonus employee benefits Bangladesh workers receive is computed on basic wage, a low basic share keeps it low too.

Timing and short-service staff

The rule fixes no dates; most employers pay before Eid-ul-Fitr and Eid-ul-Adha, or before Durga Puja, Christmas or Buddha Purnima for workers of those faiths. Pre-Eid payment is closely watched. Before Eid-ul-Fitr in March 2026 the industrial police tracked factories at risk of missing wages and bonuses, and BGMEA reported on 18 March that 99.81 per cent of member factories had paid the bonus.[14] Workers with short service received token amounts, which the rule permits for those under a year but which remains a flashpoint.[14]

In the zones, section 53(4) of the EPZ Labour Act requires a festival bonus of two months' basic wages for each permanent worker each calendar year, paid at the worker's own religious festival.[7] For tax, the festival allowance is taxable salary but is expressly excluded from the definition of "perquisite", so it does not count toward the employer's perquisite cap.[8]

Leave entitlements as a cost line

Paid leave is a real cost, and two kinds produce cash: encashment and work on festival holidays. Every worker is entitled to ten days' casual leave and, except newspaper workers, fourteen days' sick leave a year on full wages, neither carried forward.[5] After a year's service, adult workers in shops, commercial and industrial establishments, factories and road transport earn one day of annual leave for every eighteen days worked, carried forward up to 40 days in factories and road transport and 60 days in shops and commercial establishments.[1]

Encashment and the exit payment

Rule 107(2) lets a worker take cash for up to half of unspent earned leave at the end of the year, once a year.[6] Section 11 requires the employer, on any exit, including dismissal and resignation, to pay wages for annual leave still due.[1] A balance sheet that does not accrue earned leave understates a real liability. Leave encashment, like the festival allowance, is excluded from the tax definition of perquisite.[8]

Thirteen festival holidays

Section 118(1) now gives 13 days' paid festival holiday a year, up from eleven, on dates the employer fixes. A worker required to work on a festival holiday must receive one substitute holiday and two days' compensatory wages.[4] Running through Eid to meet a shipment therefore costs each worker's day's wage, two further days' wages and a day off later.

Maternity benefit: 120 days on gross wage

A woman worker with at least six months' service before delivery is entitled to maternity benefit for 60 days before the expected date of childbirth and 60 days after it. The daily rate is now her most recently fixed monthly gross wage divided by 26, paid in cash, into a bank account or by electronic transfer.[1] [2] No benefit is payable to a woman with two or more living children at delivery, although she keeps other leave due.[1]

The divisor matters. Because 120 days are paid at one twenty-sixth of monthly gross wage, maternity benefit equals about 4.6 months' gross pay, not four. A worker on a gross wage of Tk 26,000 has a daily rate of Tk 1,000 and receives Tk 1,20,000.[1] Employers still paying 112 days, or calculating on basic wage, are short-paying. The full scope of each leave type is in our guide to workers rights in Bangladesh.

Overtime: pricing extra hours

Section 108 requires overtime at twice the ordinary rate of basic wage plus dearness allowance and any ad hoc or interim wage, except for piece-rated workers.[1] House rent, medical and transport allowances are outside the base. The Act fixes no hourly divisor, so the service rules should state one and apply it consistently. On a basic wage of Tk 10,400 and a divisor of 208 hours, the hourly basic is Tk 50 and the overtime rate Tk 100, so twenty overtime hours a month cost Tk 24,000 a year.

Total hours with overtime may not exceed 60 in any week or average more than 56 a week over a year, and section 108(3) provides for an overtime register, the first document an inspector asks for.[1] [5] Our guide to labour law compliance in Bangladesh covers registers and inspections.

Workers' participation fund: the 5 per cent profit charge

For larger companies the workers' participation fund, or WPPF, is usually the largest benefit cost, and it scales with profit rather than payroll. Chapter XV applies where paid-up capital is at least Tk 1 crore or fixed assets are worth at least Tk 2 crore on the last day of an accounting year. The company must pay, within nine months of each year end, 5 per cent of the previous year's net profit in the ratio 80:10:10 to the participation fund, the welfare fund and the Bangladesh Workers Welfare Foundation Fund.[5]

A beneficiary is anyone, including a probationer, employed for at least nine months, whatever the rank, other than the employer, partners and management board members, so managers share too.[5] Since 2026 the whole amount credited to the participation fund each year is distributed in equal shares among beneficiaries.[1] [2] Governance and forfeiture are covered in our guide to the provident fund and gratuity in Bangladesh.

Export-oriented sectors

For 100 per cent export-oriented sectors, section 232(3) provides for a central sector fund of buyers and employers instead.[5] Rule 214 sets its contribution at 0.03 per cent of each work order, separated from export proceeds by the lien bank, and rule 215 splits the fund between a welfare account and an emergency account, with one-time grants such as Tk 3 lakh on a worker's death in the course of employment.[6]

Tax treatment

The company may deduct payments to the three funds up to 5 per cent of disclosed net business profit.[8] Section 246 of the Labour Act exempts sums paid to workers from the funds, yet PwC's 2026 withholding summary lists a 10 per cent deduction on amounts paid to a WPPF beneficiary.[5] [12] Trustees should withhold and document the position until the National Board of Revenue resolves the tension.

Group insurance under section 99

Section 99 makes group insurance compulsory where at least 100 permanent workers are employed. The insurance money is payable in addition to the worker's other dues; on a death the employer must recover the claim and pay the dependants directly, and the insurer and employer must settle the claim jointly within 120 days.[3]

Rule 98 requires cover for every worker in the establishment against death or permanent incapacity, with a government-approved insurer. The employer pays the annual premium and may not deduct it from wages, and the benefit does not replace any other entitlement under the Act.[6] Group insurance is therefore an addition to injury compensation and the death benefit, not a way of funding them.

Exceptions and the EPZ rule

Where a central fund exists for a 100 per cent export-oriented sector, section 99(3) dispenses with group insurance and workers are paid an equivalent amount from the fund.[3] In export processing zones, section 36 of the EPZ Labour Act requires group insurance in every enterprise with at least 25 permanent workers.[7]

Tax

Rule 98(6) states that the premium and the insurance money are exempt from income tax.[6] The 2025 budget excluded the employer's group insurance expense from employment income, and the Finance Act 2026 exempted medical expenses reimbursed under group policies.[9] [10] PwC's 2026 summary lists both employer-paid group insurance and money received under a group policy as exempt, which makes group health and life cover the most tax-efficient addition to the statutory package.[11]

Compensation for injury and death

Chapter XII makes the employer liable for personal injury caused by an accident arising out of and in the course of employment.[1] Under section 151 and the Fifth Schedule, compensation is Tk 2,00,000 on death and Tk 2,50,000 for permanent total disablement whatever the wage, a percentage of that figure for partial disablement, and, for temporary disablement after a four-day waiting period, full wages for two months, two-thirds for two more and half thereafter, for up to a year.[5] The 2026 Act did not change the Fifth Schedule.[2]

On a workplace death the exposure stacks. The Fifth Schedule sum is additional to any amount due on retrenchment, dismissal, termination or resignation.[5] Section 19 adds 30 days' wages per completed year of service, or 45 days' where the worker dies at work or from a work accident, or gratuity if higher, and the 2026 Act cut its qualifying service from two years to one.[1] Group insurance money comes on top.[3] New section 151A allows the government to notify an Employment Injury Scheme for a sector, displacing employer liability; until then, the exposure should be insured.[1] [2]

Provident fund, gratuity and pension: funding choices

Retirement benefits are optional for most employers but compulsory in one case. Under section 264(10), as replaced in 2026, an establishment with at least 100 permanent workers must set up a provident fund within six months if two-thirds of them apply in writing, with contributions of 7 to 8 per cent of basic wage matched by the employer, unless it lets interested workers join Progoti, the universal pension scheme, contributing half.[1] Gratuity under section 2(10) is at least 30 days' wages per completed year, or 45 days' where service exceeds ten years.[5] Whether gratuity is compulsory and how funds are recognised are analysed in our provident fund and gratuity guide.

• Both are basic-wage costs: an 8 per cent match and a 30-day gratuity accrual add roughly 16 per cent of annual basic wage.
• Funding decides tax: contributions to recognised provident and approved gratuity funds are not perquisites, and approved-fund gratuity is exempt up to Tk 2.5 crore.[8] [11]
• Unfunded gratuity is debt: a promise without a fund is a balance sheet liability that crystallises on every exit.

Health and welfare facilities by headcount

Chapter VIII imposes welfare facilities that switch on with headcount. Apart from section 90A on safety committees, none of sections 89 to 99 was amended in 2026.[2] Each is a capital and operating cost to budget before a site crosses the line.[1]

• First aid, every establishment: one box or cupboard per 150 workers, each in the charge of a trained person.
• Dining room, more than 25 workers: rooms with drinking water to eat and rest; a canteen counts toward this.
• Canteen, more than 100 workers: food and prices set by a canteen committee with worker representation.
• Childcare room, 40 or more women workers: rooms for children under six, supervised by a woman trained in childcare.
• Medical room, 300 or more workers: a sick room with dispensary, medical and nursing staff.
• Welfare officer, 500 or more workers: with a second officer above 2,000 under rule 79.[6]
• Health centre, 5,000 or more workers: a permanent health centre.

Section 89(7) adds a cost unrelated to headcount: a worker injured at work or affected by an occupational disease must be treated by a suitable or specialist doctor at the employer's expense until fully recovered.[1] Rule 87 adds canteen design standards, including separate arrangements for men and women, and dispenses with a separate dining room where the canteen seats 30 per cent of the workforce.[6]

Customary benefits in practice

Above the statute sits a set of customary benefits expected in formal employment. The garment minimum wage gazetted in December 2023 shows the classic structure: for a grade-four entry worker, Tk 12,500 a month comprised basic wage of Tk 6,700, house rent of Tk 3,350 at 50 per cent of basic, a medical allowance of Tk 750, transport of Tk 450 and food of Tk 1,250.[13] Office employers follow the same logic at higher levels, with basic wage usually half or a little more of gross. Current rates are tracked in our guide to the minimum wage in Bangladesh.

• Attendance bonus: a monthly factory incentive that, once routine, is treated as part of the wage package.
• Incentive bonus: discretionary in form, often contractual in substance, and a perquisite for tax.[8]
• Medical cover: group health insurance for staff and dependants, now tax-efficient on both sides.[11]
• Car or fuel: for senior staff, taxed at fixed monthly values by engine size.[11]
• Additional leave: paternity leave or extra annual leave, which the Act does not require.

A customary benefit becomes an entitlement once it is in the appointment letter, service rules or a settlement, and often once paid consistently for years. Rule 19 requires the appointment letter to state other financial benefits, listing house rent, medical, education, food, transport, festival and attendance allowances and gratuity, if any.[6] Label discretionary payments as such and state the criteria; drafting is covered in our guide to employment contracts in Bangladesh.

Tax treatment of employee benefits and perquisites

The Income Tax Act 2023 defines salary to include wages, any allowance, leave encashment, bonus, commission, overtime, advance salary, gratuities, pensions and perquisites, and treats termination compensation by whatever name as profit in lieu of salary.[8] The tax position of employee benefits Bangladesh employers provide therefore turns on three narrower questions: whether a benefit is a "perquisite", how a non-cash benefit is valued, and whether an exemption applies.

Perquisites and valuation

A perquisite is any payment or benefit, including an incentive bonus, other than basic salary, arrears, advance salary, festival allowance, leave encashment, overtime and contributions to recognised provident funds and approved pension, gratuity and superannuation funds.[8] House rent, medical and conveyance allowances are therefore perquisites. Section 33 values employer accommodation at its annual rent, or the shortfall where the employee pays reduced rent, and other benefits at monetary or fair market value.[8] Cars are taxed at fixed monthly values revised in 2025: Tk 15,000 up to 1,500 cc, Tk 20,000 to 2,000 cc, Tk 30,000 to 2,500 cc and Tk 50,000 above.[9] [11]

Exemptions that shape package design

• Standard deduction: one-third of income from employment or a cap, whichever is lower; the 2025 budget raised the cap from Tk 4,50,000 to Tk 5,00,000.[8] [9]
• Duty allowances and specified medical costs: conveyance, travel and daily allowances spent wholly on duties, and costs of heart, kidney, eye, liver and cancer operations for non-director employees, are excluded.[8]
• Group insurance and approved funds: exempt as described above.[11]

The employer's side

Section 55(d) disallows perquisites paid to an employee above a fixed amount: Tk 10 lakh in the original Act, Tk 20 lakh from the 2025 budget and Tk 25 lakh under the Finance Act 2026, except perquisites paid under a gazetted wage board decision.[8] [9] [10] Section 55 also disallows employment payments made other than by bank transfer.[8] Section 86 requires tax to be deducted from salary at the average rate on the employee's estimated income, and non-resident salary attracts 30 per cent withholding.[8] [12] See our guides to employment law for expatriates and income tax rates in Bangladesh.

Cost planning: building an employee benefits Bangladesh budget

A defensible budget starts from the wage structure, adds every statutory item that applies at the current headcount and service profile, then layers customary benefits. Take one permanent employee on a gross monthly wage of Tk 60,000, of which Tk 30,000 is basic, with between one and ten years' service, in a company with a provident fund and a gratuity scheme mirroring section 2(10).

• Gross pay: Tk 7,20,000 a year.
• Two festival bonuses at one month's basic: Tk 60,000.
• Provident fund match at 8 per cent of basic: Tk 28,800.
• Gratuity accrual at 30 days' basic: about Tk 30,000.
• Total before insurance, overtime and WPPF: Tk 8,38,800, about 16.5 per cent above gross pay.

Insurance, overtime and encashment come from quotations and history, and WPPF is budgeted at company level. Maternity benefit should be accrued across the female workforce: for this employee, 120 days at Tk 60,000 divided by 26 is about Tk 2,76,923, plus cover during her absence.[1] The sequence we use is below.

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The biggest errors come from growth, not rates. A business at 90 permanent workers hiring twenty more will cross the group insurance threshold, the canteen threshold and possibly the provident fund trigger in one year.[1] [3] A workforce hired in one wave becomes eligible for festival bonuses and annual leave on the same anniversary. Forecast headcount and service dates together.

Employee benefits Bangladesh mistakes to avoid

• Old leave figures: eleven festival holidays or 112 days' maternity benefit after 10 April 2026.[2]
• Maternity on basic wage: the 2026 formula uses gross wage divided by 26.[1]
• Unclear bonus base: paying bonuses or overtime on gross in some months and basic in others without a written policy.[6]
• Missed insurance trigger: crossing 100 permanent workers, or 25 in an EPZ, without a group policy.[3] [7]
• Late WPPF: accruing the 5 per cent but missing the nine-month payment or the 80:10:10 split.[5]
• Cash payroll and perquisite creep: losing deductions for payments not made by bank transfer, or for senior packages above the Tk 25 lakh cap.[8] [10]

Reducing a benefit that has become contractual needs consent or a negotiated settlement; restructuring for new joiners is usually straightforward. Our guide to terminating employees in Bangladesh shows how benefit design feeds exit costs.

What to watch in 2026 and 2027

Four developments will shape employee benefits Bangladesh employers budget for. First, the rules implementing Act No 43 of 2026.[2] Second, any sector notification under section 151A replacing employer injury liability with a scheme.[1] Third, garment wage revision, which would reset the basic wage on which bonuses, overtime and provident fund contributions are built. Fourth, each budget, which can move the standard deduction, vehicle values and the perquisite cap.[10]

TRW's compensation and benefits practice audits packages against the 2026 matrix, and our employment law compliance team handles service rules and inspections; or contact TRW directly.

Frequently asked questions

What employee benefits are mandatory in Bangladesh?

Casual, sick, annual and festival leave, maternity benefit, overtime, two festival bonuses after a year's service, injury compensation and the death benefit, plus, by size, group insurance, WPPF, a provident fund on demand and welfare facilities.[1] [6]

How much is the festival bonus?

Two bonuses a year after one year's service, each up to one month's basic wage; market practice pays one month's basic each. EPZ permanent workers receive two months' basic a year.[6] [7]

How is maternity benefit calculated in 2026?

For 120 days at the last monthly gross wage divided by 26, for a woman with six months' service and fewer than two living children.[1] [2]

When is group insurance compulsory?

From 100 permanent workers, unless an export-sector central fund applies, and from 25 in EPZs. The employer pays the premium.[3] [6] [7]

Which companies must pay WPPF?

Those with paid-up capital of Tk 1 crore or fixed assets of Tk 2 crore at year end: 5 per cent of net profit within nine months, split 80:10:10.[5]

How many workers trigger a canteen or childcare room?

A canteen above 100 workers, and a childcare room for children under six where 40 or more women workers are employed.[1]

Is the festival bonus taxable?

Yes, as salary, but it is not a perquisite, so it is outside the employer's Tk 25 lakh perquisite cap.[8] [10]

What is the employer perquisite limit for 2026?

Perquisites above Tk 25 lakh per employee are disallowed as a business expense, up from Tk 20 lakh.[10]

Can unused annual leave be encashed?

Up to half of earned leave once a year under rule 107, and all leave due on any exit under section 11.[1] [6]

What is due for work on a festival holiday?

One substitute holiday and two days' compensatory wages; in EPZs, two compensatory holidays with wages within 30 days.[4] [7]