Festival Bonus in Bangladesh: Entitlement, Amount, Timing and Tax in 2026

Festival bonus in Bangladesh: the rule and the practice

The festival bonus in Bangladesh is the one payment almost every worker counts on and almost every employer budgets for, yet it does not appear in the Bangladesh Labour Act 2006 at all. It comes from rule 111(5) of the Bangladesh Labour Rules 2015: two bonuses a year for anyone with one year's continuous service, each capped at a month's basic wage.[1] That short rule drives pre-Eid cash planning, shapes how pay is split between basic and allowances, and produces the most visible pay disputes of the year.

Summary: Workers with one year's continuous service must receive two festival bonuses each year under rule 111(5) of the Labour Rules 2015, each no more than one month's basic wage and paid in addition to wages. Market practice treats one month's basic as the standard. Export processing zone workers receive two months' basic a year under the EPZ Labour Act 2019. The bonus is taxable salary, withheld under section 86 of the Income Tax Act 2023, but it is not a perquisite.

Key point: The bonus is calculated on basic wage, not gross pay. For an entry-grade garment worker on the Tk 12,500 minimum wage, that means Tk 6,700 per bonus, not Tk 12,500.[1] [9] The basic and allowance split in the appointment letter therefore decides the cost of every bonus the employer will ever pay.

At a glance

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Table of Contents

Where the festival bonus in Bangladesh comes from

The legal source is narrow. Rule 111(5) says that workers employed in every factory or establishment who have completed one year of continuous employment shall be provided with two festival bonuses every year, and the proviso adds that a festival bonus shall not be more than the monthly basic wage and is additional to wages.[1] The Bangladesh Labour (Amendment) Act 2026, Act No 43 of 2026, amended the Act extensively in April 2026 but did not move the bonus into it.[4]

Two other provisions give the rule teeth. Section 120 of the Labour Act defines wages for the wages chapter to include "any bonus or other additional remuneration payable under the terms of employment", so an unpaid bonus is unpaid wages.[3] And rule 19 requires the appointment letter to list other financial benefits, naming festival allowance expressly.[1] Once the bonus is in the letter, it is a contractual right as well as a statutory one.

Who the rule covers

The rule protects "workers". The Act's definition of worker, substituted in 2026, covers skilled, unskilled, manual, technical, business development and clerical staff, whether engaged directly or through a contractor, but excludes those holding managerial or administrative authority who fall within the employer definition.[2] Managers outside the Act have no statutory bonus right. In practice almost every employer pays them the same two bonuses by contract. Our guide to employee benefits in Bangladesh sets the bonus alongside the other statutory costs.

How much is the festival bonus in Bangladesh?

The wording sets a ceiling, not a floor: each bonus may not be more than one month's basic wage.[1] Read literally, less would do, but the market treats one month's basic per bonus as the standard, and unions, buyers and inspectors apply it. Paying less to an eligible worker invites complaints and, in a factory, unrest.

Basic wage, not gross

Because the cap is tied to basic wage, the structure of pay matters more than its total. The garment wage gazette of November 2023 set the entry-grade minimum at Tk 12,500 a month, of which Tk 6,700 is basic, Tk 3,350 house rent, Tk 750 medical, Tk 450 conveyance and Tk 1,250 food.[9] An entry-grade worker's bonus is therefore Tk 6,700, roughly 54 per cent of gross. Outside the wage-board sectors the split is the employer's choice, but it should be consistent, defensible and compliant with any applicable wage board, as our minimum wage guide explains.

Paying more than the rule

An employer may pay more, such as a bonus on gross pay. Do it by contract and say whether the excess is discretionary, or it may harden into an entitlement.

Eligibility after one year's service

The trigger is "completed 1 (one) year of their employment continuously".[1] The Rules do not define continuous service for this purpose. Section 14 of the Act, which governs the employment chapter, treats a worker who has actually worked at least 240 days in the preceding twelve months as having completed one year, and counts lay-off, sickness, lawful strike and up to 120 days' maternity leave as days worked.[2] That is the sensible reference point.

Probationers and new joiners

A worker with less than a year's service has no statutory right to a festival bonus, and many employers pay nothing. Others pay a pro-rated or token amount to staff hired during the year. That practice is lawful but contentious: worker leaders said in June 2025 that around a fifth of the garment workforce is often new and therefore ineligible.[12]

Leavers and transfers

The rule does not pro-rate on exit, so a worker who leaves before the festival is generally not owed that bonus unless the contract says so. Where staff move between employers of record, the clock restarts unless the new letter recognises prior service.

Timing around Eid, Puja and other festivals

The rule fixes no dates. Employers almost always pay the two bonuses before Eid-ul-Fitr and Eid-ul-Adha for Muslim staff, and before the main festival of each other faith. The government watches the pre-Eid period closely. Before Eid-ul-Fitr in March 2026, the Home Minister announced that an additional inspector general of the Industrial Police had been appointed as a focal point to ensure that garment workers received salaries, bonuses and other benefits before the holiday.[10]

Pay early enough for staff to travel. In the week before Eid, factories release workers in phases; before Eid-ul-Adha in May 2026, Dhaka factories staggered their closures from 24 to 27 May.[11] Remember too that festival holidays rose to 13 days a year under the 2026 amendments, and a worker required to work on one must receive an alternative day off and two days' compensatory wages.[2] The Labour Act amendment guide covers the wider changes.

Non-Muslim employees

Rule 111(5) is neutral on religion. The established practice, and the only defensible one, is to pay each worker's bonuses at that worker's own festivals: Durga Puja for Hindu staff, Christmas for Christian staff and Buddha Purnima for Buddhist staff, with the second bonus at another festival of the worker's choosing or alongside an Eid. The EPZ Labour Act puts this into statute for the zones, requiring the bonus to be paid "during their own religious festival".[5]

The risk is administrative. Record each employee's festivals at onboarding and run separate cycles; expatriates are usually paid at Christmas or a festival named in the contract.

Garment sector practice and disputes

Ready-made garments are where the festival bonus in Bangladesh becomes a national issue. Each Eid the employer associations report compliance figures to the government. Before Eid-ul-Adha in 2026, BGMEA said that 2,021 of 2,134 operational factories, or 94.70 per cent, had paid the bonus and 99.20 per cent had cleared April wages, on data to 23 May.[11] The year before, Industrial Police data on 4 June 2025 showed bonuses paid in 83.69 per cent of 2,888 factories but wages cleared in only 36.39 per cent.[12]

What the disputes are about

Most disputes involve non-payment by factories in distress, late payment after workers have left, short-service eligibility or a low wage base. Unpaid bonus is recoverable as wages: a worker can apply to the Labour Court under section 132 for unpaid or delayed wages.[3] Our garments and manufacturing team advises on pre-Eid planning and negotiations.

Export processing zones

Zone enterprises follow the Bangladesh EPZ Labour Act 2019, not the Labour Rules. Section 53(4) requires the employer to pay a festival bonus equal to two months' basic wages to each permanent worker in each calendar year.[5] It is a fixed entitlement, not a ceiling.

Tax treatment of the festival bonus

For the employee, the bonus is taxable. Section 32 of the Income Tax Act 2023 includes "any allowance, leave allowance, leave encashment, bonus" in income from employment, and the same section excludes festival allowance from the definition of perquisite.[6] The exclusion matters to the employer: the Finance Act 2026 raised the per-employee perquisite cap above which the employer's deduction is disallowed from Tk 20 lakh to Tk 25 lakh, and the festival bonus does not count towards it.[7]

Withholding at source

Section 86 requires the payer of employment income to deduct tax at the time of payment at the average rate applicable to the employee's estimated total income.[6] Build the bonus into the annual projection from the start of the year. The Sixth Schedule, as consolidated in 2025, also exempts of one-third of employment income or Tk 4.5 lakh, whichever is less.[6] For the 2026–27 income year, the tax-free threshold for general individual taxpayers is Tk 4 lakh, with slabs from 10 to 30 per cent.[7]

Foreign employees

Expatriates pay tax on the bonus like any other salary. A foreign national can remit up to 80 per cent of net income after tax during the year, with the balance after assessment, and the employer's remittance certificate must reflect the benefits stated in the work permit.[13]

How Bangladesh compares

India's Payment of Bonus Act 1965 links bonus to profit, at between 8.33 and 20 per cent of salary for employees earning up to Rs 21,000 a month who have worked at least 30 days in the year.[14] In Singapore, the annual wage supplement or "13th month" payment is not compulsory and depends on the contract or collective agreement.[8]

How an employer of record handles the festival bonus in Bangladesh

A foreign company without a Bangladeshi entity can engage staff through an employer of record. TRW offers this service: TRW employs staff in Bangladesh on the client's behalf, runs payroll and statutory filings, and handles contracts, work permits and terminations under Bangladesh law. Festival bonuses are part of that payroll.

The appointment letter states the basic wage, the two bonuses and the festivals; payroll tracks eligibility dates; the client is invoiced ahead of the holiday; and tax is withheld on a projection that includes both bonuses. See our employer of record governance page and our employment contracts guide for drafting points.

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Getting the festival bonus in Bangladesh right is mostly a matter of structure and calendar: a defensible basic wage, a written clause, a record of each employee's festivals and cash in place before the holiday. For wider advice, see our employment and labour practice.

Frequently asked questions

Is the festival bonus mandatory in Bangladesh?

Yes, for workers with one year's continuous service. Rule 111(5) of the Labour Rules 2015 requires two festival bonuses each year.[1]

How much is each festival bonus?

No more than one month's basic wage under the rule. Market practice pays exactly one month's basic for each of the two bonuses.[1]

Is the bonus calculated on basic or gross salary?

On basic wage. An entry-grade garment worker with a Tk 6,700 basic within the Tk 12,500 minimum wage receives Tk 6,700 per bonus.[9]

Do new employees get a festival bonus?

Not as of right until they complete one year's continuous service, though some employers pay a token amount.[1] [12]

When must the festival bonus be paid?

The rule sets no date. Pay before the employee's festival, early enough for travel.[10]

How are Hindu, Christian and Buddhist employees paid?

At their own festivals, such as Durga Puja, Christmas or Buddha Purnima. The EPZ Labour Act requires this expressly for zone workers.[5]

What is the festival bonus in export processing zones?

Two months' basic wages a year for each permanent worker, under section 53(4) of the EPZ Labour Act 2019.[5]

Is the festival bonus taxable?

Yes, as income from employment, with tax withheld under section 86. It is excluded from the definition of perquisite.[6]

What can a worker do if the bonus is not paid?

Bonus payable under the terms of employment counts as wages, so the worker can apply to the Labour Court under section 132 for recovery.[3]

Does an employer of record pay festival bonuses?

Yes. As legal employer it pays them through payroll and withholds tax, funded by the client.