Remote Employees in Bangladesh: Hiring, Paying and Protecting a Team Without an Entity in 2026

Remote employees in Bangladesh: the 2026 legal framework for foreign employers

Remote employees in Bangladesh are now a standard part of how foreign software, design, finance and customer-support teams are built. A company in London, Dubai, Singapore or San Francisco can recruit a senior engineer in Dhaka on a video call and have them working by Monday. What it cannot do is leave Bangladeshi law behind when it does so. The labour statute, the tax code, the foreign exchange rules and the 2026 data protection law all attach to the person and the work done in Bangladesh, not to the head office that signs the offer letter.

This guide is for founders, HR leads and general counsel at foreign companies with no Bangladeshi entity. It sets out the three lawful models, contractor, employer of record and own entity, explains why a foreign payroll is the riskiest choice, and covers work-from-home rules, data and equipment, salary remittance, contracts, termination, tax residence and permanent establishment exposure.

Summary: A foreign company without a Bangladeshi entity has three workable ways to engage remote employees in Bangladesh: a genuine independent contractor agreement, an employer of record that employs the person locally, or its own subsidiary or branch. Direct employment from abroad is legally possible but leaves the company exposed: Bangladeshi labour protections still apply to a worker, salary for work done in Bangladesh is taxable there and subject to withholding, and a sustained local team can create a permanent establishment that brings the foreign company into Bangladeshi corporate tax.

Key point: The location of the work, not the location of the payroll, decides which law applies. Under the Income Tax Act 2023, employment income earned in Bangladesh is deemed to arise there wherever it is paid, and the Bangladesh Labour Act 2006 treats anyone doing skilled, technical or clerical work for wages as a worker, whatever the contract calls them.

At a glance

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Table of Contents

Why remote employees in Bangladesh need a legal structure

Bangladesh has a deep pool of English-speaking engineers, analysts and support staff, and a freelancing culture that makes remote work feel informal. That informality is the trap. Companies start with one person paid by wire transfer, add a second and a third, and later discover that the relationship has the legal features of employment, with tax and foreign exchange consequences nobody planned.

Four bodies of law apply at once. The Bangladesh Labour Act 2006, as amended in 2026, sets minimum employment terms. The Income Tax Act 2023 governs salary tax and withholding, the Foreign Exchange Regulation Act 1947 and Bangladesh Bank circulars govern money from abroad, and the Personal Data Protection Act 2026 governs employee data. None exempts employers based abroad.

What "no entity" really means

A company with no Bangladeshi entity has no local registration, no employer tax file and no local bank account. It cannot perform the compliance steps an employer is expected to perform, but the obligations do not disappear. They shift onto the employee, who may end up paying tax directly, and back onto the company if the arrangement is later recharacterised.

Your options for hiring remote employees in Bangladesh

There are three lawful ways to engage people without first setting up a company, and one approach that is common but fragile. The right answer depends on headcount, duration, the work and how much control the business needs. Foreign nationals relocating to Bangladesh raise separate work permit questions, covered in our guide to employment law for expatriates in Bangladesh.

Independent contractor

A contractor agreement is the fastest route and the cheapest at the start. It works where the individual genuinely runs their own business: they choose how and when to work, serve other clients, use their own equipment, invoice for deliverables and carry their own commercial risk. Bangladesh Bank's July 2026 circular on freelancers and individual service exporters lets banks credit foreign payments for services delivered online against electronic evidence such as contracts, emails and platform statements.[7] Freelance income also benefits from the 2026 tax exemption discussed in our guide to freelancer tax in Bangladesh.

The weakness is classification. Section 2(65) of the Labour Act defines a worker as any person employed directly or through a contractor, by whatever name called, to do skilled, unskilled, manual, technical or clerical work for wages, whether the terms are express or implied.[1] [2] A full-time "contractor" who works fixed hours, reports to a manager, uses the company's systems and has no other clients looks like a worker, and the label in the contract will not decide the point.

Employer of record

An employer of record is a Bangladeshi employer that hires the individual locally, on a Bangladeshi employment contract, and makes them available to the foreign client, which directs their day-to-day work. The employer of record runs payroll, withholds tax, provides statutory leave and benefits, and handles termination under Bangladeshi law. The client pays the employer of record a service fee that covers salary, statutory costs and the service itself.

Many foreign companies use this model for their first hires because it delivers compliant local employment without incorporation. TRW provides this service: we employ staff in Bangladesh on the client's behalf, run payroll and statutory filings, and handle contracts, work permits and terminations under Bangladesh law. The governance framework is set out on our international remote work and employer of record page.

Your own entity

A subsidiary, branch or liaison office gives the business full control and a permanent footprint. Setting up a branch or liaison office requires Invest Bangladesh approval, an office, a local bank account with an inward remittance equivalent to USD 50,000 within two months, notice to Bangladesh Bank, a certificate of filing from the Registrar of Joint Stock Companies and Firms and a tax identification number.[12] Invest Bangladesh has operated since 23 August 2026 as the apex investment agency formed by merging BIDA, BEZA and the PPP Authority under the Invest Bangladesh Act 2026.[11]

An entity makes sense once a team is large or long-term, or where the business wants to contract with local customers. The trade-offs are set out in the comparison table below.

Direct employment from abroad

The fourth approach, a foreign company issuing its own employment contract to a Bangladeshi resident and paying salary by cross-border transfer, is common and not unlawful in itself. But it leaves the company carrying every Bangladeshi employment obligation without the local machinery to discharge them, so we treat it as a stopgap rather than a structure.

Why direct employment from abroad is risky

A foreign company that employs Bangladesh-based staff directly faces three distinct risks: the employment law risk that local protections apply regardless of the contract, the tax risk that withholding and reporting are not done, and the corporate tax risk that the team creates a permanent establishment.

Local labour law still applies

Choosing English, Delaware or Singapore law in the contract does not remove the protections of the Labour Act for a worker who works in Bangladesh. The Act's minimum standards on notice, leave, festival holidays, maternity benefit and termination compensation are mandatory for workers within it. A software engineer, analyst or support agent will usually be a worker; a person employed mainly in a managerial, administrative or supervisory capacity is excluded, and their protection comes from the contract.[1]

The Act is built around establishments, meaning shops, commercial and industrial premises where workers are employed.[1] A lone home-based employee of a company with no Bangladeshi office sits at the edge of that model, with little authority on the point. Do not rely on the gap: a Labour Court is unlikely to accept that the employer's choice to have no office removes statutory rights, so give every remote worker at least the statutory minimum.

Tax withholding still applies

Section 27 of the Income Tax Act 2023 deems income under the head "income from employment" to accrue or arise in Bangladesh, wherever it is paid, if it is earned in Bangladesh.[5] Section 86 then requires the person responsible for paying employment income to deduct tax at the time of payment, at the average rate applicable to the employee's estimated total income.[5] The section does not exempt foreign payers.

A person who fails to deduct, deducts too little or fails to deposit tax is treated as an assessee-in-default under section 143 and becomes liable for the tax not deducted.[5] In practice the National Board of Revenue has limited reach over a foreign company with no local presence, so the burden falls first on the employee, who must pay directly under section 151 where tax has not been deducted.[5] But the employer's exposure revives the moment the company registers, opens an office or is found to have a permanent establishment.

No registration, no compliance trail

Without a Bangladeshi entity, the employer cannot easily file withholding returns, issue tax deduction certificates or keep the registers the Labour Act and Labour Rules 2015 expect. The labour law compliance record that protects an employer in a dispute, from appointment letter to leave records, simply does not exist.

Work-from-home rules in Bangladesh

Bangladesh has no dedicated telework statute, and the Labour Act does not contain a remote work chapter. The general rules therefore apply to home-based staff as they would to office staff, and the employment contract and a written remote work policy fill the gaps.

Working hours, rest and overtime

An adult worker may not ordinarily be required to work more than eight hours a day, extendable to ten with overtime, or more than 48 hours a week; total hours including overtime may not exceed 60 in a week and must average no more than 56 over a year.[1] Overtime is paid at twice the ordinary rate of basic wage and dearness allowance.[1] A worker in a shop or commercial establishment is entitled to a weekly holiday of one and a half days.[1]

For a remote worker these rules are hard to police, which is why time records matter: if hours are not recorded, the employee's account of evening calls with a US team will usually be preferred.

Leave and holidays

Workers are entitled to ten days' casual leave and fourteen days' sick leave with full wages in a calendar year, and to annual leave of one day for every eighteen days worked after a year's continuous service.[1] Since the 2026 amendments, festival holidays rose from eleven to thirteen days a year and maternity benefit from 112 to 120 days, split equally before and after delivery.[3] The Labour Rules 2015 also require two festival bonuses a year for workers with a year's continuous service, each capped at one month's basic wage.[4] Our guide to employee benefits in Bangladesh covers the full set.

Women working at night

A woman worker may not be required to work between 10 pm and 6 am without her consent.[1] Teams supporting American or European hours should record that consent in writing and make the schedule voluntary, with a genuine daytime alternative.

What a remote work policy should cover

A short written policy prevents most disputes. It should state the place of work, core hours in Bangladesh time, how hours and overtime are recorded, the equipment provided, who pays for internet and electricity, data security rules and how equipment is returned on exit.

Data protection and equipment for remote staff

Remote employers handle more personal data than they realise: identity documents, bank details, tax numbers, sick-leave health information and monitoring logs. The Personal Data Protection Act 2026 now governs all of it.

The Personal Data Protection Act 2026

Parliament passed the Personal Data Protection Act 2026, Act No. 63 of 2026, in April 2026, repealing the interim government's 2025 ordinance.[8] The Act reaches processing outside Bangladesh connected with products or services for data subjects in Bangladesh, and covers individuals working in Bangladesh, so a foreign employer processing its Bangladeshi staff's data from abroad should assume it is in scope.[8] The law is consent-centric, and enforcement sits with the National Data Management Authority, which operates under the Prime Minister's Office.[9]

What it means for an employer

Processing of sensitive data without consent is permitted where needed to perform duties or exercise rights conferred by law in connection with employment, alongside contract, legal obligation and other grounds.[8] Data controllers must apply technical and organisational security measures, keep data no longer than necessary, maintain records for at least five years and notify the Authority of breaches likely to cause significant damage, in a manner to be set by regulation.[8]

Large-scale transfers of sensitive identifiers, such as national ID, passport and tax numbers, and of biometric data are subject to notification, and administrative fines for security and data subject rights failures can reach Tk 25 lakh.[8] Our guide to Bangladesh data protection law covers the Act in full.

Monitoring and AI tools

Keystroke loggers, screenshot tools and AI productivity scoring are common in remote teams, and covert monitoring is hard to justify under a consent-based law. Tell employees what is monitored and why, limit retention and keep a human decision-maker behind any disciplinary step. TRW's workplace AI and monitoring practice advises on these policies.

Equipment

No statute dictates who supplies a laptop, so the contract should: who owns the equipment, what security software runs on it, how a loss is reported and how it is returned on exit. Shipping hardware into Bangladesh can attract customs duty, so many employers pay a local purchase allowance through payroll instead. Write any internet or home-office allowance into the contract and payslip.

Paying salaries from abroad

Foreign currency earned by a person in Bangladesh must be brought into the country through the formal banking system. How the money arrives also shapes how it is taxed and whether it can be proved later.

Inward remittance through authorised dealer banks

Bangladesh Bank's FEPD-1 Circular No. 22 of 22 July 2026 sets out how authorised dealer banks handle foreign receipts for services delivered online by freelancers and individual service exporters. Banks may credit receipts on the strength of electronic evidence, remittances up to USD 20,000 or its equivalent may be credited without Form-C, and online payment gateways may be used for small-value receipts of up to USD 10,000 per transaction.[7] Retention of earnings abroad, including in foreign accounts or virtual assets outside permitted arrangements, is a violation of the Foreign Exchange Regulation Act 1947.[7]

Salary is not freelance income

The circular is written for service exporters, and a monthly salary from a foreign employer is not a service export by the employee; nor does the 2026 freelancing exemption extend to employment income. The bank narrative, the contract and the payslip must tell the same story, or the employee faces source-of-funds questions and the employer an unexpected misclassification argument.

Withholding at the bank

In June 2026 the NBR chairman stated publicly that there was no provision for tax deduction on remittances of freelancers and expatriates, after reports that a bank had deducted about 7.5 per cent from an inward remittance.[10] The Finance Act 2026 separately cut withholding on certain inward remittances of fees and service charges from 7.5 to 5 per cent.[6] Bank practice is not uniform, so employees should keep the bank's certificate for any amount deducted and claim credit in the return.

How an employer of record changes the flow

Under an employer of record arrangement the foreign client pays the service fee to the Bangladeshi employer through the banking channel, and the employer pays salary in taka, deducts tax under section 86 and deposits it with the government. The employee receives an ordinary Bangladeshi payslip and tax certificate. For many employees that is the most attractive feature of the model, because it removes the guesswork from their own return.

Time zones, contracts and the governing law

Most remote employment disputes trace back to a contract written for another country: one that omits the appointment letter particulars, uses at-will termination language and gives notice far shorter than the statute requires.

What the contract must contain

Section 5 of the Labour Act requires an appointment letter and identity card for every worker, and rule 19 of the Labour Rules 2015 lists the particulars the letter must state, including designation, class of worker, joining date, wages and other financial benefits.[4] Our guide to employment contracts in Bangladesh sets out the full checklist, and our guide to hiring and firing laws in Bangladesh covers probation and confirmation.

Time zones and core hours

Bangladesh Standard Time is six hours ahead of GMT, so overlap with London falls late in the Dhaka day and with the Americas overnight. Define core hours in Bangladesh time and treat regular late calls as working time; an "available as needed" clause invites overtime claims.

Currency, governing law and disputes

State the salary currency, any exchange rate mechanism and who bears bank charges. A foreign governing law clause may govern the contract, but it does not displace the statutory minimum for a worker, and grievances under section 33 of the Labour Act go to the Labour Court in Bangladesh. For managers outside the Act, choice of law and arbitration clauses carry more weight. Draft restrictive covenants and IP assignment for Bangladesh.

Termination of remote employees in Bangladesh

Termination is where informal arrangements for remote employees in Bangladesh unravel. An email ending the relationship "with immediate effect" is likely to breach the Labour Act if the person is a worker.

Termination without cause

Section 26 lets an employer terminate a permanent worker otherwise than by dismissal on 120 days' written notice for a monthly-rated worker, or 60 days for others, or wages in lieu of notice. The employer must also pay compensation of 30 days' wages for every completed year of service, or gratuity if payable, whichever is higher, on top of other benefits.[1] Final dues must be paid within thirty working days of the employment ending.[1] Our guide to severance pay in Bangladesh sets out each calculation.

Resignation and misconduct

A permanent worker may resign on 60 days' written notice.[1] Since the 2026 amendments, a resigning permanent worker is entitled to compensation of 7 days' wages per completed year for service up to three years, 15 days for service over three and under ten years, and 30 days or gratuity, whichever is higher, for ten years or more.[3] Dismissal for misconduct requires a written charge, a hearing and an inquiry, and is covered in our guide to terminating employees in Bangladesh.

Practical points for remote exits

Serve notice in writing to the recorded address as well as by email, and keep proof of delivery. Agree the return of equipment and data before the last day, and pay notice in lieu where continued system access is a security concern. For a manager outside the Act the contract governs, but a negotiated settlement remains the cleanest exit.

Tax residence of the employee

For tax, what matters is where the employee is, not where the employer is. Remote employees in Bangladesh who live there will almost always be resident.

The residence test

An individual is resident for an income year if present in Bangladesh for 183 days or more in that year, or for 90 days or more in that year having been present for 365 days or more in the four preceding years.[5] A resident is taxed on worldwide income, including income received outside Bangladesh.[5] The income year runs from July to June.

Rates and returns

For assessment year 2026-27, a general resident taxpayer pays nothing on the first Tk 400,000 of taxable income, then 10, 15, 20 and 25 per cent on successive bands and 30 per cent on the balance; a non-resident who is not a non-resident Bangladeshi pays a flat 30 per cent.[6] An individual whose total income for the latest income year exceeds Tk 6 lakh must pay advance tax in instalments.[5] Where no employer withholds, the employee must pay directly and declare the salary in the return.[5] The slabs are explained in our guide to income tax rates in Bangladesh.

Double taxation

The employee's home ties or the employer's home country may lead to a second claim on the same salary. Where a double tax treaty applies, the employment article usually gives the primary taxing right to the country where the work is physically performed, so check the treaty before relying on home-country payroll withholding.

Permanent establishment risk in summary

The largest hidden cost of an informal remote team is not the employee's tax. It is the risk that the foreign company itself becomes taxable in Bangladesh.

The statutory definition

Section 2(92) of the Income Tax Act 2023 defines a permanent establishment as a fixed place of business through which a person's business is wholly or partly carried on, and expressly includes places of management, branches, offices and, under clause (k), the furnishing of services, including consultancy services, by any person or by manpower engaged for the purpose, where those activities continue in Bangladesh.[5] Income arising through a permanent establishment in Bangladesh is deemed to arise in Bangladesh.[5]

Where remote teams create exposure

A single developer writing code for the group's own product is a lower risk than a sales lead who negotiates contracts with Bangladeshi customers, a country manager who takes strategic decisions from Dhaka, or a team that delivers services to clients in Bangladesh. Clause (k) is the provision that should worry service businesses, because it does not depend on an office. The Finance Act 2026 also made withholding suffered by non-residents without a permanent establishment a final tax, which increases the stakes of the line between the two positions.[6] We analyse the tests, treaty overrides and mitigations in our dedicated insight on permanent establishment risk in Bangladesh.

How the models compare

An employer of record reduces but does not eliminate the risk, because the activities of the people it places still matter. Genuine contractor relationships reduce it further. Only an entity removes the uncertainty, by accepting a taxable presence on defined terms.

Choosing the right model

The model should follow the facts of the role, not the other way round. The table compares the options on the points that matter most.

A sensible sequence for most foreign companies is to hire through an employer of record, keep genuine contractors for project work, and move to an entity once scale or local business makes it cheaper and cleaner.

Step by step: setting up a compliant remote team

The following sequence is the one we use when a foreign client wants a compliant team in place quickly.

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The organisations below are the ones that matter in practice.

How TRW's employer of record service works

TRW is a Dhaka-headquartered law firm with offices in London, Dubai, Singapore, Mumbai and Bengaluru. Through our employment and labour practice, we act as employer of record for foreign companies that want remote employees in Bangladesh without incorporating. We employ the individual under a Bangladeshi employment contract, run payroll and statutory filings including tax withholding, and handle work permits for foreign staff and terminations under Bangladesh law.

Because TRW is a law firm, the contract, remote work policy, privacy notice and any exit are handled by one team. We also run payroll for companies with an entity, review contractor arrangements for misclassification and advise on visa sponsorship and relocation.

What to watch in 2026 and 2027

Three developments will shape how foreign employers manage Bangladeshi teams over the coming year. First, the regulations under the Personal Data Protection Act 2026 on breach notification and transfers will turn general duties into concrete deadlines. Second, the 2026 amendments moved Wage Board revisions to a three-year cycle.[3] Third, bank practice under Circular No. 22 and the NBR's position on withholding from inward remittances are still settling, and both affect how remote salaries are received and evidenced.[7] [10]

Frequently asked questions

Can a foreign company employ remote employees in Bangladesh without a local entity?

Yes, but direct employment from abroad leaves the company carrying Bangladeshi labour, tax and permanent establishment obligations without local machinery. Most companies use an employer of record or, for genuinely independent work, a contractor agreement.

Does Bangladeshi labour law apply if the contract is governed by foreign law?

For a worker within the Labour Act, yes. The statutory minimum on notice, leave, holidays and termination compensation applies to work done in Bangladesh, and managers excluded from the Act rely on their contract.[1]

Is salary paid from abroad taxable in Bangladesh?

Yes. Employment income earned in Bangladesh is deemed to arise there wherever it is paid, and a resident is taxed on worldwide income.[5]

When is a remote employee tax resident in Bangladesh?

When present for 183 days or more in the July to June income year, or for 90 days or more in the year after 365 days or more in the previous four years.[5]

Who withholds tax if the employer is abroad?

Section 86 places the duty on the person paying employment income. If no one deducts, the employee must pay directly, and advance tax applies where total income exceeds Tk 6 lakh. An employer of record withholds locally.[5]

Can a remote employee be paid in US dollars?

Foreign-currency pay must arrive through an authorised dealer bank or a permitted payment channel, and earnings may not be retained abroad outside permitted arrangements.[7]

How much notice is needed to terminate a remote worker in Bangladesh?

Under section 26, 120 days for a monthly-rated permanent worker or wages in lieu, plus 30 days' wages per completed year of service or gratuity, whichever is higher.[1]

Does the Personal Data Protection Act 2026 apply to a foreign employer?

It should be assumed to. The Act reaches processing outside Bangladesh connected with data subjects in Bangladesh and covers individuals working there.[8]

Can remote employees create a permanent establishment?

Yes. The statutory definition includes services furnished through people engaged in Bangladesh where the activities continue there, as well as places of management and offices.[5]

Does TRW act as employer of record in Bangladesh?

Yes. 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.