Fixed-fee memo · Employment and tax
Employment model memo for foreign companies hiring in Bangladesh
Before you hire employees in Bangladesh, we compare a local entity, independent contractors and a third-party employer for your actual roles, and set out the labour, tax and permanent establishment consequences in a written memo delivered on a date fixed at the outset.
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Who this is for
Why it matters now
Hire employees in Bangladesh
Foreign companies that want to hire employees in Bangladesh usually choose between three routes: setting up a local entity or branch, engaging individuals as independent contractors, or using a local third-party employer. Each route allocates legal and tax risk differently, and the choice needs fresh analysis in 2026 because the Bangladesh Labour (Amendment) Act 2026, Act No. 43 of 2026 dated 10 April 2026, amends the definitions section of the Labour Act 2006 along with more than sixty other provisions [1]. The interim Ordinance it replaced had brought employees and officers into the definition of worker, and Parliament removed those terms before passing the Act [2].
Whether a person is a worker matters because it decides who has the Act's protections, who can join a union and who is counted towards thresholds such as the provident fund requirement for establishments with 100 or more permanent workers [2]. At least 20 workers can apply to register a union, and no more than three unions may be registered in an establishment or group [3]. A contractor arrangement that works like employment in practice can be challenged, and a third-party employer does not settle who really controls the work. The answer turns on each role, not on the label in the contract.
Tax follows the same facts. Under the Income Tax Act 2023, a permanent establishment covers a fixed place of business and also the furnishing of services, including consultancy, through employees or other personnel where those activities continue in Bangladesh, as well as a commercially dependent person acting in connection with sales [4][5]. Withholding applies as well: published rates include 30% on salary paid to a non-resident and 10% to 20% on many service fees, subject to treaty relief [6]. A hiring model chosen without this analysis can create a tax presence the company did not plan for.
What is included
What our hire employees in bangladesh service includes
A structured questionnaire and call covering each planned role: who directs the work, where it is done, how people are paid, what equipment they use, whether they deal with Bangladesh customers and how long the engagement is expected to last.
A side-by-side analysis of a local subsidiary or branch, independent contractors and a third-party employer, covering set-up steps, ongoing obligations, termination exposure, control of the work and how easily you can move from one route to another.
An assessment of whether each role is likely to fall within the amended definition of worker, and what follows: union rights, leave, provident fund or Progoti participation, layoff compensation and end-of-service benefits.
A review of whether your planned activities could create a permanent establishment under the Income Tax Act 2023 and any applicable tax treaty, including service activity, dependent agents and significant digital presence.
A plain summary of who must deduct tax, on which payments and at what published rates, for salaries, contractor fees and cross-border service payments, with the points where treaty relief or a reduced-rate certificate may be relevant.
If expatriates will be based in Bangladesh, an explanation of why a registered local office or company is needed to sponsor work permits, and how that affects the choice of route.
A written memo with a clear recommendation, a risk table and next steps, delivered on the date fixed in the engagement letter, followed by a call to answer questions from your HR, tax or legal team.
How it works
Hire employees in Bangladesh, step by step
- Scoping callBefore work starts
We discuss your business plan, the roles you expect to fill, timing and any existing arrangements in Bangladesh, then confirm the scope, the fixed fee and the memo delivery date in a written engagement letter.
- Questionnaire and document reviewAfter engagement
You complete a short questionnaire for each role and send any draft contracts, offer letters, service agreements or group policies. We raise follow-up questions in one consolidated list so your team is not asked twice.
- Labour and tax analysisAfter the questionnaire is returned
We test each role against the amended Labour Act, assess permanent establishment and withholding exposure under the Income Tax Act 2023, and compare how each route to hire employees in Bangladesh handles that exposure.
- Memo deliveredDate fixed in the engagement letter
You receive the written memo on the agreed date, with an executive summary for decision-makers, a role-by-role risk table and a list of the documents and registrations each route would need.
- Follow-up callAfter delivery
We walk your team through the memo, answer questions from HR, tax and legal, and, if you wish, scope the next step, such as incorporation, contracts or work permits, as a separate fixed-fee engagement.
The memo is priced as a single fixed fee. The fee depends on the number of distinct roles, whether expatriates are involved, how many existing arrangements we need to review and whether you need treaty analysis for more than one country. The scope, fee and delivery date are confirmed in writing before work starts, and any government fees are passed through at cost.
We confirm the fee in writing before any work starts. Government fees, court fees and stamp duty are passed through at cost.Questions
Hire employees in Bangladesh: questions
Can a foreign company hire employees in Bangladesh without a local entity?
It can engage people through contractors or a third-party employer, but each route has limits. Services furnished through employees or other personnel in Bangladesh can create a permanent establishment [5]. If you want to bring in foreign staff, work permits are issued to registered companies and offices, and new permit applications require the office permission letter or incorporation documents [7][8]. The memo tests these routes against your actual roles and explains when a subsidiary or branch becomes the safer option.
How did the 2026 Act change the definition of worker?
The Bangladesh Labour (Amendment) Act 2026 is Act No. 43 of 2026 and amends section 2 of the Labour Act 2006, among many other sections [1]. The Ordinance that preceded it had included employees and officers within the definition of worker, but the bill passed by Parliament removed both terms [2]. Because the outcome depends on what each person actually does, we read the gazetted wording against each role rather than relying on job titles.
Does using contractors create permanent establishment risk?
It can. The Income Tax Act 2023 defines a permanent establishment to include the furnishing of services, including consultancy, through employees or other personnel where those activities continue in Bangladesh, and a person commercially dependent on a non-resident who carries on activity connected with its sales [4][5]. A significant digital presence with 100,000 or more customers or subscribers in Bangladesh can also create one [5]. Treaty provisions must be checked alongside the domestic definition [5].
What tax must be withheld on payments to people and suppliers abroad?
Published withholding rates include 30% on salary or remuneration paid to a non-resident, 10% to 20% on technical, advisory and consultancy services depending on whether the payee is an individual, and 20% on royalties, with lower rates possible under a tax treaty or a certificate from the National Board of Revenue [6]. The memo maps which payments in your chosen model attract withholding and who is responsible for deducting it.
Is the memo delivered in a fixed timeframe?
Yes. The delivery date is set in the engagement letter before work starts, once we know how many roles and arrangements are involved. The date assumes the questionnaire and documents are returned promptly; if new facts emerge that change the scope, we tell you in writing before any change to the fee or the date. You then have a follow-up call to discuss the memo with your team.
Will you recommend a third-party employer provider?
No. The memo explains how a third-party employer arrangement works under Bangladesh labour and tax law, what the contract with any provider should cover and which risks stay with your company, but it does not name or rank providers. If you have already chosen one, we can review its agreement as a separate task, focusing on control of the work, termination, data, tax deductions and the transfer of staff if you later set up your own entity.
Sources
- Bangladesh Labour (Amendment) Act 2026 (Act No. 43 of 2026), Laws of Bangladesh
- Prothom Alo: Passage of labour law ordinance (13 April 2026)
- Dhaka Tribune: National Parliament passes labour bill
- National Board of Revenue: Income Tax Act 2023
- PwC Worldwide Tax Summaries: Bangladesh corporate residence (reviewed 31 July 2026)
- PwC Worldwide Tax Summaries: Bangladesh withholding taxes (reviewed 31 July 2026)
- Invest Bangladesh: Commercial offices services (work permit)
- Invest Bangladesh (formerly BIDA): Procedure for work permit application
Related
Start with a consultation
Tell us the facts and deadlines. We will confirm scope, fee and timeline in writing before we begin.
General information on the law of Bangladesh, not legal advice. Sending an enquiry does not create a lawyer-client relationship.
