Social Security Law in Bangladesh 2026: Pensions, Safety Nets, Employer Benefits and Incentive Pay

Social security law Bangladesh: the 2026 framework

Social security law Bangladesh employers, workers and policymakers deal with in 2026 is not one statute. It is a layered system: tax-financed safety nets planned under the National Social Security Strategy, a contributory state pension under the Universal Pension Management Act 2023, a set of employer-funded benefits imposed by the Bangladesh Labour Act 2006, a donor-backed employment injury pilot in the garment sector, and a separate, budget-funded pension for government servants. Each layer has its own legal source, its own paymaster and its own gaps.

This guide maps those layers as they stand on 20 October 2026, after the Labour (Amendment) Ordinance 2025 became the Bangladesh Labour (Amendment) Act 2026, after the first budget of the elected government, and while the strategy for 2026 to 2035 is being settled. It also covers the reward side of the employment relationship, namely incentive pay, bonuses, profit participation and employee share schemes, because for most private employers social security and remuneration are planned, costed and taxed together.

Summary: Bangladesh has no single social insurance code. Old-age and poverty protection comes from state safety-net programmes and the voluntary Universal Pension Scheme; workplace protection comes from employer obligations under the Labour Act 2006, including provident fund or Progoti, gratuity, group insurance, maternity benefit and injury compensation; garment workers also have a pilot Employment Injury Scheme; and government servants receive a non-contributory pension. Incentive pay, the workers' participation fund and share schemes sit alongside these benefits and follow their own tax rules.

Key point: Since 10 April 2026, an employer with at least 100 permanent workers must set up a provident fund within six months if two-thirds of them demand one in writing, unless it lets interested workers join the Progoti scheme of the Universal Pension Scheme and pays half the contribution. The same 2026 Act lets the government replace employer injury liability with an Employment Injury Scheme Fund, sector by sector.

At a glance

Swipe or scroll →

Table of Contents

What social security law Bangladesh covers in 2026

In Bangladesh, social security covers four distinct legal regimes, and confusing them is the root of most planning errors. The first is non-contributory social protection: allowances, food transfers and public works financed from the budget and coordinated under a national strategy rather than a single statute. The second is contributory pension saving through the Universal Pension Scheme. The third is employer liability under the Labour Act 2006, which makes the employer, not the state, the payer of most workplace benefits. The fourth is the public service pension, paid by the state as employer.

Why the employer carries so much of the load

Unlike systems with a payroll-funded national insurance fund, Bangladesh historically placed workplace risks directly on the employer. Injury compensation, death benefit, gratuity and maternity pay are owed by the owner of the establishment and enforced through the Labour Court.[1] The 2026 amendments, discussed below, take the first steps towards pooled social insurance.[2]

How this guide relates to our other analysis

Benefit-by-benefit costing, overtime, leave and tax treatment are in our guide to employee benefits in Bangladesh. Trustee rules, gratuity calculation and recovery of unpaid dues are in our guide to the provident fund and gratuity in Bangladesh. Registers, inspections and penalties are in labour law compliance in Bangladesh. This article stays at the level of the system: how the state, the employer and the individual share risk, and where reward planning fits.

The National Social Security Strategy and the 2026 to 2035 framework

The National Social Security Strategy, adopted in 2015, introduced a life-cycle approach to social protection, grouping programmes around childhood, working age, old age and disability, and its implementation period ends in June 2026.[8] The strategy is a policy instrument, not legislation. It does not create enforceable individual rights, but it drives budget allocations, programme design and the government's legislative agenda for social insurance.

The successor framework

A final review of the strategy and its second action plan, dated 8 February 2026 and published through the Social Security Policy Support programme of the Cabinet Division and the General Economics Division, sets out a strategic framework for 2026 to 2035.[8] Its main proposals are a household-level Family Card paying Tk 2,500 a month, a target of around 2 crore households by 2029-30, consolidation to around 30 programmes by 2030 and 15 to 20 core programmes by 2035, and social protection spending rising progressively to 3 per cent of GDP.[8]

A timetable for social insurance

For employers, the framework's social insurance chapter matters most. Under a National Social Insurance Scheme it proposes an employment injury insurance Act by 2027, an unemployment insurance pilot in 2028-29, a maternity insurance pilot in 2028 to 2030, an umbrella social insurance Act by 2030 and full formal-sector coverage by 2035. It also sets Universal Pension Scheme targets of 5 million enrollees by 2030 and 20 million by 2035.[8] These are proposals, not law, but the direction is clear.

What the FY2026-27 budget actually funds

The first budget of the elected government proposed Tk 1,44,338 crore for social safety nets, about 2.1 per cent of GDP and 15.39 per cent of the budget, across 90 programmes, down from 95. The Family Card received Tk 14,500 crore for 41 lakh households.[9] The headline is misleading. Only Tk 56,229 crore went to 48 pro-poor programmes; Tk 35,379 crore was for pensions and Tk 27,000 crore for agricultural subsidies. Finance ministry officials said only pensions of low-income government employees are counted in the safety-net budget.[9]

The Universal Pension Scheme under the Universal Pension Management Act 2023

The Universal Pension Management Act 2023 (Act No 4 of 2023) is the closest thing Bangladesh has to a general pension statute. Section 4 requires the government to establish the National Pension Authority as a statutory body, and the Authority's governing board approves investment guidelines covering government securities, other low-risk securities and profitable infrastructure.[4] The scheme was launched on 17 August 2023.[6]

Who may join and what they receive

Under section 14, citizens aged 18 to 50 may join on the basis of their national identity card, and older citizens may join under special consideration. A monthly pension requires at least ten years of continuous contributions and is paid from age 60. If a pensioner dies before 75, the nominee receives the pension for the remaining period up to the pensioner's 75th birthday; if a contributor dies before completing ten years, deposits are returned to the nominee with profit. Up to 50 per cent of deposits may be withdrawn as a loan.[4]

Voluntary for now

Participation is voluntary until the government makes it compulsory by gazette notification, and employees of government, semi-government and autonomous bodies are excluded until a notification provides otherwise.[4] No compulsion notification has been issued. Contributions qualify for an investment tax rebate and pension income is exempt from income tax, and the government may pay part of the contribution for low-income contributors.[4]

The four schemes

The Universal Pension Scheme runs four schemes. Probash is for Bangladeshis working abroad, Progoti for employees of private and non-government institutions, Surokkha for the self-employed, and Somota (also transliterated Samata) for very poor self-employed citizens.[5] Somota is open to people earning less than Tk 60,000 a year; the member pays Tk 500 a month and the government adds Tk 500.[6] A fifth scheme, Prottoy, designed for employees of autonomous and state bodies, met resistance and was never implemented.[7]

Changes in 2025 and 2026

In May 2025 the Authority's governing board allowed contributors reaching pensionable age to take up to 30 per cent of their deposits as a one-time lump sum, cut the minimum monthly contribution for Probash and Progoti from Tk 2,000 to Tk 1,000, raised the Progoti maximum from Tk 10,000 to Tk 15,000 and brought outsourced service workers into Progoti.[5] In June 2026 the government directed Bangladesh Bank and all scheduled banks to enrol their staff in Progoti and endorsed a target of at least one pension participant in each of about 40 million families by 2030. A Shariah-based option and lifelong benefits for nominees remain under consideration.[7]

Where enrolment stands

The legal framework is ahead of public uptake. More than three lakh people joined in the first ten months but only 38,034 in the following twenty; new registrations were 240 in January 2026 and 148 in February. Somota accounts for nearly three-quarters of members.[6] By 30 May 2026 enrolment stood at 377,930, with 48 banks and financial institutions having signed agreements with the Authority.[7]

Employer-side social security under the Labour Act 2006

For private employers, the operative social security law Bangladesh imposes is the Labour Act 2006 and the Labour Rules 2015. The Act does not use the words social security, but five obligations do the work of a social insurance system: retirement savings, gratuity, group insurance, maternity benefit and injury compensation. Detailed calculations are in our linked guides.

Provident fund or Progoti

Section 264 lets any private employer establish a provident fund, with contributions of 7 to 8 per cent of basic wage from each permanent worker after one year's service, matched by the employer. As substituted in 2026, section 264(10) makes a fund compulsory for an owner of an establishment with at least 100 permanent workers if two-thirds of them demand one in writing, and section 264(11) gives six months to frame rules and start it.[1] The owner is exempt if it arranges for interested workers to join Progoti, paying 50 per cent of the contribution, and owes nothing for a worker who declines in writing.[1] [2]

That link between the Labour Act and the Universal Pension Scheme is the most important structural change in private-sector social security law Bangladesh has made in a decade. It gives employers a choice between running a trust fund, with trustee boards, investment rules requiring at least half of the fund in government-owned investment sectors and annual audit, or outsourcing the pension to the state scheme.[1] The trade-offs are covered in our provident fund and gratuity guide.

Gratuity and death benefit

Gratuity is defined in section 2(10) as at least 30 days' wages for every completed year of service, or part exceeding six months, and 45 days' wages for each year where service exceeds ten years.[3] Section 19 adds a death benefit for a worker who dies in service: 30 days' wages per completed year, or 45 days' where death occurs at work or follows a workplace accident, or gratuity if higher, payable in addition to retirement benefits.[3] Section 19 was amended in 2026, so check qualifying periods against the current text.[2]

Group insurance under section 99

Section 99 requires an establishment with at least 100 permanent workers to maintain group insurance. Claim money is additional to the worker's other entitlements; on a death, the employer must pursue the claim and ensure payment to the dependants, and the insurer and employer must settle the claim within 120 days. Where a central fund exists for a 100 per cent export-oriented sector, an equivalent amount is paid from that fund instead.[1]

Maternity benefit

The 2026 Act replaced eight weeks with 60 days in sections 45 and 46, so a woman worker is entitled to maternity benefit for 60 days before and 60 days after delivery, 120 days in total.[2] Section 48, as substituted, calculates the benefit at the average daily wage, which is the most recently fixed total monthly wage divided by 26, payable in cash, into a bank account or by electronic transfer.[1] Maternity benefit is therefore an employer-funded social insurance payment; the 2026 to 2035 framework proposes a pooled maternity insurance pilot only from 2028.[8]

Compensation for injury

Under section 150 the employer must compensate personal injury caused by an accident arising out of and in the course of employment, unless incapacity lasts three days or less or, in non-fatal cases, the worker was intoxicated or wilfully ignored safety rules. Listed occupational diseases count as accidents.[1] Section 151 fixes the amounts by reference to the Fifth Schedule: a sum on death, payable in addition to any retrenchment, termination or resignation dues, a sum for permanent total disablement, a percentage of that sum for partial disablement, and monthly payments for temporary disablement after a four-day waiting period.[1] The current figures are set out in our employee benefits guide.

The Labour (Amendment) Ordinance 2025 and the 2026 Act

The interim government approved the Bangladesh Labour (Amendment) Ordinance 2025 on 17 November 2025. On 9 April 2026 the Jatiya Sangsad passed a bill to enact the ordinance, with some amendments, as an Act of Parliament.[14] It became the Bangladesh Labour (Amendment) Act 2026, Act No 43 of 2026, dated 10 April 2026.[2] Policies aligned with the ordinance should be checked against the Act.

Changes that matter for social security

• Maternity: leave before and after delivery is now expressed as 60 days each, and the benefit formula in section 48 was substituted.[2]
• Employment Injury Scheme Fund: new section 151A empowers the government to establish the fund and, by gazette notification, apply it to specified industries or sectors, after which employer liability under section 150 ceases for employers in those sectors.[2]
• Provident fund: section 264 was amended to add the 100-worker threshold, the two-thirds trigger and the Progoti alternative.[1] [2]
• Participation fund: section 242, on the use of the participation fund, was amended.[2]
• Continuous service and lay-off: continuous service is defined as 240 days in twelve months or 120 days in six months, and registered workers with at least three months' service are entitled to full lay-off compensation.[14]

The Act also eased trade union registration and prohibited blacklisting and discrimination, which changes the bargaining environment for benefit disputes.[14] Our overview of labour law in Bangladesh covers the wider reform, and these changes now form part of social security law Bangladesh employers must apply.

The Employment Injury Scheme pilot for the garment sector

The Employment Injury Scheme pilot began in June 2022 for export-oriented ready-made garment factories, covering about 2.8 million workers, with factories in export processing zones included through funding from the zones authority.[10] It is the first attempt in Bangladesh at a no-fault, pooled employment injury insurance of the kind described in ILO standards, and sits within the National Social Insurance Scheme planned under the strategy.[10]

How the pilot is funded and governed

During the pilot, benefits are funded voluntarily by international apparel brands, which pledge 0.019 per cent of their sourcing value; participating brands have grown from seven to more than 80. Employers contribute to the existing Central Fund rather than directly to the scheme. Governance involves a governing body, a project support unit, the Central Fund and the Department of Inspection for Factories and Establishments, which handles inspections and medical assessments, with technical support from the ILO and GIZ.[10]

What injured workers receive

The defining feature is periodic payments. A worker's dependants receive a monthly death benefit of 40 to 60 per cent of former wages depending on the number of dependants, and a disabled worker receives up to 60 per cent of former wages according to an assessment of lost capacity. Where the monthly sum would be below Tk 1,000, a lump sum is paid instead.[10]

From pilot to statute

The pilot is planned to run from 2022 to 2027, followed by an amendment of the Labour Act to make the scheme mandatory, placement under the Ministry of Labour and Employment, and gradual extension to other sectors; the estimated cost is about 0.15 per cent of wages.[10] Section 151A now supplies the legal hook, and the 2026 to 2035 framework targets an employment injury insurance Act by 2027.[2] [8] Until a sector is notified, employers in it remain liable under section 150 and should insure that exposure.

Government employee pensions

Government servants sit outside both the Labour Act and, for now, the universal pension, which excludes employees of government, semi-government and autonomous bodies until a notification brings them in.[4] Their pension is a non-contributory, defined-benefit entitlement under the public service rules, paid from the budget. That is why pensions appear inside the safety-net allocation: Tk 35,379 crore in the FY2026-27 proposal, a classification that economists criticise because it inflates the figure presented as support for the poor.[9]

The failed move to contributions

The Prottoy scheme was intended to bring employees of autonomous and state-owned bodies into a contributory model under the universal pension framework. It met resistance and was not implemented.[7] Any future attempt to move new public-sector entrants to contributory pensions will need a fresh notification under section 14 of the 2023 Act.[4]

The National Pay Scale 2026

On 31 August 2026 the cabinet chaired by Prime Minister Tarique Rahman approved the National Pay Scale 2026, effective from 1 July 2026 and phased in. Basic pay rises in three phases to 1 July 2027, with allowances from 1 January 2028. Net pensions increase on a slab basis: 100 per cent up to Tk 9,000, 75 per cent from Tk 9,001 to Tk 20,000, 65 per cent from Tk 20,001 to Tk 30,000, 60 per cent from Tk 30,001 to Tk 40,000 and 55 per cent above Tk 40,000. The government also plans to introduce One Rank One Pension in phases by 2030.[13]

Employee incentives and remuneration: bonuses, ESOPs and profit participation

Social security law Bangladesh sets the floor; incentives and remuneration decide whether an employer can recruit and retain. Reward is regulated less tightly than benefits, but four rules shape every package: the definition of wages, the festival bonus, the workers' participation fund and the tax treatment of incentives and share schemes. Base pay, minimum wages and contract terms are covered in our guides to the minimum wage in Bangladesh and employment contracts in Bangladesh.

Bonuses and incentive pay

The festival bonus derives from the Labour Rules 2015 rather than the Act itself; our employee benefits guide covers entitlement, timing and market practice. Performance and incentive bonuses are contractual. For tax, salary includes bonuses, and a perquisite is any payment or benefit, including an incentive bonus, other than basic salary, festival allowance, leave encashment, overtime and contributions to recognised funds.[11] An incentive bonus therefore counts toward the employer's perquisite limit, while a festival allowance does not.

Profit participation under Chapter XV

Chapter XV of the Labour Act requires companies above the statutory size thresholds to establish a participation fund and a welfare fund and to pay a share of annual net profit into them for the benefit of workers.[1] The 2026 Act amended section 242, on how the participation fund is used.[2] Because the fund is statutory, it cannot be offset against a discretionary bonus pool; the two must be budgeted separately. The rate, split and beneficiary rules are explained in our provident fund and gratuity guide.

Employee share schemes and ESOPs

Bangladesh has no dedicated ESOP statute. Section 58 of the Companies Act 1994 bars a company from buying its own shares except through a court-sanctioned capital reduction and, subject to exceptions for private companies, from giving financial assistance to buy its shares. Practitioners argue that issuing new shares to employees falls outside the financial assistance ban, but that reading is untested in court.[12] For listed issuers, rule 4(1)(l) of the BSEC Public Issue Rules 2015 allowed up to 15 per cent of an IPO to be allotted to employees or selected persons, which addresses only the IPO stage and not long-term option plans.[12]

In practice, a listed company must fit any share plan within the current public offer and capital-issue rules, obtain BSEC consent for new shares and expect scrutiny of pricing and dilution; see our guide to BSEC compliance in Bangladesh. Private companies usually use a trust or direct-issue structure documented in the articles and a shareholders' agreement.

How share schemes are taxed

Section 34 of the Income Tax Act 2023 deals with employee share schemes, defined as arrangements under which a company issues shares to its employees or those of linked companies, directly or through a trustee. The taxable amount arises in the year the shares are received and equals their fair market value on that date less the cost of acquisition, including any price paid for the option itself. If an employee sells or transfers the right to acquire shares, the gain is employment income.[11] Grant and vesting are not taxable events under the text.

Cross-border plans

Where Bangladeshi staff are to join a foreign parent's plan, residents acquiring foreign securities raise exchange control issues, so the plan needs Bangladesh Bank clearance or a cash-settled design before any award. Expatriate staff are covered in our guide to employment law for expatriates in Bangladesh.

Institutions that administer social security

Social security law Bangladesh relies on several bodies with overlapping roles.

Benefit claims are heard by the Labour Court; pension questions go to the National Pension Authority.

Comparing the pillars of social security in Bangladesh

The table sets out how each pillar works, who pays and the legal basis. On a phone, scroll it sideways.

The pattern of social security law Bangladesh has built is clear. The state pays for safety nets and public service pensions; members and, through Progoti, employers fund the universal pension; employers pay almost everything else directly. Until a social insurance Act is passed, the employer remains the main insurer of its own workforce.

Building a compliant benefits and reward structure

For an employer setting up or reviewing a package against the 2026 Act, we follow this sequence.

Swipe or scroll →

Document every choice. A worker's written election not to join Progoti, the actuarial basis of a gratuity provision and the board resolution approving a share plan are the documents a Labour Court, an auditor or the National Board of Revenue will ask to see.

Social security law Bangladesh mistakes to avoid

• Treating Progoti as an optional extra rather than a statutory alternative: where two-thirds of 100 or more permanent workers demand a provident fund, the employer must either establish one within six months or offer Progoti and pay half the contribution.[1]
• Running maternity pay on old formulas: the 2026 Act moved to 60 days before and after delivery and substituted the calculation in section 48.[2]
• Assuming the injury pilot removes employer liability: section 150 liability ends only when the government notifies a sector under section 151A.[2]
• Setting off the participation fund against bonuses: Chapter XV is a statutory charge on profit, separate from contractual incentive pay.[1]
• Granting options without a legal route: section 58 of the Companies Act and capital-market rules constrain share plans, particularly for public and listed companies.[12]
• Mis-timing share-scheme tax: the charge arises when shares are received, on fair market value less cost.[11]

What to watch in 2026 and 2027

Four developments will shape social security law Bangladesh over the next year. First, the government's choice on the successor to the National Social Security Strategy, including whether the employment injury insurance Act proposed for 2027 is introduced on time.[8] Second, the first gazette notifications under section 151A, which will tell garment and other employers when their direct injury liability ends.[2] Third, the push to expand Progoti through banks and other large employers, and any move to make participation compulsory under section 14 of the 2023 Act.[4] [7] Fourth, rules under the 2026 Act that will settle open procedural questions.

Employers should plan for a gradual shift from direct liability to contributions. For advice on structuring benefits, pensions and incentive plans, contact TRW or explore our compensation and benefits practice.

Frequently asked questions

Is there a national social insurance system in Bangladesh?

Not yet. Workplace risks are mostly borne by employers under the Labour Act 2006, and the National Social Insurance Scheme remains a proposal in the 2026 to 2035 strategy framework, which targets an umbrella Act by 2030.[8]

Is the Universal Pension Scheme compulsory?

No. Section 14 of the Universal Pension Management Act 2023 makes participation voluntary until the government makes it compulsory by gazette notification.[4]

What are the four universal pension schemes?

Probash for expatriates, Progoti for private-sector employees, Surokkha for the self-employed and Somota for very poor self-employed citizens.[5]

Can an employer use Progoti instead of a provident fund?

Yes. Under section 264(10) as amended in 2026, an owner is exempt from the compulsory fund if it arranges Progoti membership for interested workers and pays 50 per cent of the contribution.[1]

How long is maternity benefit in 2026?

60 days before and 60 days after delivery, 120 days in total, following the Bangladesh Labour (Amendment) Act 2026.[2]

Who is covered by the Employment Injury Scheme pilot?

Workers in export-oriented garment factories, about 2.8 million people, including factories in export processing zones.[10]

Does the injury pilot replace Labour Act compensation?

Not automatically. Section 151A lets the government notify sectors for an Employment Injury Scheme Fund, and employer liability under section 150 ends only for notified sectors.[2]

Do government employees join the Universal Pension Scheme?

No. They are excluded until a notification provides otherwise, and remain on the non-contributory public service pension.[4]

How are employee stock options taxed?

Under section 34 of the Income Tax Act 2023, employment income arises when the shares are received, measured as fair market value less acquisition cost.[11]

Is an incentive bonus taxed differently from a festival bonus?

Both are taxable salary, but an incentive bonus is a perquisite under the Income Tax Act 2023 while a festival allowance is excluded from that definition.[11]