Switching EOR Provider in Bangladesh: Transfer, Benefits, Tax and a 2026 Checklist

Switching EOR provider in Bangladesh: what actually moves

Switching EOR provider in Bangladesh is a legal transfer of employment, not a change of supplier. The employer of record signs the appointment letters, holds the service books, withholds tax and answers to the labour inspectorate. When a client moves its team, each of those relationships must end with one employer and restart with another, and no Bangladeshi statute does this automatically. Done carelessly, the switch triggers termination dues, resets festival bonus eligibility, exposes provident fund balances to tax and leaves work permits pointing at the wrong company.

This guide explains why companies switch, how employment moves, what happens to accrued benefits, how to handle consent, payroll and tax, what to check in the new contract, and how TRW takes on a transfer.

Summary: Bangladesh has no automatic transfer of employment when a client changes employer of record. Each employee leaves the outgoing provider and signs a new appointment letter with the incoming one. The client chooses between a clean break, in which the outgoing provider pays all end-of-service dues, and recognised continuity, in which the new provider counts prior service. Payroll, tax and work permit records must move with the people.

Key point: Continuity of service in Bangladesh is created by agreement, not by law. If the new appointment letter does not recognise prior service, staff wait a year for festival bonus eligibility, and the old provider owes resignation dues within 30 working days.

At a glance

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Table of Contents

Why companies switch EOR provider in Bangladesh

The commonest reason is compliance drift: templates that predate the 2026 Labour Act reforms, festival holidays at the old figure, missed withholding returns. The Bangladesh Labour (Amendment) Act 2026 raised festival holidays to 13 days, extended maternity benefit to 120 days and introduced resignation compensation from the first completed year, so an un-updated provider now exposes the client to claims.[1] [2] See our guide to the Labour Act amendment 2025. Other triggers are commercial: vendor consolidation, a need for work permits or a misclassification review, or a wish for a provider that is itself the Bangladesh employer rather than a reseller.

How employment transfers when switching EOR provider in Bangladesh

No automatic transfer rule

In the UK, regulation 4(1) of the TUPE Regulations 2006 continues assigned employees' contracts with the transferee.[13] Singapore's Employment Act also moves covered employees with continuity of service; Hong Kong and India do not.[14] Bangladesh sits with the second group: the Labour Act 2006 has no general transfer-of-undertaking provision.[1] Each employment with the outgoing provider must end by resignation or release, and the new employer must issue an appointment letter under section 5 and take custody of the worker's service book under section 6.[3]

Most engineers, analysts and sales staff are "workers" under section 2(65), which since 2026 covers technical and business development work and excludes only staff with genuine managerial or supervisory authority.[1] Senior managers outside the definition rely on their contracts alone.

Route one: clean break

Each employee resigns and joins the new provider as a new hire. The outgoing provider must pay all dues within 30 working days under section 30. For a resigning permanent worker, section 27(4) pays 7 days' wages per completed year for up to three years' service, 15 days for more than three and under ten years, and 30 days or gratuity, whichever is higher, after that.[1] The worker is entitled to a certificate of service under section 31.[3] A clean break leaves no legacy liability, but the client usually funds the settlement and staff restart service-based entitlements.

Route two: recognised continuity

The new provider issues appointment letters that expressly count prior service for leave, festival bonus, gratuity, notice and compensation. Dues are not paid out; the client and both providers agree a funding transfer and an indemnity for the liabilities assumed. Staff experience the switch as an administrative change, but only if the recognition clause is precise and the service records are complete. Many transfers mix the routes, paying out leave while recognising service for bonus and gratuity. Our guide to employment contracts in Bangladesh covers the drafting.

Accrued leave, gratuity, provident fund and festival bonus

Earned leave

An adult worker in a commercial establishment earns one day's annual leave for every 18 days worked, carried forward up to 60 days, or 40 days in a factory.[3] Section 11 requires payment for unavailed leave when service ends for any reason, including resignation.[1] Either the outgoing provider pays it or the new contract carries it forward with funding. Doing both is a double cost we still see.

Gratuity and compensation

Section 2(10) defines gratuity as at least 30 days' wages per completed year, or part over six months, and 45 days' wages for service over ten years. Where a scheme exists, the exit provisions pay the higher of gratuity and statutory compensation, not both. Section 14 counts a year as 240 days worked in twelve months and uses last basic wage plus dearness and ad hoc allowances.[1] See our guides to provident fund and gratuity and severance pay.

Provident fund balances

A tax-recognised fund must pay the accumulated balance on the day the employee leaves the employer maintaining it, and the balance is exempt only after five years' continuous service with that employer. The Commissioner may allow exemption for shorter service ended by a cause beyond the employee's control.[7] A client-driven switch is arguably such a cause, but apply and document it rather than assume. Headcount also matters: at 100 permanent workers, a two-thirds written demand triggers a provident fund duty unless interested workers join the Progoti pension scheme.[5]

Festival bonus eligibility

Rule 111(5) of the Labour Rules 2015 gives workers with one year's continuous employment two festival bonuses a year, each up to one month's basic wage.[4] Without recognised service, eligibility restarts, and staff notice at the next Eid. In export processing zones the EPZ Labour Act 2019 requires two months' basic wages a year instead.[6] The 13 festival holidays under section 118 apply from day one.[1]

Employee consent and communication

Because the switch ends one employment and starts another, it cannot be imposed. Each employee signs a release with the outgoing provider and accepts the new appointment. An employee who refuses stays employed by the outgoing provider, and any termination must follow section 26 with statutory notice and compensation.[1] Avoid less favourable terms, such as a lower basic wage share, unless the employee agrees in writing.

Staff want four answers: whether pay, bank account and pay date change; whether service and leave are recognised; what happens to the provident fund; and whom to call if pay is late. A joint briefing by the client and both providers, a written notice and a signed acknowledgement of the recognised start date prevent most disputes.

Payroll and tax handover

Section 86 of the Income Tax Act 2023 requires the payer of employment income to deduct tax at the average rate on the employee's estimated total income, adjusting earlier surpluses or deficits.[7] A mid-year switch splits the July to June tax year between two payers, so the new provider needs each employee's year-to-date salary, benefits and tax deducted, with the outgoing provider's section 145 certificates. Both file monthly withholding returns under section 177, and a payer that fails to deduct or deposit is an assessee-in-default under section 143.[7] Since the Finance Act 2026, a withholding default attracts additional tax of 150 per cent.[8]

Foreign nationals and work permits

Invest Bangladesh, operating since 23 August 2026 after the merger of BIDA, BEZA and the PPP Authority, now issues most work permits; BEPZA remains separate.[9] [10] A permit covers the named employer only, so the new provider needs its own, and cancelling the old one requires the release letter, a board resolution and tax clearance.[11] Bangladesh Bank allows salary and savings remittances only against the permit's benefits and an approved contract.[12] See our guide to employment law for expatriates.

Timeline and checklist for switching EOR provider in Bangladesh

Start with the exit clause in the current EOR agreement: termination notice, transition assistance and file return decide the earliest date. Plan backwards from a payroll cut-off, and allow longer where a new work permit must be in place before the old one is cancelled.

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Before the effective date, hold for every employee the release, the new appointment letter, the service book, the leave ledger, year-to-date payroll and tax certificates, fund statements and, for expatriates, the new permit. If an item is missing, move the date, not the risk.

Contract review checklist for the new EOR

• Legal employer: the provider itself, not a local subcontractor, is named in every appointment letter.
• Recognition of service: an express clause with funding and indemnity terms.
• Labour Act baseline: templates updated for Act No 43 of 2026.[2]
• Tax: responsibility for section 86 withholding, section 177 returns and the cost of any default.
• Funds: who sponsors the provident fund or Progoti enrolment.
• Terminations: who runs inquiries and final settlements and who bears statutory dues.
• Exit: transition assistance and return of files and service books if you switch again.
• Immigration: who files, renews and cancels permits and security clearance.

For wider governance points, see TRW's page on employer of record governance.

How TRW onboards a transfer

TRW provides employer of record services in Bangladesh through its employment and labour practice. We employ staff on the client's behalf, run payroll and statutory filings, and handle contracts, work permits and terminations under Bangladesh law, so the legal review and the employment sit with one team.

On a transfer we request each file from the outgoing provider, review it against the Labour Act as amended in 2026, recommend clean break or recognised continuity for each benefit, and draft the release, recognition and indemnity documents. We then issue appointment letters, load year-to-date tax data, set up fund arrangements and file new permits before old ones are cancelled. Staff get one joint briefing and a written summary of what has changed.

Frequently asked questions

Does employment transfer automatically when switching EOR provider in Bangladesh?

No. There is no transfer-of-undertaking rule, so each employee leaves the outgoing provider and signs a new appointment letter.[1] [3]

Can the new provider recognise prior service?

Yes, by contract. The appointment letter should count prior service for leave, bonus, gratuity, notice and compensation, backed by a funding and indemnity agreement.

What does the outgoing provider owe on resignation?

7, 15 or 30 days' wages per completed year depending on service, plus unavailed leave and other dues, within 30 working days.[1]

What happens to accrued annual leave?

It must be paid on exit under section 11, unless the new contract carries it forward with funding.[1]

Will staff lose festival bonus eligibility?

Yes, unless prior service is recognised, because rule 111(5) requires one year's continuous employment.[4]

Is a provident fund payout taxable?

A recognised fund balance is exempt after five years' continuous service; for shorter service the Commissioner may allow exemption where the cause was beyond the employee's control.[7]

Must employees consent?

Yes. An employee who does not sign a release and accept the new appointment stays employed by the outgoing provider.[1]

How is income tax handled mid-year?

The new provider withholds under section 86 using the outgoing provider's year-to-date data and deduction certificates.[7]

Does a foreign employee need a new work permit?

Yes. A permit covers the named employer only, so the new provider applies and the old permit is cancelled.[11]

How long does switching EOR provider in Bangladesh take?

It depends on your current notice period, the payroll cycle and any new permits. Plan from a payroll cut-off and fix the date only when every file is complete.