Hiring and Managing Employees in Bangladesh

In this section we discuss essential aspects of hiring, managing, and separating employees in Bangladesh, focusing on legal compliance under the Labour Act 2006 and Labour Rules 2015. These legislation covers the employer-employee relationship, key terms, mandatory benefits, employee representation, and termination procedures.

Notice to DIFE before Commencement of Work

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Before commencing operations, an employer is required to notify the Department of Inspection for Factories and Establishments (DIFE).

Classification of Personnel: Workers vs. Management

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The labour law differentiates between personnel categories, which significantly impacts the application of its provisions:

• Workers: This category includes employees performing manual, skilled, unskilled, technical, trade promotional, clerical, or operational tasks. ‘Workers’ benefit from the full scope of rights and protections under the law, including specific rules on working hours, overtime, leave, termination, and trade union participation.
• Persons with Administrative, Supervisory, or Managerial Functions: Individuals primarily employed in roles involving significant decision-making authority, supervision of staff, or administrative oversight are generally excluded from the definition of ‘worker’. Consequently, many specific provisions of the Act (e.g., working hour limits, overtime calculations, certain leave rules, specific termination notice periods) may not apply directly to them. Their employment terms are primarily governed by their individual employment contracts and general legal principles, although fundamental employer obligations like providing a safe workplace still apply.
• Employer/Owner: Represents the entity or individual employing others.

Hiring Employees in Bangladesh

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Appointment Letter & Contract:

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The law mandates issuing a formal appointment letter. In addition, for many roles, particularly ‘white-collar’ positions, a more detailed employment contract is standard practice. The appointment letter should clearly state:

• Employee’s full name, address, and details.
• Job title, description of duties, and nature of work.
• Classification of the worker (e.g., permanent, temporary, probationary).
• Wages/salary details.
• Other benefits (e.g., bonuses, insurance).
• Probation period, if applicable.
• Other terms and conditions of employment.

Required Documents & Records:

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Employers must issue certain documents to employees and maintain specific records:

• Employee ID Card: Must be provided by the employer, including a photograph.
• Service Book: Provided by the employer (except for certain temporary categories like casual or substitute workers), maintained by the employer, containing key employment details (joining date, position, promotions, wages, leave record, etc.).
• Employer Records: Employers must maintain registers such as:
  • Register of Workers.
  • Service Book (as above).
  • Leave Register.
  • Register of Wages.
  • Register of Deductions and Fines.
  • Register of Overtime.

Employers typically require copies of the employee’s National ID (NID), educational certificates, Taxpayer Identification Number (TIN) certificate, and bank account details for payroll.

Types of Workers:

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The law classifies workers into categories such as apprentice, casual, temporary, probationary, permanent, and seasonal. Key distinctions for practical purposes often involve:

• Probationary: A worker undergoing a probation period, typically 3 months for most workers (6 months for clerical staff), extendable by another 3 months. During probation, termination requires less stringent notice.
• Permanent: A worker who has successfully completed their probation period or has been engaged for a task of permanent nature. Even workers on fixed-term contracts can be deemed permanent if the work is of a permanent nature or if they complete the probation period. Permanent workers have full entitlements under the law regarding termination notice and benefits.

Records and Returns Filing

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Employers are obligated to maintain the registers mentioned above and file periodic returns with relevant authorities like the DIFE.

I. Some of the Registers and Records to be Maintained by Employers are:

• Service Book
• Worker Register
• Register of Leave
• Muster Roll for Laid-off Workers
• Register of Fines
• Register of Deductions for Damage or Loss
• Register of Advances
• Register of Accidents and Dangerous Occurrences
• Register of Overtime Work
• Register of Women Workers’ Consent for Night Shift
• Register of Compensatory Weekly Holidays
• Register of Testing Lifting Machinery, Hoists & Lifts
• Register of Examination of Pressure Vessels
• Register of Workers Examining/Operating Moving Machinery
• Register/Record of Personal Protective Equipment (PPE) Supply
• Register of Cleanliness (Whitewashing/Painting)
• Register of Humidity Records (Textile Mills)
• Record Book for Firefighting/Rescue/First-Aid Training
• Record Book for Fire/Emergency Drills
• Register for Health Examination of Workers in Hazardous Jobs
• Safety Record Book
• Register of Wages
• Apprentice Register
• Apprentice Proficiency Report

II. Some of the Returns, Notices, and Filings with Authorities are:

• Notice before Commencing Work
• Application for Factory Layout Plan Approval/Extension
• Application for Factory/Establishment License/Registration & Renewal
• Notice of Lay-off/Closure
• Notice of Retrenchment
• Report/Notice of Accident (Fatal/Serious, Minor, Dangerous Occurrence)
• Half-Yearly Accident Report
• Notice of Occupational Disease
• Maternity Benefit Returns (Monthly and Annual)
• Annual Return of Wage Deductions
• Notice of Periods for Work (Submission and Display)
• Notice/Display of Summaries of Act/Rules and Authority Contacts

Hiring Foreign Nationals

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Employing foreign nationals requires obtaining a valid work permit and the appropriate visa (e.g., Employment ‘E’ Visa, Investor ‘PI’ Visa). Once legally employed, foreign nationals are generally subject to the labour laws and possess the same core employment rights and protections as local employees.

Key Terms and Conditions of Employment

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The labour law outlines minimum standards (primarily for ‘workers’):

Working Hours:

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• Standard: 8 hours per day, 48 hours per week.
• Maximum: Up to 10 hours per day, 60 hours per week (including overtime). Average weekly hours over a year should not exceed 56.
• Night Work: Special consent needed for women to work between 10 PM and 6 AM, with transport and safety provisions.
• Rest Intervals: Mandatory breaks (e.g., 1 hour for work > 6 hours; 30 mins for work > 5 hours).
• Weekly Holiday: Generally 1 full day (factories) or 1.5 days (shops/commercial establishments) per week. Work on a holiday requires compensatory leave and payment.

Wages and Payment:

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• Minimum Wage: Set sector-wise by the government’s Wage Boards. Employers must pay at least the minimum wage applicable to their industry.
• Payment Frequency: Wages must be paid at least monthly, typically by the 7th working day of the following month.

Health, Safety & Welfare:

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Employers have extensive responsibilities, including:

• Providing a safe and healthy working environment.
• Ensuring safe machinery, equipment, and necessary Personal Protective Equipment (PPE).
• Maintaining adequate lighting, ventilation, sanitation, and clean drinking water.
• Implementing fire safety measures (equipment, drills, exits).
• Reporting accidents causing death or serious injury to DIFE.
• Providing first-aid facilities.
• Establishing Safety Committees in workplaces with 50+ workers.

Employee Representation: Trade Unions and Participation Committees

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The labour law facilitates employee representation:

Trade Unions

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• Right to Organise: Workers have the right to form and join trade unions. Registration with the Department of Labour requires meeting minimum membership thresholds (typically 20% or 30% of workers in the establishment).
• Collective Bargaining Agent (CBA): A registered and recognised/certified union acts as the CBA, holding the exclusive right to negotiate with the employer on collective matters (wages, benefits, working conditions, etc.). Agreements reached are legally binding.
• Right to Strike: The CBA can call a strike following specific legal procedures (notice, conciliation attempts) if an industrial dispute remains unresolved. Restrictions apply, especially in essential services.
• Dispute Resolution: The law outlines a process involving bipartite negotiation, mandatory conciliation, optional arbitration, and adjudication by Labour Courts/Tribunal.

Participation Committees

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If there are no trade unions in a company, the law mandates the formation of Participation Committees if the number of employees exceeds 50:

• Formation Requirement: Establishments employing 50 or more permanent workers are legally required to form a Participation Committee.
• Composition: The committee must consist of an equal number of representatives from the employer and the workers. Worker representatives must be elected by the workers.
• Functions: The primary objective of the Participation Committee is to foster mutual trust, understanding, and cooperation between the employer and workers. Its functions include:
  • Protect workers’ interests until a trade union is formed.
  • Promoting congenial work environment and harmonious labour relations.
  • Discussing matters related to occupational safety and health (OSH), welfare measures, working conditions, productivity improvements, and vocational training.
  • Encouraging compliance with labour laws.
  • Facilitating communication and information sharing.

Mandatory Employee Benefits

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Employers must provide several statutory benefits under the labour law (primarily applicable to ‘workers’):

Leave Entitlements:

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• Casual Leave: 10 days per calendar year with full wages. Cannot typically be carried forward.

• Sick Leave: 14 days per calendar year with full wages (average pay for newspaper workers). Medical certificate required if absence exceeds 3 days. Cannot be carried forward.

• Annual Leave (Earned Leave): Granted after 1 year of continuous service. Accrual rate depends on the sector (e.g., 1 day per 18 days worked in shops/factories; 1 per 11 days for newspaper workers; 1 per 22 days for tea plantations). Can be accumulated up to 40-60 days depending on type. Encashment of unused leave (up to 50% while employed, 100% on separation) is provided.

• Festival Holidays: Minimum 11 days per calendar year with full wages. Specific days decided by the employer, often in consultation. Working on a festival holiday requires two compensatory days off with pay plus a substitute holiday.

• Maternity Leave: 16 weeks (112 days - 8 weeks pre-natal, 8 weeks post-natal) with full pay for eligible women (min. 6 months service, max. two surviving children for payment eligibility, though leave itself is granted). 4 weeks leave with pay for miscarriage after notifying employer.

Financial Benefits:

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• Festival Bonus: Two bonuses per year are payable to workers with at least one year of continuous service. While the law mandates the payment of festival bonuses, it does not specify the amount. Common practice, often established through company policy or collective bargaining agreements, is typically equivalent to one month’s basic salary per bonus.

• Provident Fund (PF): Establishing a Provident Fund is generally optional for the employer. However, it becomes mandatory if requested in writing by at least two-thirds of the total workers employed in the establishment. Once established, both the employer and the participating employees contribute a percentage of the employee’s basic wages, as defined by the rules of the specific fund. Contribution rates can vary but are often set within a range like 7% to 8% each.

• Workers Profit Participation Fund (WPPF): This is mandatory for companies meeting specific paid-up capital or fixed asset value thresholds. Such companies are required to contribute 5% of their profit to the fund. This fund is then distributed among eligible beneficiaries, which include the company’s workers and a government-managed welfare fund, according to the rules outlined in the law.

Insurance & Compensation:

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• Group Insurance: Mandatory for establishments with 100+ permanent workers.

• Compensation for Injury/Death: Provides specific compensation amounts for work-related injuries leading to disablement or death, calculated based on injury severity, wage, and age factor.

Separation from Employment

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Termination of employment must follow procedures outlined in the labour law:

Resignation

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Termination initiated by the employee.

• Notice: Requires written notice from the employee. For a permanent worker (monthly-rated), the notice period is 60 days. (Temporary workers follow different notice periods).
• Final Dues: Upon resignation, a permanent worker is entitled to all outstanding wages and benefits (e.g., earned leave encashment). Additionally, if a permanent worker has completed at least 5 years of continuous service, they are entitled to compensation calculated at 14 days’ wages for each completed year of service (for 5-10 years of service) or 30 days’ wages for each completed year (for service exceeding 10 years), or gratuity if payable and higher than this compensation amount.

Retrenchment (Redundancy)

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Termination due to surplus labour. Requires:

• One month’s notice (or pay in lieu) for each year of service.
• Compensation: 30 days’ wages for each completed year of service, or gratuity if payable and higher.
• Notifying the Chief Inspector (DIFE) 30 days prior.
• Adhering to the ’last in, first out’ principle within the relevant worker category, unless reasons for deviation are recorded.

Termination Simpliciter (Without Cause)

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Employer terminates for reasons other than misconduct (e.g., loss of confidence, business needs not amounting to redundancy). Requires notice or pay in lieu:

• Permanent worker (monthly-rated): 120 days’ notice.
• (Temporary worker notice periods as per resignation apply).
• Requires payment of compensation (30 days’ wages for each completed year of service) or gratuity, whichever is higher, plus other dues.

Discharge

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Termination due to certified physical/mental incapacity or continuous ill-health certified by a registered medical practitioner. Requires payment of 30 days’ wages for each completed year of service (or gratuity, if higher) if service is one year or more.

Dismissal (For Cause/Misconduct)

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Termination due to proven misconduct or conviction for a criminal offence. Requires following disciplinary procedures (charge sheet, inquiry, hearing).

• If dismissed for certain serious misconduct (like theft, fraud) or criminal conviction, the worker is not entitled to any compensation or gratuity.
• For other types of proven misconduct leading to dismissal, gratuity/compensation entitlement remains.

For assistance with employment law matters in Bangladesh, including contract drafting, compliance audits, dispute resolution, or navigating termination procedures, please reach out to:

• Osman Goni
  • Phone: +8801715569498
  • Email: [email protected]
• Habib Morshed
  • Phone: +8801678148367
  • Email: [email protected]