Payroll Management in Bangladesh

Bangladesh is a populous, developing nation that offers prospects to international companies. The production of clothing and agriculture are the main drivers of the nation’s economy. Due to its relatively reduced labor costs and potential market for US exports, it is drawing in more international businesses.

How is Payroll Calculated in Bangladesh?

When setting up a payroll in Bangladesh, it is essential to understand the salary computation.

The standard formula for calculating payroll is Net Salary = Gross Salary – Deductions.

The Gross Salary is divided into several components, such as:

• Basic salary
• House rent allowances
• Medical allowances
• All other allowances
• Reimbursements
• Bonuses.

The Deductions include—

• Professional tax
• Provident fund
• Income tax
• Insurances
• Entertainment allowance
• Other standard deductions.

Elements of Salary Structure in Bangladesh

An essential aspect of payroll policies and procedures in Bangladesh includes understanding the components of a salary structure. Here are a few essential payroll elements in Bangladesh:

• Minimum wage: Although Bangladesh does not have a generalized minimum wage requirement, it generally varies according to the industry. For instance, employees in the garment industry are entitled to a monthly minimum compensation of 8,100 Bangladeshi Taka (BDT). Every five years, the National Minimum Wage Board reviews the minimum salaries of different industries, and the next updated remuneration rates should be in effect by December 2023.
• Overtime: Overtime is common in the garment industry in Bangladesh. Typically an employee should not work more than 60 hours a week. Overtime is paid at double the rate of the employee’s income, including housing and medical payments.
• House rent: This salary component is paid by the employer to meet the accommodation expenses of employees. As per the Bangladesh payroll process, the house rent allowance is 50% of the basic salary or TK. 25,000 monthly, whichever is higher.
• Medical allowance: This is a mandatory fixed allowance paid to the employee irrespective of submitting medical bills. Bangladesh tax laws state 10% of the basic salary or TK. 120,000 yearly for medical allowance.
• Conveyance allowance: This extra allowance compensates for travel between work and residence. Under the tax laws, the conveyance allowance is 10% of the basic salary. ‍
• Additional allowances: There are other additional allowances for employees in Bangladesh, such as festival bonuses, overtime allowances, etc. All government employees get 20% of the basic salary as a festival bonus twice a year.