Hiring Your First Employee in Bangladesh: Legal Requirements and Best Practices

Hiring your first employee in Bangladesh changes your legal position more than most founders expect. Before, you were someone running a business. After, you are an employer under the Bangladesh Labour Act, with records to keep, leave to track and, in many cases, tax to deduct every month.

Most people get the order wrong. They find someone good, agree a number over tea, and sort out paperwork months later, usually after something goes wrong. The appointment letter and service book you prepare in week one are what protect you if the relationship sours. If you have worked through a general startup legal checklist, think of this as the detailed chapter on taking on staff.

The timing matters too. In April 2026, Parliament passed the Bangladesh Labour (Amendment) Act 2026, Act No. 43 of 2026, which repealed the interim government's 2025 ordinance. Some of the ordinance's reforms survived. Others were changed or dropped, and old templates and blog posts now get several points wrong.

Updated September 2026. This guide is general information, not legal or tax advice. Requirements depend on your business type, establishment and the worker involved, so check the current law and official guidance before acting.

Does the Labour Act Cover Your First Employee?

For most private businesses, yes. The Bangladesh Labour Act 2006 covers shops, commercial establishments, industrial establishments and other workplaces that employ people for wages, and its core rules apply from the first covered worker. The consolidated text on bdlaws already includes the 2026 amendments.

It is not universal, though. Section 1(4) lists establishments and categories of workers the Act does not cover, and some duties only switch on at a certain size or establishment type. The 2026 Act also extended specific protections to domestic workers, agricultural labourers and seafarers, so older lists of excluded groups are out of date. If your business sits inside an Export Processing Zone, a separate law applies: the Bangladesh EPZ Labour Act 2019. This guide covers employers under the ordinary Labour Act.

Who counts as a "worker" after 2026

This is the change that caught the most people out. The 2025 ordinance briefly counted officers and supervisors as workers. The 2026 Act reversed part of that. The Daily Star reported that the new definition covers everyone except people appointed under section 2(49)(b), which treats anyone responsible for management, supervision and control of the establishment as part of the "owner" side.

For a first hire, the practical point is simple. A developer, sales executive or accounts assistant doing the actual work is almost certainly a worker, whatever the job title says. If you genuinely hire someone to manage or supervise, record that responsibility in writing and make sure the job actually involves it. A title on a business card will not carry the argument by itself.

Legal Requirements for Hiring Your First Employee in Bangladesh

Three documents do most of the work: the appointment letter, the ID card and the service book.

Appointment letter and photo ID

Section 5 of the Act requires the employer to give each worker an appointment letter and an identity card with a photograph. This applies even if you only have one employee.

The Act and the Labour Rules 2015 set out the required form. On top of that, we recommend the letter clearly covers the position, wage breakdown (basic and allowances), worker classification, probation terms, working hours, leave and notice terms. Some of these are statutory. Others are simply good drafting that saves you arguments later. Build your template from the current Act and Rules rather than an old sample from the internet, because many of those predate the 2026 changes.

Service book

Section 6 requires a service book for every worker, kept in the prescribed manner. A spreadsheet is useful for tracking attendance, payroll and leave, but do not treat it as a substitute for the statutory service book. Keep both.

Probation

Section 4 sets probation at six months for clerical workers and three months for other workers. For a skilled worker, the period can be extended by up to three months if you could not assess their work in time. Put the classification and probation terms in the appointment letter, and make a written decision when probation ends. Do not rely on an informal understanding about what happens if the date passes quietly.

Working Hours, Leave and Pay

These are statutory minimums. Where the Act applies, an employment contract should not reduce them.

Hours and overtime

Normal working time is 8 hours a day and 48 hours a week. The Act allows longer hours within limits: up to 10 hours in a day and, under conditions in section 102, up to 60 hours in a week, with a cap on the annual average. Section 108 requires overtime to be paid at twice the ordinary rate of basic wage and dearness allowance, plus any ad hoc or interim wage.

If your team regularly works late, pay for it or change the workload. Unpaid late nights are a very common source of labour complaints.

Leave and holidays

The Act provides a weekly holiday, 10 days of casual leave and 14 days of sick leave on full pay a year. Sick leave generally needs a medical certificate. Earned leave accrues once a worker completes a year of continuous service, so it does not start on day one.

Festival holidays rose from 11 to 13 days a year under section 118(1). Maternity leave is now 120 days, split into 60 days before the expected delivery and 60 after, subject to the statutory conditions.

Paying wages on time

Section 123 requires wages to be paid within seven working days after the wage period ends. Paying by bank transfer is not a legal requirement in every case, but it gives you a clean record for labour inspections and tax. It is a good reason to open a separate business bank account before your first payroll.

Minimum wage and festival bonus

Bangladesh has no single national minimum wage. The Minimum Wages Board recommends rates for specific sectors and the government declares them. Check the latest declared wage rates to see whether your sector has one.

Festival bonuses have a legal basis too. Rule 111(5) of the Labour Rules 2015 gives workers with one year of continuous service two festival bonuses a year, each capped at one month's basic wage. A new hire does not qualify in month one, but budget for it from the start.

Business Setup, DIFE and Tax Before the First Payday

A trade licence and a legal entity are two different things. Founders mix them up constantly.

Structure, trade licence and tax IDs

Your legal structure decides who the employer actually is. A sole proprietorship makes you personally the employer. A partnership or company is a different arrangement with different registration steps.

If you are forming a company, the steps to register a private limited company come before the employment contract, so the right party signs it. Separately, you need a trade licence from your city corporation or local authority, a TIN, and a BIN if VAT registration applies to your business.

DIFE registration and licensing

Section 326 lets the government require factories, establishments or particular classes of them to hold a licence from the Department of Inspection for Factories and Establishments (DIFE). Whether and how it applies depends on your establishment type. Check your position before you start employing. If you need a licence, apply through DIFE's online licence application on the LIMA portal, where fees are now paid through a-Challan directly from the application.

Withholding tax on salaries

Section 86 of the Income Tax Act 2023 requires the person paying employment income to deduct tax at source. Whether a particular salary needs deduction depends on the employee's taxable income. For a taxable salary, the usual method is to estimate the year's liability and deduct it monthly. The official English text of the Act only runs to the Finance Act 2024, so check current rates against later Finance Acts and NBR's 2026 rules.

Once you deduct tax, you must deposit it and meet the reporting rules. Section 177 sets out who files withholding tax returns, and the details depend on your legal status and the current rules. For 2026, that means the Withholding Tax Rules 2026 and their July amendment, both listed on NBR's income tax rules page. Our guide to tax for startups covers the company side.

The Complaint Committee Rule Most Small Teams Miss

If you only change one thing after reading this guide, make it this one.

The 2026 amendments added section 332A, which requires every establishment to form a complaint committee for discrimination, violence and harassment complaints. It has five members, a woman as chair and a majority of women. Section 332A also sets out further rules on who else can sit on it. Breaching section 332A is an offence under section 307A, with a fine of Tk 20,000 to Tk 50,000.

For a three-person startup, the problem is obvious: you cannot fill a five-member committee with a majority of women from your own staff. The law does not currently offer an easy exemption for very small teams. So do not assume a one-page policy and a named HR contact is enough. Read section 332A, and if you cannot see how to comply at your size, get advice from an employment lawyer before your first hire, not after a complaint.

The same amendments ban discrimination on grounds including gender, religion, disability, political opinion and social status. They also prohibit blacklisting workers, so avoid keeping or sharing any list meant to stop former staff from finding work elsewhere.

Other 2026 Changes Worth Knowing

The full text of the Labour (Amendment) Act 2026 is on bdlaws, and TBS's summary is a readable overview. A few changes matter to small employers now or soon.

Continuous service is now defined as 240 days within 12 months or 120 days within six months, and a worker with three months of service can qualify for full layoff compensation. Sections 23 and 27, covering dismissal and resignation, were also amended, and termination benefits changed. Read the current text before you draft the exit clause of your appointment letter.

Some duties only apply as you grow. A safety committee under section 90A applies at around 50 workers. An establishment with 100 or more workers must set up a provident fund or join the national pension scheme if two-thirds of employees ask for it in writing. Neither applies to your first hire, but both are worth planning for.

Employee or Freelancer?

Many Bangladeshi startups begin with freelancers, and that is fine when the arrangement is genuinely freelance. The label on the contract does not settle the question, though.

There is no single statutory test. Whether someone is really independent depends on the facts: who controls their hours and methods, whether they work for other clients, how they are paid, what the contract says and what the work actually involves. A person on fixed hours who reports to you daily and uses your equipment looks more like an employee than a contractor. As more Bangladeshis mix freelancing and salaried work, these lines get blurrier, so put the terms in writing and get advice if a role sits in the grey zone.

Practical Hiring Advice for Bangladeshi Founders

This section is our recommendation, not the law.

Use more than one sourcing channel. Referrals and professional networks often surface good candidates quickly, while Facebook groups and job platforms like Bdjobs reach people outside your circle. Referrals from friends and family are useful, but they make it awkward to reject someone. Decide your criteria before you ask around.

For skills-based roles, a short, job-relevant task adds evidence a CV cannot. Keep it proportionate. If the task produces work you would actually use, pay for it.

Before making an offer, model the full cost against your cash flow: salary, overtime risk, leave cover, festival bonuses after year one, and the time you will spend managing. Our guide to financial planning walks through building that model.

Finally, consider paying a local employment lawyer or tax professional for a one-time review of your appointment letter, your tax setup and the complaint committee question. You may handle routine steps yourself later, but getting the template right once is cheaper than fixing a dispute.

First-Hire Checklist

1. Confirm the Labour Act covers your business and that you are not under the EPZ regime.

2. Settle your legal structure, trade licence, TIN and BIN where applicable.

3. Check whether you need DIFE registration or a licence, and apply through LIMA if so.

4. Draft the appointment letter from the current Act and Rules, covering classification, pay, probation, hours, leave and notice.

5. Issue a photo ID card and open a service book in the prescribed form.

6. Keep attendance, wage and leave records alongside the service book.

7. Pay wages within seven working days of each wage period, ideally by bank transfer.

8. Work out whether the salary needs tax deduction, and follow the Withholding Tax Rules 2026 for deposit and reporting.

9. Read section 332A and plan how you will form the complaint committee.

10. Budget for statutory leave now and festival bonuses from the first anniversary.

Get the Paperwork Right Before the First Salary

Most first hires in Bangladesh start with trust: a cousin's recommendation, a friend of a friend, someone you met at an event. That is a fine way to find a person. It is not a way to run an employment relationship, and the 2026 amendments give workers clearer rights to enforce when things go wrong.

The steps in this guide cover the core first-hire duties: the appointment letter, ID card, service book, on-time wages, statutory leave, DIFE status, salary tax and the new complaint committee. They are not a full compliance review. Safety, termination and sector rules can all add more as you grow.

Treat this first hire as the template for every one after it. The documents you create now will get copied for employee two, five and twenty. So this week, pull up section 332A, check your DIFE position on LIMA, and draft the appointment letter against the current Act. When your first employee walks in, the paperwork should already be waiting.