Employer Action Code: Act
Recent amendments to the Labor Act expand a variety of employee benefits and establish new employment protections, in the most extensive overhaul of labor law in more than a decade. In addition to requiring companies with 100 or more permanent workers to establish a provident fund (or enroll workers in the government’s new universal pension plan), the amendments increase paid time off and end-of-service benefits (EOSBs) on resignation.
Key details
The changes, effective November 17, 2025, include:
- Employers with 100 or more permanent workers must establish a provident fund for permanent workers (previously the mandate applied only if at least three-quarters of workers requested it). Workers with a year or more of service must contribute at least 7.0% of basic pay (up to 8.0%) to their provident fund individual account, which the employer is required to match. Alternatively, employees can request in writing to join the state universal pension plan (Progoti) established in 2023, funded by the employee at flat contribution rates of between 2,000 and 10,000 Bangladeshi takas per month, which the employer must match
- Entitlement to the employer-paid lump sum EOSB on resignation for permanent workers now applies upon three years of service with the employer (rather than five years) and is equal to (per year of service): seven days' pay if the worker has three years of service at resignation; 15 days' pay if more than three and less than 10 years’ service; 30 days’ pay if 10 or more years’ service; or, if greater, the amount payable under the employer’s gratuity plan, if any. (Previously, the resignation EOSB was 14 days’ pay per year of service for workers with five but less than 10 years’ service, and same as above for 10 or more years’ service)
- Employer-paid maternity leave increased from 112 to 120 calendar days. Annual leave in factories increased from one day for every 18 days of work to one day for every 14 days; in offices, it remains one day for every 18 days. Employees are now entitled to 13 days of paid public holidays (formerly 11 days), selected by the employer from a government list of holidays
- Broader protection against discrimination in employment was established on grounds such as gender, race, religion, political opinion, disability, nationality or social origin, including a formal definition of sexual harassment and procedures to investigate and resolve claims
- Provisions include a mandate for the government to establish a central workers compensation fund to provide workers compensation benefits, replacing the mandate for employers to purchase workers compensation insurance, once the fund is established
- Union recognition requirements are reduced from union membership of at least 20% of an enterprise’s workforce to: 20 union members in workplaces with up 300 workers; 40 members for 301 to 500 workers; 100 members for 501 to 1,500 workers; 300 members for 1,051 to 3,000 workers; and 400 members for establishments with more than 3,000 workers
Employer implications
In January 2026, the government formed a tripartite committee to make recommendations on potential changes to the Labor Act amendments to address concerns raised by various employer organizations. In February, the center-right Bangladesh Nationalist Party won a two-thirds majority in Parliament, pledging to revitalize the economy, which may affect the work of the committee. In the meantime, employers should review the changes and their impact on pay and benefits as well as on their employment policies.
