Depending on their workforce, employment arrangements and financial position, Bangladeshi employers have obligations relating to provident funds, gratuity or other end-of-service benefits, and the Workers’ Profit Participation Fund.
Each is governed by the Bangladesh Labour Act, 2006, and each has been touched, directly or indirectly, by the reform cycle that ran from the November 2025 Ordinance to the Bangladesh Labour (Amendment) Act 2026.
Here is what each one requires.
Three benefits, three triggers
The provident fund obligation depends on headcount and a written demand from workers. Gratuity depends on length of service and the mode of separation. The Workers’ Profit Participation Fund (WPPF) is driven by company size and profit.
That difference matters. Whether any of these obligations applies depends on statutory conditions, and the answer can change from one year to the next.
The provident fund
Under the original Section 264 of the Labour Act, a private-sector establishment had to set up a provident fund if three-quarters of its workers asked for one. Contributions are typically 7% to 8% of basic wages from the worker, matched by the employer.
The Bangladesh Labour (Amendment) Ordinance 2025, effective 17 November 2025, went further. It required employers with 100 or more permanent workers to establish a provident fund, with enrolment in the government’s Progoti universal pension scheme available as an alternative.
The final Act, published and effective on 10 April 2026 as Act No. 43 of 2026, retained the 100-permanent-worker threshold but made the obligation conditional on a written demand from at least two-thirds of the workers.
Under the amended Section 264, an establishment with at least 100 permanent workers must establish a provident fund if at least two-thirds of its workers submit a written demand. An employer may instead secure participation in the government’s Progoti universal pension scheme for personnel who express an interest in writing, with the employer and worker each contributing 50% of the applicable contribution. Workers may opt out in writing, in which case the employer need not make that worker’s 50% contribution.
The amended section also adds a new investment provision, under which at least half of provident fund assets may be invested in a government-owned investable sector.
Gratuity
Section 2(10) defines gratuity as at least 30 days’ wages at the worker’s last rate for every completed year of service, or a period exceeding six months. Where service exceeds ten years, the definition uses 45 days’ wages per year.
The amount actually payable on separation should be determined under the applicable provision governing resignation, retrenchment, discharge, termination, retirement or death, including any “compensation or gratuity, whichever is higher” rule.
The 2026 reforms also changed resignation benefits under Section 27(4). As reported, they are now graduated by length of service:
• three years of service: 7 days’ wages for each completed year;
• more than three but fewer than ten years: 15 days’ wages for each completed year; and
• ten years or more: 30 days’ wages for each completed year, or gratuity if higher.
End-of-service provisions should be recalculated against the amended formula.
The Workers’ Profit Participation Fund
Chapter XV of the Act applies to a company that, on the last day of its accounting year, has paid-up capital of at least Tk 1 crore or fixed assets worth at least Tk 2 crore.
A qualifying company must pay 5% of the previous year’s net profit within nine months of the close of each year, split 80:10:10 between three funds:
• the Participation Fund (80%);
• the Welfare Fund (10%); and
• the Bangladesh Workers’ Welfare Foundation Fund (10%), established under the Bangladesh Workers’ Welfare Foundation Act, 2006.
Of the amount deposited each year in the Participation Fund, two-thirds is distributed in equal proportion to all eligible workers in cash, and one-third is invested for their benefit. The funds are managed by a Board of Trustees that includes worker representatives.
The Act allows the government to make separate rules for 100% export-oriented industries and 100% foreign-owned enterprises. Companies in those categories should check which arrangement applies to them.
Who counts as a worker
The 2026 Act amended the Labour Act’s scope and several relevant definitions. Employers should assess whether individuals fall within the statutory definition of “worker” under the amended Act rather than relying solely on internal job titles, and should obtain local legal advice in borderline cases.
What payroll and finance should check
1. Headcount and demand. Track permanent worker numbers against the 100-worker threshold, and record any written demand for a provident fund and the share of workers supporting it.
2. Service dates. Gratuity depends on accurate joining dates and continuous service, including the six-month rule.
3. Last-drawn wages. Gratuity uses the last rate of wages, so salary history must be reliable.
4. WPPF eligibility. Test paid-up capital and fixed assets on the last day of every accounting year.
5. The nine-month deadline. Calendar the WPPF deposit from year-end, and reconcile the 80:10:10 split.
6. Provisioning. Recalculate end-of-service reserves for the amended resignation and gratuity rules.
Where systems help
These obligations are calculated from data HR already holds: worker classification, service dates and wage history. MiHCM Enterprise, supported locally by MiHCM in Bangladesh, keeps that data in one auditable record so calculations stay consistent as the rules change.
Frequently Asked Questions
How is gratuity calculated in Bangladesh?
Under Section 2(10) of the Bangladesh Labour Act, gratuity is at least 30 days’ wages at the last rate for every completed year of service, or part of a year over six months. For service of more than ten years, it is 45 days’ wages per year.
Which companies must contribute to WPPF?
Companies with paid-up capital of at least Tk 1 crore, or fixed assets of at least Tk 2 crore, on the last day of the accounting year.
How much is the WPPF contribution?
5% of the previous year’s net profit, paid within nine months of year-end and split 80:10:10 between the Participation Fund, the Welfare Fund and the Bangladesh Workers’ Welfare Foundation Fund.
Is a provident fund mandatory in Bangladesh?
For an establishment with at least 100 permanent workers, the employer must establish a provident fund if at least two-thirds of its workers make a written demand. The employer may qualify for an exemption by enabling interested personnel to participate in the Progoti universal pension scheme in accordance with Section 264.
How is the WPPF Participation Fund distributed?
Two-thirds of the annual deposit is paid in cash in equal shares to all eligible workers, and one-third is invested for their benefit.
Sources
• Bangladesh Labour (Amendment) Act, 2026 (Act No. 43 of 2026), Extraordinary Gazette, 10 April 2026, and the consolidated Bangladesh Labour Act, 2006 on the Laws of Bangladesh portal (bdlaws.minlaw.gov.bd) – amended Sections 27 and 264
• Bangladesh Labour Act, 2006 (consolidated text, FAOLEX) – Section 2(10) gratuity
• The Bangladesh Labour Act, 2006, Chapter XV (Lawyers & Jurists) – Sections 232 and 234
• Shanjid Siddique & Jurists, WPPF under the Bangladesh Labour Act, 2006
• The Daily Star, Your Advocate: Workers' participation in companies' profits – Section 232 fixed assets test
• MiHCM, The Bangladesh Labour (Amendment) Act 2026: What changed and what HR must do now
