A provident fund is not automatically mandatory for a private company in Bangladesh. It becomes mandatory the moment three-fourths of your workers ask for one in writing.
Until that application arrives, setting up a fund is your choice. Once it arrives, the Bangladesh Labour Act 2006 requires you to constitute one.
Most guidance online answers this with a flat yes or a flat no. Both are wrong, and the difference matters, because the trigger sits with your workforce rather than with your headcount, your turnover or your ownership.
We set up and run statutory funds for foreign-owned employers under employee benefits and compensation services, alongside the monthly obligations in the NBR filing cycle.
The three-fourths rule
An establishment in the private sector is required to constitute a provident fund for the benefit of its workers where at least three-fourths of the total number of workers employed there demand it, by application in writing to the employer.
Read each part of that.
- Three-fourths of total workers, not of those who signed, and not a simple majority
- In writing. A verbal request or a union discussion does not start the obligation
- To the employer. The demand goes to you, not to a government office
The provisions sit in the Bangladesh Labour Act 2006 as summarised by PwC, reviewed 31 July 2026.
There is a practical reading of this that employers miss. The rule gives you a window, not an exemption. If your workforce is likely to reach that threshold, building the fund on your own timetable is considerably easier than building it inside a statutory deadline after a written demand.
What you contribute once a fund exists
| Who | Contribution |
|---|---|
| Employee, including foreign nationals | 7% to 8% of salary, at a fixed rate |
| Employer | A matching contribution |
| Deposit | Both amounts, every month |
The employer deposits both halves. The employee’s share is deducted from salary, the employer’s share is added, and the combined amount goes to the employee’s provident fund monthly.
Budget for the employer half as a real cost of employment. On a BDT 100,000 monthly salary at 8%, the fund costs the company BDT 8,000 a month, or BDT 96,000 a year, on top of the salary itself.
Foreign nationals are included
This catches expatriate employers repeatedly. Employees working at an establishment to which the social security regulations apply contribute to the provident fund, and that includes foreign nationals.
An expatriate on a 2-year posting is not outside the fund because they will leave. If your establishment has a fund, their salary is inside the same 7% to 8% deduction, and the company matches it.
Where that sits against their income tax position depends on residence, which is set out in the 183-day residence test.
Gratuity is a separate obligation
Both are described as social security contributions under the Labour Act 2006, and employers often treat them as one arrangement. They are not.
Gratuity is payable to workers on termination of employment, and it is payable in addition to any compensation, wages or allowance otherwise due on termination.
2 differences matter for planning:
- The fund accrues monthly through the employment. Gratuity crystallises at the end of it
- The fund is contributed to by both sides. Gratuity is an employer obligation
A company that has funded one diligently and made no provision for the other has covered half its exposure.
Where this sits in the cost of employing someone
A foreign parent modelling Bangladeshi headcount from a salary figure alone will be short. The employer-side items that sit on top include:
- The matching provident fund contribution, where a fund exists
- Gratuity accruing against termination
- Festival bonuses
- The Workers’ Profit Participation Fund, where it applies
- Withholding tax administration on salary and on benefits
Benefits provided in kind carry their own tax treatment, separate from the fund, and the valuations are set by law rather than by what they cost you. Those are in the prescribed perquisite valuations.
Deciding before the demand arrives
3 situations make setting up a fund early the better call.
You expect to grow past a small team. The three-fourths threshold is easier to reach in a workforce of 40 than in a workforce of 4, and a growing company tends to cross it without warning.
You are competing for staff. A provident fund is a visible part of a package in the Bangladeshi market, and a company without one is comparing badly against a company with one.
Your group already runs equivalent plans elsewhere. Aligning the Bangladeshi entity early avoids a retrofit that has to happen at speed.
Against that, a genuinely small establishment with no near-term growth has a reasonable case for waiting. We would rather say that plainly than push every client into a fund they do not yet need.
4 mistakes with provident funds in Bangladesh
1. Reading “not mandatory” as “not required”
It is conditional, not optional. A written demand from three-fourths of workers makes it a legal obligation, and the clock starts then.
2. Excluding expatriate staff
Foreign nationals working at an establishment covered by the regulations contribute on the same basis as local employees.
3. Treating gratuity as covered by the fund
They are separate obligations. Gratuity is payable on termination in addition to anything else owed, and it is funded entirely by the employer.
4. Missing a month
Both the employee’s and the employer’s contributions are deposited monthly. A fund that is set up and then funded irregularly is a compliance problem rather than a benefit.
Setting the fund up properly
We advise foreign-owned employers on whether to constitute a provident fund now or later, set the contribution mechanics so both halves reach the fund each month, and run gratuity provisioning alongside it under the Khan Akber Workforce Compliance Framework.
For a view on your own workforce and where the threshold sits, talk to our team.
Provident fund and gratuity obligations sit under the Bangladesh Labour Act 2006 as amended. Rules and rates change by amendment. Confirm your position with a qualified adviser before constituting a fund.
Frequently asked questions
Is a provident fund mandatory in Bangladesh for private companies?
Not automatically. A private-sector establishment must constitute a provident fund when at least three-fourths of its total workers demand one by written application to the employer. Before any such demand arrives, setting one up remains entirely the employer’s own commercial decision.
How much is the provident fund contribution in Bangladesh?
Employees contribute at a fixed rate of 7% to 8% of salary, and the employer makes a matching contribution on top. The employer then deposits both the employee’s share and its own share into the employee’s fund every single month.
Do foreign employees contribute to a provident fund in Bangladesh?
Yes. Employees working at an establishment to which the social security regulations apply contribute to the fund, and that expressly includes foreign nationals. An expatriate on a fixed-term posting is treated in exactly the same way as a local employee would be.
Is gratuity the same as a provident fund in Bangladesh?
No. They are separate obligations under the Labour Act 2006. A provident fund accrues monthly with contributions from both employer and employee. Gratuity is paid by the employer alone on termination, in addition to any wages or compensation otherwise due.
Which law governs provident funds in Bangladesh?
The Bangladesh Labour Act 2006, as amended from time to time, governs social security in Bangladesh, including both provident fund and gratuity. The obligation to constitute a fund, the contribution rates and the monthly deposit all sit under that Act.
