Guide to employment, payroll and benefits in

Sri Lanka

Rivermate offers complete payroll, benefits and compliance services for

Sri Lanka

01. Overview

Last updated: 

August 19, 2021

Sri Lanka Rupee
Sri Jayewardenepura Kotte
Ease of doing business
GDP growth

02. Grow your team in

Sri Lanka

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Sri Lanka

, particularly if you don't have established local relationships. You can hire employees in

Sri Lanka

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Sri Lanka, formerly known as Ceylon, is a South Asian island nation whose official name is the Democratic Socialist Republic of Sri Lanka. It is located on the Indian Ocean, southwest of the Bay of Bengal and southeast of the Arabian Sea, with the Gulf of Mannar and the Palk Strait separating it from the Indian subcontinent. Sri Jayawardenepura Kotte serves as the country's legislative capital, while Colombo serves as the country's largest city and financial center. Sri Lanka has a 3,000-year recorded history, with ancient human settlements dating back at least 125,000 years. It has a rich cultural heritage, with the Pli Canon, Sri Lanka's first recorded Buddhist writings, dating back to the Fourth Buddhist Council in 29 BCE. From the time of the ancient Silk Road to the modern Maritime Silk Road, its strategic position and deep harbors made it extremely important. From the Anuradhapura era onwards, its location as a major trading hub made it known to both the Far East and Europe. Sri Lanka's trade in luxury goods and spices drew merchants from all over the world, resulting in a diverse population. The Portuguese, who arrived in Sri Lanka by chance, tried to manage the island's maritime regions and lucrative foreign trade during a period of great political turmoil. The Dutch subsequently took over the Portuguese possessions. The British took over the Dutch possessions and colonized the island from 1815 to 1948, extending their dominance over the entire island. Ceylon became a republic in 1948 and adopted its current name in 1972, following a nationwide campaign for political freedom in the early twentieth century. Sri Lanka's recent history has been marred by a 26-year civil war, which ended decisively in 2009 when the Sri Lanka Armed Forces defeated the Liberation Tigers of Tamil Eelam. Sri Lanka is a multi-cultural, multi-lingual, and multi-ethnic nation. The Sinhalese make up the majority of the population, but a substantial minority of Tamils have also had a significant impact on the island's history, as have Moors, Burghers, Malays, Chinese, and the indigenous Vedda. As a founding member of the SAARC and a member of the United Nations, the Commonwealth of Nations, the G77, and the Non-Aligned Movement, it has a long tradition of international involvement. Sri Lanka is the only country in South Asia to score highly on the Human Development Index, with the region's second highest per capita income.

04. Public holidays

05. Types of leave

Paid time off

Employees receive 14 days of paid vacation per year after one year of work, in addition to public holidays. Employees with less than a year of service are entitled to four to ten days of vacation, as follows:If your job starts on or after April 1st but before July 1st, you'll have 10 days off.If your job starts on or after July 1st but before October 1st, you'll have seven days off.If you start work on or after October 1st but before December 31st, you will get four days off.Employees must use a minimum of seven days of annual leave in a row within a 12-month period of accumulation. The dates on which leave may be taken are negotiated between the company and the employee.

Public holidays

The following holidays are observed in Sri Lanka:Duruthu Full Moon Poya DayTamil Thai Pongal DaySri Lanka National DayNavam Full Moon Poya DayMahasivarathri DayMadin Full Moon Poya DayGood FridayBak Full Moon Poya DayDay prior to Sinhala & Tamil New Year DaySinhala & Tamil New Year DayMay day (Labor Day)Id-Ul-Fitr (Ramazan Festival Day)Vesak Full Moon Poya DayDay following Vesak Full Moon Poya DayPoson Full Moon Poya DayId-Ul-Alha (Hadji Festival Day)Esala Full Moon Poya DayNikini Full Moon Poya DayBinara Full Moon Poya DayMilad-Un-Nabi (Holy Prophet’s Birthday)Vap Full Moon Poya DayDeepavaliIll Full Moon Poya DayUnduvap Full Moon Poya DayChristmas Day

Sick days

Employees are entitled to up to seven days of sick leave each year. Sick leave is earned at a rate of one day every two months during the first year of work.

Maternity leave

Employees who are female are entitled to 12 weeks of paid maternity leave. The first two weeks can be taken up to two weeks before the projected due date, and the remaining ten weeks can be taken after the baby is born. If the pregnancy does not result in a live birth, the employee is entitled to six weeks of paid leave, two weeks before and four weeks after the projected due date.The employer shall provide maternity benefits for the period leading up to and including the day of confinement within 48 hours of the employee showing proof of pregnancy. Payment is made in two payments during the second and fourth weeks of leave for the period after the delivery.

Paternity leave

There is no statutory paternity leave.

Parental leave

Other than the already mentioned terms regarding maternity and paternity leave, there are no other provisions in the law of Sri Lanka regarding parental leave.

Other leave

06. Employment termination

Termination process

Employment contracts may be cancelled by either the employer or the employee at the conclusion of the contract term (if the contract is for a specified term).

Employers have the authority to terminate an employee for misconduct or disciplinary reasons related to poor performance. Employers must tell employees of the reason for termination in writing within two days of the termination. Justifications for terminating an employee include extreme negligence, abusive or insubordinate behavior, fraud, theft or dishonesty, intoxication or other impairment, abandonment or chronic absenteeism.

Termination of an employee for any cause other than discipline, including redundancy, normally requires approval by the Labor Commissioner or the employee's consent. Written approval and consent are required.

Employees are entitled to redundancy pay if their employment is terminated due to the business's closure.

Notice period

Notice periods for dismissal, or payments in lieu of notice, are typically stipulated in the employment contract. However, if the employer invokes the notice period or payment in lieu of notice provisions during an unjust dismissal, the employee may challenge the termination on the grounds of unjust dismissal. When an employee is dismissed on disciplinary grounds, the employer is required to inform the employee, in writing, of the reasons for the dismissal before the end of the second working day following the dismissal.

Severance pay

The amount of compensation that may be awarded is determined by the length of service of the employee. For each year of service completed, employees with one to five years of service are entitled to 2.5 months' salary as compensation. Employees with between six and fourteen years of service are entitled to receive two months' salary as compensation for each year of service. Employees with 15 to 19 years of service are entitled to 1.5 months' pay as compensation for each completed year of service. Employees with between 20 and 24 years of service are entitled to receive one month's salary as compensation for each year of service. Employees with between 25 and 34 years of service are entitled to receive 0.5 months' salary as compensation for each completed year of service. Under the above formula, the maximum severance payment that can be made is 1.25 million Sri Lankan Rupees.

Probation period

There is no clear provision in labor laws on the duration of probation period in Sri Lanka. Generally, the probation period is six months' long.

07. Working hours


The standard work week is 45 hours long, with eight hours per day from Monday to Friday.

Male employees between the ages of 14 and 18 are generally prohibited from working at night, defined as between 6 p.m. and 6 a.m. Male employees between the ages of 16 and 18 are, however, permitted to work between the hours of 6 a.m. and 10 p.m. if employed in a hotel, restaurant, or place of entertainment.

Female employees, with a few exceptions, are also prohibited from working at night. Female employees who are at least 18 years old may work overnight in a residential hotel, between the hours of 6 p.m. and 10 p.m. if employed in a hotel or restaurant, or between the hours of 6 p.m. and 8 p.m. if employed in an office.


Overtime is limited to 12 hours per week and is compensated at 150% of the basic rate.

08. Minimum wage


The minimum wage is 10,000 Sri Lankan rupees per month.

09. Employee benefits


Sri Lanka offers a free universal public healthcare system that is delivered via a network of healthcare facilities and hospitals. Citizens and workers are both covered by the universal healthcare system. Some private companies provide supplementary health insurance policies, although they are regarded perks rather than entitlements.

A probationary term, pay on yearly vacations, public holidays, sick leaves, maternity leave, paternity leave, and overtime pay are all mandated by law. Social security payments are sometimes included in statutory benefits.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Sri Lanka

to hire a team takes time, money, and effort. The labor law in

Sri Lanka

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Sri Lanka

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Sri Lanka

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Sri Lanka

via our Employer of Record / PEO solution.

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