Rivermate | Bangladesh flag


Termination and Severance Policies

Learn about the legal processes for employee termination and severance in Bangladesh

Notice period

The Bangladesh Labour Act, 2006, stipulates the legal requirements for notice periods during employment termination for both employers and employees.

Notice Period for Employers Terminating Employees

Employers are required to provide written notice to the employee before termination. The notice period varies based on the employee's classification:

  • Permanent Workers: Employers must give 120 days' written notice to a permanent worker receiving monthly wages.
  • Other Workers: For all other workers (temporary, daily rated, etc.), the notice period is 60 days.

Employers also have an alternative option:

  • Compensation in Lieu of Notice: Employers can choose to pay the employee wages for the stipulated notice period instead of providing written notice.

Notice Period for Employees Resigning

Employees are also obligated to provide written notice before resigning:

  • Permanent Workers: Permanent workers must give 60 days' written notice to their employer.
  • Temporary Workers: The notice period for temporary workers resigning is 30 days for monthly-rated employees and 14 days for others.

Employees also have an alternative:

  • Payment in Lieu of Notice: Resigning employees can pay their employer an amount equal to their wages for the notice period to forgo the written notice requirement.

Important Note: These are the minimum legal requirements. Employment contracts can stipulate longer notice periods, which must be adhered to by both parties.

Severance pay

In Bangladesh, severance pay entitlements are categorized under "service benefits" as per the Bangladesh Labour Act, 2006.

Entitlement to Severance Pay

Employees are entitled to severance pay in the following scenarios:

  • Termination by Employer (Other Than Misconduct): If an employer terminates an employee for reasons other than misconduct, the employee is entitled to service benefits as per Section 20 of the Bangladesh Labour Act, 2006.
  • Resignation with Sufficient Service: Employees may be entitled to service benefits if they resign after completing a minimum period of continuous service. The duration of service required can vary based on regulations and individual employer policies.

Calculation of Severance Pay

The Bangladesh Labour Act, 2006, provides guidelines for the calculation of service benefits:

  • 14 to 5 Years of Service: If an employee's employment lasted between 5-10 years, they are entitled to 14 days' wages for each completed year of service (Section 20 (2)).
  • 10 Years or More of Service: If an employee has worked for 10 years or more, they are entitled to 30 days' wages for each completed year of service (Section 20 (2)).

Please note that the calculation of severance pay is based on the employee's last drawn wages, excluding allowances (Section 2 (58)). Employers can also have more generous severance policies than the legal minimum required.

Exceptions to Severance Entitlement

There are certain circumstances where an employee may not be entitled to severance pay:

  • Dismissal Due to Misconduct: Employees dismissed for misconduct, as defined by the Bangladesh Labour Act, 2006, are not entitled to service benefits (Section 20(1)(c)).
  • Resignation without Sufficient Service: Employees who resign before completing a specified minimum period of employment may not be eligible for severance, depending on the employer's policies.

Termination process

The employment termination process in Bangladesh is governed by the Bangladesh Labour Act, 2006. This process must be strictly adhered to, and it involves several steps and considerations.

Types of Termination

There are two main types of termination:

  • Termination by Employer: The employer can terminate the employment contract under certain conditions and procedures.
    • Termination for Cause: Employers can immediately terminate a worker for "misconduct" as defined in Section 16 of the Bangladesh Labour Act, 2006.
    • Termination without Cause: When terminating employment without cause, employers must follow certain procedures.
  • Termination by Employee (Resignation): Employees can terminate their employment by providing the employer with a written resignation notice.

Steps in the Termination Process

The termination process involves several steps:

  1. Written Notice: A written notice must be provided, outlining the reason for termination, the effective date of termination, and adherence to the required procedures.
  2. Investigation for Misconduct: If the termination is for cause, the employer may conduct a fair investigation before dismissal.
  3. Settlement of Dues: Upon termination, the employer must settle all outstanding financial dues to the employee, including unpaid salary and wages, and accrued leave benefits.
  4. Issuance of Documents: Employers must provide the terminated worker with an experience certificate or a service certificate.

Considerations for Downsizing

When terminating employment due to downsizing, the employer may need to follow additional guidelines, such as notifying relevant authorities and considering priority for retrenched workers when rehiring.

Termination Disputes

If a dispute arises during the termination process, the aggrieved party (employer or employee) can file a complaint with the Labour Court for resolution. For the most up-to-date and comprehensive information on labor laws and termination procedures in Bangladesh, always refer to the official Bangladesh Labour Act, 2006.

Rivermate | A 3d rendering of earth

Hire your employees globally with confidence

We're here to help you on your global hiring journey.