Navigating the complexities of employment termination in Bangladesh requires a thorough understanding of the country's labor laws. The process involves specific requirements regarding notice periods, severance pay, valid grounds for termination, and strict procedural steps that must be followed to ensure compliance and avoid legal challenges. Employers must adhere to these regulations to manage workforce changes effectively and lawfully.
Properly handling terminations is crucial not only for legal compliance but also for maintaining good employee relations and the company's reputation. Understanding the nuances of the Bangladesh Labor Act is essential for employers operating in the country, whether they are local entities or international companies employing staff through an Employer of Record.
Notice Period Requirements
The required notice period for terminating employment in Bangladesh depends on the employee's category and how they are paid. Employers have the option to provide the required notice or pay wages in lieu of notice.
| Employee Category | Service Length | Notice Period (Monthly Paid) | Notice Period (Other Paid) | Pay in Lieu Option |
|---|---|---|---|---|
| Permanent Employee | Any Length | 60 days | 30 days | Yes |
| Temporary Employee | Any Length | 30 days | 15 days | Yes |
- The notice period starts from the date the notice is served.
- If pay in lieu of notice is given, the amount must be equivalent to the wages the employee would have earned during the notice period.
Severance Pay Calculations and Entitlements
Severance pay, often referred to as 'compensation' or 'retrenchment benefit' depending on the context of termination, is a significant entitlement for employees in Bangladesh upon the cessation of their employment, provided certain conditions are met. The calculation is primarily based on the employee's length of service and the reason for termination.
For termination by the employer without cause (e.g., retrenchment/redundancy, abolition of position, ill-health, inefficiency not due to misconduct):
- Employees are generally entitled to 30 days' wages for each completed year of service or any part thereof exceeding six months.
- The 'wages' used for calculation typically include basic pay, dearness allowance, and any other allowance regularly paid in cash.
For dismissal due to misconduct:
- An employee dismissed for proven misconduct is generally not entitled to severance pay. However, they are entitled to other dues like earned leave encashment and provident fund contributions (if applicable).
For resignation by the employee:
- Employees who resign after a certain period of service (typically one year) are entitled to 14 days' wages for each completed year of service if they resign after one year but before five years, and 30 days' wages for each completed year if they resign after five years.
| Reason for Termination | Service Length | Severance Pay Entitlement (Wages per Year of Service) |
|---|---|---|
| Termination by Employer (without cause) | 1 year or more (including part year > 6 months) | 30 days |
| Dismissal for Proven Misconduct | Any Length | Generally None (other dues apply) |
| Resignation by Employee | 1 year to less than 5 years | 14 days |
| Resignation by Employee | 5 years or more | 30 days |
In addition to severance pay, terminated employees are also entitled to payment for any accrued but untaken annual leave, and their share of the provident fund (if a provident fund scheme is in place).
Grounds for Termination
Employment in Bangladesh can be terminated based on several grounds, broadly categorized as termination with cause and termination without cause.
Termination With Cause (Dismissal): This occurs when an employee is terminated due to proven misconduct. The Labor Act lists specific acts that constitute misconduct, including:
- Willful insubordination or disobedience.
- Theft, fraud, or dishonesty.
- Taking bribes or illegal gratification.
- Habitual absence without leave or absence without leave for more than ten days.
- Habitual late attendance.
- Habitual breach of any law applicable to the establishment or any rules or regulations.
- Riotous or disorderly behavior.
- Inciting others to riotous or disorderly behavior.
- Striking illegally.
- Damage to the employer's property.
- Inefficiency or negligence causing loss or damage.
- Breach of the terms of employment.
Termination Without Cause: This type of termination is not due to the employee's fault. Common grounds include:
- Retrenchment (Redundancy): Termination due to surplus labor or restructuring.
- Abolition of Position: The employee's position is no longer required.
- Ill-health: If an employee is certified by a registered medical practitioner to be permanently incapacitated due to illness.
- Inefficiency: If an employee becomes inefficient, provided it is not due to misconduct.
- Termination Simpliciter: Termination by the employer by giving notice or pay in lieu thereof, without assigning a specific reason (though this must still comply with procedural requirements and not be discriminatory or unfair).
Procedural Requirements for Lawful Termination
Strict adherence to procedural requirements is critical for a lawful termination in Bangladesh, particularly in cases of dismissal for misconduct. Failure to follow the correct process is a common pitfall leading to wrongful dismissal claims.
Procedure for Dismissal (Misconduct):
- Show Cause Notice: A written notice must be issued to the employee clearly stating the alleged misconduct and providing a reasonable opportunity (usually at least 7 days) to explain their conduct.
- Investigation: If the employee's explanation is unsatisfactory or if they fail to respond, an impartial inquiry must be conducted. The employee has the right to be present, present evidence, and cross-examine witnesses.
- Inquiry Report: The inquiry committee or officer must prepare a report detailing the findings and recommending a course of action.
- Final Termination Order: If the misconduct is proven based on the inquiry report, a written termination order must be issued, stating the grounds for dismissal and the effective date.
- Payment of Dues: All final dues, including earned leave encashment and provident fund (if applicable), must be paid promptly. Severance pay is generally not applicable in cases of dismissal for proven misconduct.
Procedure for Termination Without Cause (e.g., Retrenchment):
- Notice: Provide the required notice period or pay in lieu of notice as per the table above.
- Written Order: Issue a written termination order stating the reason (e.g., retrenchment) and the effective date.
- Payment of Dues: Pay all final dues, including notice pay (if applicable), severance pay, earned leave encashment, and provident fund (if applicable).
Documentation: Proper documentation is essential throughout the termination process. This includes copies of the appointment letter, show cause notice, employee's response, inquiry proceedings and report, final termination letter, and records of final payment.
Employee Protections Against Wrongful Dismissal
Employees in Bangladesh are protected against wrongful dismissal. A termination can be deemed wrongful if it is carried out without valid grounds, without following the prescribed legal procedure, or if it is discriminatory.
Common pitfalls for employers leading to wrongful dismissal claims include:
- Terminating an employee without a valid reason recognized by law.
- Failing to issue a proper show cause notice or conduct a fair inquiry in misconduct cases.
- Not providing the correct notice period or pay in lieu.
- Incorrectly calculating or failing to pay severance and other final dues.
- Terminating employment based on discriminatory grounds (e.g., gender, religion, union membership).
- Terminating an employee during a period of protected leave (e.g., maternity leave).
If an employee believes they have been wrongfully dismissed, they can file a complaint with the Labor Court. The court can order reinstatement of the employee with back wages or award compensation. Navigating these potential disputes requires careful attention to legal requirements and robust documentation.
