Sri Lanka is a popular destination for foreign investment and a wonderful spot to start a business and reach the Asian market because of its ideal position. With a labor force involvement rate of 48.6%, Sri Lanka also has one of the most highly skilled worker forces in the world. Hiring selections can be made by utilizing Sri Lanka’s pool of highly skilled labor. 

When hiring in Sri Lanka, employers should be aware that the local currency is the Sri Lankan Rupee (LKR). Furthermore, standard employment practices include providing sick leave, yearly leave, and other benefits, contingent on duration of service. 

Sri Lanka’s labor laws are reasonable and flexible, catering to the interests of both businesses and employees. Hiring workers in Sri Lanka is easy if you follow these labor laws.

Labor Laws in Sri Lanka

Gaining an understanding of Sri Lanka’s labor laws is advantageous for employers involved in the recruitment and management of workers within the country. These laws oversee every aspect of the employer-employee relationship.

In the public sector, workers are subject to the terms outlined in the Establishment Code of the labor laws. Conversely, for those in the private sector, the Wages Board Ordinance, the Shop and Office Employees Act, and the Factories Ordinance serve as the primary regulations governing various aspects of employment.

Additionally, the Sri Lanka Bureau of Foreign Employments Act is a crucial piece of legislation that addresses issues related to the recruitment and employment of foreign workers in Sri Lanka.

Working Hours:

Details	Number of hours
Shop and Office Employment Act	Eight hours of daily maximum work and 45 hours of weekly maximum work.
Wages Board	For an adult: 48 hours of work per week, or nine hours per day. Regarding a minor (someone who is younger than sixteen): It should end at 6 p.m. and not last longer than twelve hours every day. It should start at 6 a.m.
Factories Ordinance	These terms are identical to what the Wages Board has established. Extra clauses include: For minors (those under the age of 18): Workdays must end at 1 p.m. on all days of the week and cannot extend past 8 p.m. For women: It is not possible to force them to work longer than 4.5 hours straight without providing a half-hour break.

Chapter III of Sri Lanka’s constitution upholds the principle of equality, guaranteeing equal rights for all individuals and deeming any sex-based discrimination unconstitutional. Furthermore, various employment laws, such as the Employment of Women, Young Persons, and Children Act, Maternity Benefits Ordinance, and Payment of Gratuity Act, are formulated to champion and reinforce equality across the nation.

In Sri Lanka, minimum wage standards are governed by the Minimum Wages Act, supported by the Budgetary Relief Acts of 2005 and 2016. These legislative measures collectively contribute to the establishment of equitable compensation practices.

Crucial elements of employment in Sri Lanka include statutory benefits like provident funds, trust funds, and gratuities. Social Security laws play a pivotal role in ensuring that employees receive these statutory benefits in adherence to established regulations.

Concerning health and safety in the workplace, the Factories Ordinance establishes comprehensive regulations to promote well-being. Additionally, the Workmen’s Compensation Ordinance outlines compensations that employers are obliged to provide in the unfortunate event of employee injuries, reaffirming a commitment to workplace safety.

Payroll and Taxes in Sri Lanka

The characteristics of the Sri Lankan payroll are as follows:

• Minimum Wage
  • In Sri Lanka, the minimum wage is currently LKR 12,500 per month.
  • In Sri Lanka, payroll is conducted every month.

• Overtime pay
• According to the Shop and Office Employees Act, overtime is compensated at a rate equal to 1.5 times the employee’s base pay.
• Overtime, though, is limited to 12 hours per week.

Employer and Employee Contributions

Employees Provident Fund	Employer: 12% Employee: 8%
Employees Trust Fund	Employer: 3%

Tax on Income

• Sri Lankan personal income tax rates are determined by an individual’s earnings and income. 
• The personal income tax rate ranges from 6% to 36% as of 2023.

Dates of Taxation

• The fiscal year of Sri Lanka is from April 1 to March 31. 
• Installments of taxes must be made every quarter.

Installment	Period
1st Installment	April to June
2nd Installment	July to September
3rd Installment	October to December
4th Installment	January to March

Employee Benefits in Sri Lanka

Leave Policy in Sri Lanka

Paid Time Off:

For every year of employment, employees are entitled to 14 days of paid yearly leave. A prorated share of the leave entitlement is awarded in the first year of work; in future years, the leave allocation is based on a predetermined formula or regulation. Here is the distribution:

• Four days if the employment commences on or after October 1 but before December 31.
• Seven days if the job starts immediately following July 1 but before September 30.
• Ten days if the employment begins right after April 1 but before June 30.
• Fourteen days if the job starts immediately after January 1 but before March 31.

Public Holidays:

The Sri Lankan government annually declares public holidays. The statutory holidays in Sri Lanka include:

Tamil Thai-Pongal Day	January 1
National Day	February 14
Day Before Sinhala and Tamil New Year Day	April 13
Sinhala and Tamil New Year Day	April 14
May Day	May 1
Day Following Vesak Day	May 16
Milad Un Nabi	October 9
Christmas Day	December 25

Maternity Leave:

Mothers in Sri Lanka are entitled to twelve weeks of fully paid leave for childbirth. Employee compensation is equal to six-sevenths of their base pay during this time. Mothers who have a stillbirth are entitled to six weeks of maternity leave to help them deal with the psychological and physical effects of the ordeal.

Paternity Leave:

Paternity leave is a recognized benefit for state-sector workers in Sri Lanka, enabling fathers to take three days of paid leave to assist and actively engage in their child’s early life. This clause recognizes the significance of family participation and shared duties in the dynamics of parenthood.

Sick Leave:

Year of Employment	Leave Entitlement
First year	One day for each completed 2 months (½ day accumulated at the end of each month)
Second year onwards	Seven days per year

Employees Provident Fund:

People might start receiving payouts from the Employees Provident Fund after they retire. In addition to retirees, this financial benefit also covers women who leave their jobs after getting married, people who are incapacitated and those who are impacted by government companies closing. This ensures that a wide range of life situations are covered.

Employees Trust Fund:

The Employees Trust Fund offers a financial safety net for people managing career changes by making payments available upon retirement, discharge, or resignation. The fact that this fund can only be used once every five years highlights its intended function as a sporadic support mechanism.

Gratuity:

Workers who have completed a minimum of five years of service and are let go, resign, or retire from their employers are entitled to a severance payment. In order to recognize and thank the employee for their years of dedication, the gratuity is computed as half of a month’s wage for each year of service.

Probation Period:

There is no legally required probationary term in Sri Lanka. Nonetheless, it is common for businesses to include a probationary term, lasting roughly six months, in their hiring and assessment procedures. Employers can use this procedure to determine whether a candidate is qualified for a long-term position while giving both sides enough time to decide whether to proceed with employment.

Cost of Hiring an Employee in Sri Lanka

The cost of hiring in Sri Lanka is influenced by several factors, such as:

1. Location of business
2. Job posting
3. Job Requirements
4. Training (if any)
5. Employee salaries
6. Employee benefits
7. Taxes

Top Job Listing Sites in Sri Lanka

Collaborating with EOR Services ensures access to skilled and experienced professionals in Sri Lanka, regardless of your industry. We are dedicated to seamlessly aligning your employment requirements with the most suitable candidates. Additionally, our comprehensive Employer of Record (EOR) platform simplifies the task of accessing and managing all your employees with unmatched ease.

To enhance your recruitment efforts in Sri Lanka, consider exploring the following platforms:

• Topjobs.lk:
  This site, with a substantial daily visitor count, provides employers with a diverse pool of candidates. It takes an extra step by directly forwarding relevant CVs to employers with posted vacancies.
• XpressJobs:
  As one of Sri Lanka’s leading platforms, XpressJobs has assisted 170,000 candidates in realizing their career aspirations. Offering convenient pricing packages to recruiters, this platform streamlines the process for employers to identify and connect with suitable candidates.
• CV.lk:
  Known for its user-friendly interface, CV.lk simplifies the candidate shortlisting process with comprehensive filter options. Additionally, it allows employers to list vacancies for overseas positions, expanding the reach of your recruitment efforts.
• Ikman Jobs:
  With over 273,000 candidate profiles, Ikman Jobs stands out with one of the most robust pools of job applicants. Available as a user-friendly app, it offers the flexibility to manage your hiring processes anytime, anywhere.
• Jobpal.lk:
  Featuring a streamlined user portal, Jobpal.lk empowers recruiters to efficiently manage job postings and applications. Its direct communication feature enables job applicants to contact recruiters directly, saving valuable time for both parties.

Compliance Risks of Hiring Employees in Sri Lanka

It is important to be aware of the following compliance concerns in Sri Lanka:

• The surcharge rates for payments to the Employees Provident Fund and Trust Fund might vary from 5% to 50%, depending on the duration of the delay. 
• Depending on how long the delay lasted, an employer that fails to pay their employee their gratuity on time may be fined 10% to 30% of the whole amount owing.

How to Hire Talent in Sri Lanka

To establish your workforce in Sri Lanka, you can consider the following approaches:

Option 1: Establishing a Subsidiary

Ensuring compliance with Sri Lanka’s laws empowers businesses to set up a subsidiary, enabling direct management of the hiring process. While this choice offers increased control, it requires a significant investment of time, money, and resources, with potential compliance risks.

Option 2: Hiring on a Contractual Basis

For companies seeking workforce flexibility, contractual employment is an option. Adhering to relevant laws is crucial, and having a proficient legal team ensures that agreements align with legal requirements. This approach allows for greater adaptability while maintaining legal compliance.

Option 3: Engage an Employer of Record (EOR) – EOR Services

Collaborating with an employer of record, such as EOR Services, offers companies the advantage of onboarding a skilled and diverse workforce without compromising on compliance or depleting resources. This option allows businesses to delegate essential tasks, including payroll management and tax compliance, to EOR Services, streamlining operations and ensuring regulatory adherence.

Hiring Trends in Sri Lanka in 2023

In recent years, Sri Lanka has witnessed a notable change in its recruiting policies. Therefore, if you’re trying to hire in Sri Lanka, you need to be aware of the following developments:

• Companies are becoming more accommodating to remote workers and freelancers. This leads to increased employee flexibility, which boosts overall workplace efficiency. 
• Many sectors in Sri Lanka, especially the IT sector, resort to offering competitive wage and benefits packages in order to guarantee that they can attract the greatest talent pool. 
• Companies provide a broad range of roles to candidates, allowing specialists from various fields to join their team.

Hiring in Sri Lanka Made Simpler with EOR Services

Entrepreneurs from around the world are attracted to Sri Lanka by its vibrant and expanding business environment. To fully capitalize on this market, businesses must first hire workers in Sri Lanka. This could prove to be a difficult procedure if you don’t collaborate with an Employer of Record.

Businesses that partner with EOR Services for EOR can hire workers and contractors in Sri Lanka. Local onboarding, multi-currency payroll, and 100% compliance in Sri Lanka and more than 110 other countries are made possible by EOR Services’ single platform. Schedule a demo now to find out more!