Sri Lanka Employment Guide
Sri Lanka Employment Guide
Sri Lanka, an island nation in South Asia, has a population of around 22 million. Its economy is driven by agriculture, tourism, apparel manufacturing, and services. Employment in Sri Lanka is governed by the Shop and Office Employees Act, Wages Board Ordinances, and other labor regulations, which cover contracts, working hours, leave entitlements, minimum wage, and termination procedures. Employers must ensure compliance with social security contributions, workplace safety, and fair labor practices. The labor market supports both full-time and part-time employment with regulated benefits.
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Currency
Sri Lankan Rupee (LKR)
Capital
Colombo
Official language
Sinhala, Tamil
Salary Cycle
Monthly
Our Employment Guide in Sri Lanka
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Understanding Sri Lanka's Minimum Wage Regulations
For businesses expanding into Sri Lanka, understanding the local labor compensation framework is essential. The national minimum wage is set at LKR 12,500 per month. This baseline is a critical starting point for structuring compliant and competitive compensation packages for your workforce.
Navigating Sri Lanka's Personal Income Tax System
Personal income tax in Sri Lanka operates on a progressive scale, with rates ranging from 6% to 36%. It's important to note that an individual's final tax liability can be influenced by personal circumstances, such as marital status and the number of dependents. The table below outlines the current tax brackets based on annual taxable income.
| Annual Taxable Income (LKR) | Tax Rate (%) |
|---|---|
| 0 - 1,200,000 | 0% |
| 1,200,001 - 1,700,000 | 6% |
| 1,700,001 - 2,200,000 | 12% |
| 2,200,001 - 2,700,000 | 18% |
| 2,700,001 - 3,200,000 | 24% |
| 3,200,001 - 3,700,000 | 30% |
| Over 3,700,000 | 36% |
Calculating Total Employment Costs
When budgeting for a team in Sri Lanka, employers must account for statutory contributions beyond the gross salary. A standard estimate for these employer-side costs is approximately 15% of the employee's wages. This typically includes:
- Employer Provident Fund (EPF) Contribution: 12%
- Employee Trust Fund (ETF) Contribution: 3%
For instance, for an employee earning the minimum wage of LKR 12,500, the employer would contribute an additional LKR 1,875 towards these funds. It is highly recommended to consult with experts like SailGlobal for a precise, customized cost analysis for your specific hiring scenario.
Overtime Regulations and Standard Working Hours
The standard workweek in Sri Lanka is defined as 40 hours, typically spread over five days (Monday to Friday) with 8-hour workdays. The workweek can be legally extended to 45 hours, for example, by including a 4-hour shift on a Saturday.
Overtime compensation is mandatory and calculated separately from the base salary. Any work performed beyond the standard hours is considered overtime, provided it has received prior approval from the employer. The law permits a maximum of 12 overtime hours per week, which must be compensated at a rate of 150% of the employee's regular hourly wage.
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