Due to its advantageous location, Sri Lanka is a desirable destination for foreign investment and a great place to establish a business and enter the Asian market. In addition, Sri Lanka boasts one of the world’s most highly skilled labor forces, with a labor force engagement rate of 48.6%. Using Sri Lanka’s highly skilled labor pool, you can make hiring decisions.
Employers should be aware that the Sri Lankan Rupee (LKR) is the local currency when hiring in Sri Lanka. In addition, depending on the length of service, common employment practices include offering sick leave, annual leave, and other benefits.
Regarding Sri Lanka’s labor laws, the rules are fair and adaptable, taking into account the needs of both employers and workers. If you abide by these labor laws, hiring workers in Sri Lanka is simple.
Employers can benefit from understanding Sri Lanka’s labor laws when hiring and managing workers in the nation. Every facet of the employer-employee relationship is governed by these laws.
Terms of Service
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. |
Equality is enshrined in Chapter III of Sri Lanka’s constitution, ensuring that all individuals enjoy equal rights and rendering any discrimination based on sex unconstitutional. Additionally, various employment laws, including the Employment of Women, Young Persons, and Children Act, Maternity Benefits Ordinance, Payment of Gratuity Act, among others, are crafted to uphold and reinforce equality throughout the country.
Minimum wage standards in Sri Lanka are governed by the Minimum Wages Act and further supported by the Budgetary Relief Acts of 2005 and 2016. These legislative measures collectively contribute to establishing fair compensation practices.
Statutory benefits form a crucial aspect of employment in Sri Lanka, encompassing provident funds, trust funds, and gratuities. Social Security laws play a pivotal role in ensuring that employees receive these statutory benefits in accordance with established regulations.
In matters of health and safety at the workplace, the Factories Ordinance lays down comprehensive regulations to promote well-being. Additionally, the Workmen’s Compensation Ordinance delineates the compensations that employers are obligated to provide in the unfortunate event of employee injuries, reinforcing a commitment to workplace safety.
The characteristics of the Sri Lankan payroll are as follows:
Employer and Employee Contributions
| Employees Provident Fund | Employer: 12% Employee: 8% |
| Employees Trust Fund | Employer: 3% |
Tax on Income
Dates of Taxation
| Installment | Period |
| 1st Installment | April to June |
| 2nd Installment | July to September |
| 3rd Installment | October to December |
| 4th Installment | January to March |
Leave Policy in Sri Lanka
Paid Time Off:
Employees are entitled to enjoy 14 days of paid annual leave for each employment year. During the initial year of employment, a prorated portion of the entitled leave is granted, while in subsequent years, the leave allocation is determined using a predefined formula or rule. The distribution is as follows:
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:
In Sri Lanka, mothers are granted a comprehensive twelve weeks of fully paid maternity leave. During this period, employees receive remuneration equivalent to 6/7th of their standard income. In the unfortunate event of a stillborn child, mothers are entitled to six weeks of maternity leave to cope with the emotional and physical aspects of such a situation.
Paternity Leave:
For state-sector employees in Sri Lanka, paternity leave is a recognized benefit, allowing fathers to take three days of paid leave to support and actively participate in the early stages of their child’s life. This provision acknowledges the importance of shared responsibilities and family involvement 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:
Upon retirement, individuals become eligible to receive disbursements from the Employees Provident Fund. This financial benefit extends not only to retirees but also to women leaving employment due to marriage, individuals unable to work due to incapacitation, and those affected by the closure of government corporations where they were employed, ensuring comprehensive coverage for various life circumstances.
Employees Trust Fund:
Payments from the Employees Trust Fund are accessible upon retirement, dismissal, or resignation, providing a financial safety net for individuals navigating transitions in their career. Notably, the utilization of this fund is restricted to once every five years, emphasizing its purpose as a periodic support mechanism.
Gratuity:
Employees who experience termination, resignation, or retirement are entitled to a severance payment from their employers, provided they have completed a minimum of five years of service. The gratuity amount is calculated at half a month’s salary for each year of service rendered by the employee, acknowledging and rewarding their commitment over the years.
Probation Period:
In Sri Lanka, there is no legally mandated probation period. However, it is customary for companies to implement a probationary period of approximately six months as part of their hiring and evaluation processes. This practice allows employers to assess the suitability of employees for long-term roles while providing a reasonable timeframe for both parties to make informed decisions about continued employment.
The cost of hiring in Sri Lanka is influenced by several factors, such as:
Establishing a Subsidiary vs. Employer of Record (EOR) in Sri Lanka
| Criteria | Establishing a subsidiary | Partnering with Marzuna |
| Initial Cost | High; includes setup costs, legal fees, etc. | Since Marzuna is already well-established, the initial prices are significantly lower. |
| Duration for setup | can take months and be very complicated. | Because of Marzuna’s pre-existing infrastructure in Sri Lanka, it happened almost instantly. |
| Employment liabilities | high because all compliance needs to be ensured by both the parent company and the subsidiary. | Marzuna will be in charge of hiring staff and upholding regulations |
| Operational overhead | must address things like payroll processing, tax management, benefit coverage, and more. | notably low because Marzuna handles all aspects of employment in Sri Lanka. |
| Flexibility | Extended commitment is required. | Relevant for both long and short-term commitments. |
| Local compliance | Can be tricky and complex. | As Marzuna is knowledgeable about the local laws and regulations, it is guaranteed. |
Partnering with Marzuna ensures that you have access to the most talented and seasoned professionals in Sri Lanka, regardless of your industry. Our commitment is to seamlessly match your employment needs with the most suitable candidates. Moreover, our integrated Employer of Record (EOR) platform simplifies the process of accessing and managing all your employees with unparalleled ease.
For additional resources to enhance your hiring efforts in Sri Lanka, consider exploring the following platforms:
Topjobs.lk: This website boasts a substantial daily visitor count, providing employers with a diverse pool of candidates. It goes a step further by directly forwarding relevant CVs to employers with posted vacancies.
XpressJobs: As one of Sri Lanka’s premier platforms, XpressJobs has facilitated 170,000 candidates in realizing their dream jobs. Offering convenient pricing packages to recruiters, this platform streamlines the process for employers to identify and connect with suitable candidates.
CV.lk: Notable 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: Boasting 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: With 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.
In Sri Lanka, the following compliance risks should be anticipated:
To build your workforce in Sri Lanka, consider one of the following approaches:
Sri Lanka has seen a significant shift in its hiring practices in recent years. Therefore, you need to be aware of the following developments if you’re looking to hire in Sri Lanka:
Business owners from around the world are drawn 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 Marzuna 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 Marzuna’s single platform. Schedule a demo now to find out more!
