Hiring in Sri Lanka: Tapping into a Skilled Workforce

Facts & Stats

Sri Lanka privileges a well-educated and skilled workforce, making it an attractive destination for businesses.

The country offers competitive labor costs compared to many Western countries.

Hiring in Sri Lanka requires compliance with local labor laws and regulations.

Remote Work in Sri Lanka

The Evolution of Remote Work

Sri Lanka, like many other countries, has witnessed the growth of remote work, driven by technological advancements and the global shift towards flexible work arrangements.

Regulatory Considerations

Companies embracing remote work must navigate regulatory nuances, including tax implications, employment laws and data privacy regulations, both in Sri Lanka and the employees' home countries.

Sri Lanka Labor Laws

Upholding Employment Regulations

Sri Lanka's labor laws encompass a wide range of aspects, including employment contracts, working hours, minimum wage (which exists in certain sectors), and employee rights. Adhering to these laws is essential for businesses.

Employment Contract

Employment contracts are fundamental in Sri Lanka. They detail terms such as salary, benefits, working hours, notice periods and termination procedures, providing legal protection for both employers and employees.

Working Hours in Sri Lanka

Sri Lanka typically follows a 45-hour workweek, usually spread across five days. Overtime pay applies when employees work beyond their regular hours.

Employment Taxes

Managing employment taxes in Sri Lanka involves observing to income tax regulations and contributions to statutory funds like the Employees' Provident Fund (EPF) and the Employees' Trust Fund (ETF).

Employee Income Tax Rates

  • First 100, 000 LKR from gross salary Income Tax: 0%
  • LKR 100,000 - LKR 141,667: 6%
  • LKR 141,667 - LKR 183,333: 12%
  • LKR 183,333 - LKR 225,000: 18%
  • LKR 225,000 - LKR 266,667: 24%
  • LKR 266,667 - LKR 308,333: 30%
  • Above LKR 308,333: 36%


If the employee is a non-resident in terms of the provisions of the Inland Revenue Act (whether he is a citizen in Sri Lanka or not), the tax should be deducted, by the employer at the rate of 36%, unless otherwise an instruction has been issued by the Commissioner General or any officer authorized by The Secretariat considering special circumstances.

Employer Income Tax

Small and medium-sized businesses (SMEs) that operate in Sri Lanka, don't have a legal associate and have a yearly revenue of under 500 million Sri Lankan rupees (LKR), Corporate Income Tax will be applicable from 14 – 30 %.

Health Insurance

While not mandatory, some employers offer health insurance to employees as part of their benefits package, promoting employee well-being.

Maternity Leave

Female employees in Sri Lanka are entitled to maternity leave, typically ranging from 12 to 84 days, depending on factors such as the number of children and the type of employment.

Sick Leave in Sri Lanka

Sri Lankan labor law mandates paid sick leave for employees who are medically certified as unfit for work. The duration of sick leave varies based on factors like employment type and length of service.

Vacation Leave in Sri Lanka

Employees in Sri Lanka are entitled to annual leave, typically ranging from 7 to 28 days, depending on factors like years of service and the industry.

Severance in Sri Lanka

Sri Lanka has detailed severance laws that outline notice periods, termination reasons and compensation in cases of termination.

Termination in Sri Lanka

Termination procedures in Sri Lanka include notice periods, valid reasons for termination, and the return of company property. Fair employment practices are essential when navigating these regulations.

Employee Compensation & Benefits

Providing competitive compensation packages, including salary, bonuses, and benefits, is crucial for attracting and retaining talent in Sri Lanka's competitive job market.

Expanding your business into Sri Lanka is a strategic move, and partnering with a Sri Lanka EOR or PEO service can streamline the process. These services provide a solid foundation for HR and compliance, ensuring a smooth transition into the dynamic Sri Lankan business landscape.

Frequently Asked Questions (FAQs)

How do e-square EOR and PEO services benefit my business in Sri Lanka?

e-square EOR and PEO services in Sri Lanka help businesses simplify HR and compliance processes, including payroll management, tax compliance and employment regulations, allowing you to focus on core business activities.

Do EOR and PEO services in Sri Lanka handle employee immigration matters?

Some EOR and PEO services may assist with immigration-related issues for foreign employees in Sri Lanka, such as work visas and compliance with immigration laws.

Can EOR and PEO services assist with remote work arrangements in Sri Lanka?

Yes, EOR and PEO services can help navigate the complexities of remote work in Sri Lanka, including compliance with local regulations and tax considerations.

Can my business maintain control of day-to-day operations with e-square EOR and PEO services in Sri Lanka?

Yes, your business retains control of day-to-day operations and decision-making. e-square EOR and PEO services focus on specific employment-related tasks, allowing you to concentrate on your core business objectives.

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