How to hire remote employees in

Sri Lanka

Sri Lanka’s a great place to hire talent. And if you’re thinking about making a remote hire, you’re in the right place. In the next five minutes, we’ll teach you how to hire there—without spending thousands of dollars on EOR fees and legal red tape:

Country snapshot

CURRENCY
Sri Lankan Rupee (LKR)
EMPLOYER TAXES
15.00%
PAYROLL FREQUENCY
Weekly, bi-weekly, or semi-monthly
OFFICIAL LANGUAGE
Sinhala/Tamil/English

What to know before you hire in 

Sri Lanka

Sri Lanka’s a great place to hire talent. And if you’re thinking about making a remote hire, you’re in the right place. In the next five minutes, we’ll teach you how to hire there—without spending thousands of dollars on EOR fees and legal red tape:

If you want to successfully hire in 

Sri Lanka

, you have two options:

Hire talent as contractors

Laws about hiring contractors are significantly more simple in 

Sri Lanka

. Onboarding talent takes days, not weeks or months. Both you, the company, and your talent have more flexibility. And in many cases, since you’re remote, the talent you’re hiring is better classified as a contractor, anyway. Of course, it’s not possible in every case, but it’s what we built Panther for.

Hire talent as employees

This is the long route. You can either establish a physical presence with an entity and register as an employer, or you can use an Employer-of-Record (EOR) solution. Odds are, you’ll find using an EOR to be the easier route. Still, using an EOR in 

Sri Lanka

 is expensive—it can often be $500 per month per employee—and sometimes prone to lengthy onboarding times.

Why hire independent contractors in 

Sri Lanka

Hiring contractors is normally the easier, faster, more flexible choice—but don’t just take it from us. Below are the specific benefits and drawbacks to hiring contractors in 

Sri Lanka

.

It’s the fastest way to hire globally

Hiring employees takes months, at the minimum. When you hire with Panther’s locally-generated contracts, it’s a matter of days or weeks. This means you can hire the best talent, fast, without losing them to a hellish procession of paperwork.

It’s a lot cheaper

It costs just $0 to sign up for Panther, then $49 per month to hire your contractors with Panther. If you hired employees manually (or did contracting on your own), you’d likely be on the hook for thousands of dollars each month. Setting up an entity alone can cost tens of thousands of dollars.

It’s more flexible for you & your team

Hiring contractors in 

Sri Lanka

 means you’re generally not on the hook for things like health insurance and paid time off. This makes hiring flexible for you, and it gives your talent more options.

It’s less risky than hiring employees

Hiring employees is a bigger commitment, and generally puts you at a bigger risk for legal fees. When you hire contractors overseas, your biggest risk is misclassification—but even then, misclassification penalties are often minimal and just require you to pay off any compensation that the person would have been owed as an employee.

Some people want to be employees

The contractor life isn’t for everyone—some people want the security that being an employee often appears to provide. Though it’s rare, this does happen, and it’s one disadvantage of manage an all-contractor team.

You might not have as much control over your talent

Most countries’ contractor-employer relationship laws stipulate that the employer can’t set fixed working hours, among other things. These laws give contractors more freedom over how and when they do their work than an employee would have. In reality, however, most contractors are willing & able to work on the company’s schedule—it’s a matter of setting expectations beforehand.

How can I pay people in 

Sri Lanka

?

If you’re hiring contractors in 

Sri Lanka

, you can pay them with Panther in a single click. You won’t need to worry about complicated wire transfers, fees, or currency conversions. We’ll take care of it all. Just make a click and your contractor will get paid in their currency of choice. This is a valuable bonus for talent in countries where the local currency is particularly weak—most people appreciate the ability to receive their payment in stronger currencies.

Hiring and paying your team in 

Sri Lanka

Hire and pay with Panther

Pay everyone with a single click
Get great currency conversion rates
Pay $0 in platform fees
Run payroll in seconds
Let Panther automatically create & store invoices
Let Panther automatically write locally-compliant contracts
Let Panther automatically file local tax documents

Hire and pay without Panther

Pay all your contractors individually
Do all currency conversions yourself
Shoulder the burden of platform fees
Spend hours each month making payments
Manually track & store invoices
Manually write & sign contracts
Manually file relevant tax documents

Let Panther save you from hiring headaches.

Sign up today for $0

If you want to hire employees in 

Sri Lanka

If you’ve read up until this point, you’ll know that it’s easier, cheaper, and more flexible to hire contractors in Sri Lanka than employees. Still, there are valid reasons why you might want to hire employees instead. The content below is for you—we’ll cover employer taxes and obligations in Sri Lanka.

Taxes in 

Sri Lanka

Employer tax

Provident Fund (EPF)

Employee Trust Fund

Individual tax

0 – 3,000,000 - 6.00% + 180,000 LKR on excess

6,000,000 – and above - 18.00%

Leave

Paid Time Off (PTO)

The employee is entitled to 14 days of annual leave after completing a full year of service. Annual leave for the second year of employment is accrued based on the date the employee joined service.

According to Section 73 of the Factories Ordinance:

  • A young person shall not be employed in a factory on a Sunday
  • Every woman or young person employed in a factory shall be allowed six whole days as holidays on six consecutive week days per year

As per Sub Section 5 of the Shop and Office Employees Act

  • Every person employed in a shop or office shall be allowed one whole day and one half day as paid holidays per week.
  • Such holidays shall be allowed with full remuneration if the employee has worked for not less than twenty-eight hours, exclusive of any period of overtime work, during that week.
  • The holidays due in respect of any week shall be allowed either in that week or in the week immediately succeeding

Public Holidays

There are 23 public holidays.

Sick Days

The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:

  • In accordance with the Shop and Office Act, every worker certified by a medical practitioner is entitled to a paid sick leave (sickness benefit) for a period of 07 days (in a 12-month period) for private business, ill-health or any other reasonable cause.
  • These are generally known as casual leave.

Maternity Leave

The duration of maternity leave is 12 weeks (84 days) excluding weekly holidays, Poya days and statutory holidays.

Six weeks of maternity leave are given to women with two or more children. Two weeks should be taken before the birth and four weeks immediately following the birth.

Paternity Leave

It is limited to 3 days for the state sector. The employee must take this leave within three months from the date of birth of the child.

Parental Leave

There are no statutory laws regarding paternity leave.

Other Leave

Work-Related Injury Leave:If an employee is absent from work due to injury sustained during work and under the circumstances specifically attributed to the nature of his duties, they are granted accident leave.

Duty Leave: All staff members are granted duty leave for the following purposes:

  • Any employee who is in the reserve list of a volunteer unit of Armed Forces
  • To attend examinations with regards to language proficiency
  • To attend any medical examination
  • To cast votes for elections or referendums

Marriage Leave

There is no provision for marriage leave. It is at the employer's discretion.

Bereavement Leave

There is no special provision for bereavement leave in Sri Lanka. It is at the employer's discretion.

Termination

Termination Process

Whilst there is no specific definition in either the TEWA or the IDA of what constitutes justifiable cause, case law has identified that the following types of conduct will constitute grounds for justifiable cause to dismiss on disciplinary grounds (these are not exhaustive):

  • Persistent and unauthorized absence, or late arrival, or early departure.
  • Gross negligence in the discharge of duties.
  • Insubordination.
  • Abusive/unruly behavior.
  • Dishonesty.
  • Theft.
  • Intoxication whilst at work.

An employer's loss of confidence in an employee has also been held to be a sufficient ground for dismissal, provided that it is coupled with a specific ground of misconduct as set out above.

Even where a loss of confidence cannot be linked to a specific ground of misconduct, it is often pleaded by employers to persuade adjudicating

forums that reinstatement is not a suitable remedy.

Notice periods, or payments in lieu of notice, for dismissal are typically stipulated in the contract of employment.

However, where the provisions concerning notice periods, or payments in lieu of notice, are exercised by the employer during the course of an

unjust dismissal, the employee can challenge that termination on the basis of unjust dismissal.

In the case of a dismissal on disciplinary grounds, the Termination of Employment of Workmen (Special Provisions) Act No 45 of 1971 (TEWA)

makes it mandatory for the employer to inform the employee, in writing, of the reasons for the dismissal before the expiry of the second working day after the dismissal has taken place.

Non-disciplinary termination requires a notice period (typically one month) that is mutually agreed in the contract of employment.

Notice Period

The notice period in Sri Lanka is:

  • Notice periods, or payments in lieu of notice, for dismissal are typically stipulated in the contract of employment.
  • However, where the provisions concerning notice periods, or payments in lieu of notice, are exercised by the employer during the course of an unjust dismissal, the employee can challenge that termination on the basis of unjust dismissal.
  • In the case of a dismissal on disciplinary grounds, the Termination of Employment of Workmen (Special Provisions) Act No 45 of 1971 (TEWA) makes it mandatory for the employer to inform the employee, in writing, of the reasons for the dismissal before the expiry of the second working day after the dismissal has taken place.

Notice periods, or payments in lieu of notice, should be stipulated in the contract of employment. In Sri lanka generally it is a period if six months.

Severance Pay

The quantum of compensation that may be awarded by the Commissioner of Labor (Commissioner) as a result of a successful application for unjust dismissal under the TEWA is regulated as follows, depending on the employee's length of service:

  • Employee with one to five years' service: 2.5 months' salary paid as compensation for each year of service competed (capped at 12.5 months' salary).
  • Employee with six to 14 years' service: 2 months' salary paid as compensation for each year of service competed (capped at 30.5 months' salary).
  • Employee with 15 to 19 years' service: 1.5 months' salary paid as compensation for each year of service competed (capped at 38 months' salary).
  • Employee with 20 to 24 years' service: 1 months' salary paid as compensation for each year of service competed (capped at 43 months' salary).
  • Employee with 25 to 34 years' service: 0.5 months' salary paid as compensation for each year of service competed (capped at 48 months' salary).

The maximum severance payment that can be made under the above formula is LKR1.25 million.

Probation Period

There is no clear provision in labor laws on the duration of probation period in Sri Lanka.

Generally, probation period is six months.

Employee requirements in 

Sri Lanka

Working Hours

A normal working week cannot exceed 48 hours.

All work over and beyond that period is considered overtime.

Overtime

If a worker works beyond the stipulated working hours, he/she is entitled to an overtime pay that is 150% (1.5 of X) of the rate of his ordinary pay.

The overtime hours in a week cannot exceed 12 hours.

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