Contractor to Employee · Bangladesh
Contractor Conversion in Bangladesh
Turn the contractors who already work like your staff into properly employed team members in Bangladesh, through your own entity or our employer of record service, with lawful contracts, payroll and tax from the first month.
- No paid leave
- No tax deducted at source
- No festival bonus
- Ends with the contract
- Statutory leave
- Salary TDS handled
- Festival bonuses
- Notice and service benefits
ILLUSTRATIVE
Definition
What Is Contractor Conversion?
Contractor conversion is the process of moving a person you engage as an independent contractor in Bangladesh onto a formal employment contract, so they are treated as a worker under the Bangladesh Labour Act 2006, with an appointment letter, salary tax deducted at source, statutory leave and the other protections the law gives employees.
A contractor works under a contract for services. Once someone works like a member of staff, the label on the contract matters less than how the work is actually done.
Why companies convert
- 1The contractor has become core to the team
- 2A buyer, investor or auditor asks how the team is engaged
- 3The person wants a payslip for a bank loan or visa
- Works only, or mostly, for you
- Keeps hours you set
- Uses your email, laptop or systems
- Reports to one of your managers
- Paid a fixed monthly fee, not per deliverable
- Has worked with you for more than a year
The more of these are true, the more the relationship looks like employment.
Contractor vs employee
Contractor or Employee: What Changes in Bangladesh?
The work may look the same. The law, the tax and the paperwork behind it do not.
Contractor
Employee
Your options
Three Ways to Convert a Contractor in Bangladesh
There is no single right answer. The route depends on whether you have, or want, a company in Bangladesh.
Hire through your own entity
Register a subsidiary or branch in Bangladesh and put the person on its payroll.
Best when: you plan a long-term team and local operationsEmployer of record
We employ the person on your behalf under a Bangladesh contract while you direct the work.
Best when: you have no entity yet and want to move within weeksFix the contractor agreement
If the person is genuinely independent, tighten the contract so it reflects how the work is really done.
Best when: they work for several clients and control how they workGoing the employer of record route? See EOR and payroll for your team. Want the full employment rulebook? See labour law compliance in Bangladesh.
How it works
A Four-Week Contractor Conversion Plan
Most of the work is paperwork done in the right order, so the first payroll is right the first time.
Illustrative plan for one person through an employer of record. Setting up your own entity first takes longer.
Continuity of service
Should Contractor Time Count Towards Service?
When a contractor becomes an employee, their service under the Labour Act usually starts on the appointment date. You can agree to recognise earlier time, for example for leave or service benefits, and write it into the appointment letter.
Recognising past service costs more but often makes the move easier to accept, and can reduce the risk of a later claim that the person was an employee all along.
Decide before the offer
- 1Start date for leave accrual
- 2Start date for service and termination benefits
- 3Whether pay is grossed up for salary tax
FAQs
Contractor Conversion: FAQs
What is contractor conversion in Bangladesh?
It is moving a person engaged as an independent contractor onto an employment contract, either with your own Bangladesh entity or through an employer of record, so they get the protections of the Bangladesh Labour Act and salary tax is handled at source.
How do I know if a contractor should be an employee?
Look at how the work is actually done: who sets the hours, who supervises, whose tools and systems are used, whether they work only for you and for how long. After the 2026 amendment, the worker definition in Section 2(65) focuses on the nature of the work rather than the job title.
What happens if a contractor is treated as an employee by mistake?
The person can claim the rights of a worker, such as leave, overtime, festival bonuses and service benefits for the period they worked, and can take a claim to the labour court. The company may also face questions about salary tax that was never deducted.
Can a foreign company employ staff in Bangladesh without a local entity?
Not directly as the legal employer on a Bangladesh payroll. The usual options are to register a subsidiary or branch, or to use an employer of record that employs the person locally while you manage the work.
How long does contractor conversion take?
Through an employer of record, a single conversion can usually be done within a few weeks of agreeing the offer. Setting up your own entity first takes considerably longer.
Does previous contractor time count as service?
Not automatically. Service normally starts on the appointment date, but you can agree to recognise earlier time for chosen purposes and state it in the appointment letter.
Will the person's take-home pay change?
Usually yes. As an employee, salary tax is deducted at source each month and other deductions may apply. Many employers agree a gross salary that keeps take-home pay close to the old fee.
What documents are needed to convert a contractor?
An appointment letter and ID card, the person’s NID or passport, TIN and bank details, nominee forms, entry in the company’s registers, and a written close-out of the old service agreement.
Turn Your Contractors Into a Compliant Team
Tell us how many contractors you have in Bangladesh, what they do and how you pay them today. We will score the employment risk, recommend a route and quote a fee to convert and run their payroll.