Employers agree to mandatory provident fund, revise minimum wage every 3 years
Minimum annual increment to remain at 5%
Highlights
- Minimum wage to be revised every 3 years; provident funds mandatory in factories with 100+ workers
- More leave, extended maternity benefits, and bans on blacklisting and forced overtime
- Employers oppose union formation by 20 workers and proposed CBA voting changes
- 90% of the workforce in the informal sector remains unprotected by the new law.
Bangladesh is on the verge of a significant overhaul of its labour laws, following a consensus between the government and employers on key amendments that could dramatically improve conditions for formal sector workers, labour ministry sources say.
The proposed changes, which have been widely welcomed by economists and labour experts, include a more frequent revision of the minimum wage and the establishment of mandatory provident funds in larger factories.
Keep updated, follow The Business Standard's Google news channel
The new draft of the Bangladesh Labour Ordinance 2025, which amends 124 sections of the current act, introduces a provision to revise the minimum wage every three years instead of the current five-year cycle. The minimum annual increment for workers will remain at 5%.
BGMEA President Hasan Mahmud Khan and Bangladesh Employers' Federation (BEF) President and BKMEA Senior Vice President Fazlee Shamim Ehsan confirmed the development to The Business Standard.
Inflation and GDP to determine wage
This change is a direct response to concerns that inflation erodes workers' real wages. The revision will consider inflation and GDP growth to ensure workers can maintain a dignified life.
Additionally, the amendments will make it mandatory for employers to establish a provident fund in factories with at least 100 workers.
While worker participation will remain voluntary, this measure is seen as a crucial step towards providing long-term financial security. The contribution amount will be determined through factory-level discussions.
Regarding provident funds, the current law requires that a fund be established if three-fourths of a factory's workers submit a written request to the employer.
The amended draft makes the fund mandatory for employers while keeping worker participation optional. The portion of a worker's basic salary contributed to the fund will be determined through discussions between employers and workers in each factory.
After a new wage structure is implemented, inflation often reduces workers' real wages, making it reasonable to revise wages every three years while considering inflation and GDP growth.
"Reasonable wage revision"
Economists have welcomed the development. Centre for Policy Dialogue (CPD) Distinguished Fellow Mostafizur Rahman said that after a new wage structure is implemented, inflation often reduces workers' real wages, making it reasonable to revise wages every three years while considering inflation and GDP growth.
CPD Executive Director Fahmida Khatun echoed this view, noting that five years is too long, as living costs rise significantly even during periods of moderate inflation.
She said making the provident fund mandatory is logical, as without it, workers have no financial security after long-term employment. She also noted that revising wages every three years could reduce workers' tendency to leave jobs or switch factories.
90% workers left out
Syed Sultan Uddin Ahmed, Executive Director of the Bangladesh Institute of Labour Studies (BILS) and head of the interim government-formed Labour Reform Commission, told TBS that they recommended revising wages every three years to ensure that minimum wages allow workers to lead a dignified life.
He added that the commission recommended a national minimum wage covering both formal and informal sector workers.
"However, the government is drafting the labour law only for formal sector workers. This means that 90% of the country's workforce, employed in the informal sector, will remain without legal protection," he said.
He also noted that many small factories employ just 40–50 workers. "In such factories, provisions should allow at least 10 workers to form a trade union, and the government must ensure regular CBA elections."
The Bangladesh Labour Ordinance 2025 is being drafted by amending or adding 124 sections of the current Labour Act. A tripartite committee comprising government, employer, and worker representatives has reached consensus on 122 of these proposals.
Disagreement on Trade Unions
Employers have not yet agreed on two sections: allowing 20 workers to form a trade union and permitting Collective Bargaining Agreement (CBA) candidates to be elected by 50% plus one of total casting votes.
To resolve these, business leaders have met Jamaat-e-Islami Amir Shafiqur Rahman alongside negotiations with the government.
BGMEA President Hasan Mahmud Khan told TBS that employers have agreed to 122 of the 124 proposals. "We have not agreed on the formation of trade unions by 20 workers or the CBA election process. Once these matters are finalised, the government will gazette the amended ordinance."
Under existing law, a factory with a single union counts it as the CBA. The amended ordinance would allow up to five unions in a factory, with CBAs elected by majority votes. Employers have proposed lowering the minimum participation to form a union from 20% to 15% of total workers.
CPD's Mostafizur Rahman said that although employers strongly opposed forming unions with just 20 workers, past experience shows that workers often suffered without union protection. He added that counting casting votes instead of total workers for CBA elections is reasonable.
Agreement on benefits
Consensus has also been reached on increasing worker benefits and raising penalties for employers in different offences through amendments and additions to existing law. The labour ministry has consulted the International Labour Organization (ILO), the US, and the European Union in preparing these amendments.
The current law allowing pilots, engineers, and cabin crew to form unions under international recognition in civil aviation has been removed. Besides, existing law prohibits strikes or lockouts in foreign-owned factories during the first three years of operation; the amendment reduces this to two years.
No worker blacklisting
Garment workers have complained that leaving a factory often leads to being blacklisted in a central database, preventing employment elsewhere.
The draft bars employers from creating such databases or lists that impede future employment through verification of personal data such as NID, birth certificates, or biometrics.
However, BGMEA, BKMEA, and BEF have stated that they do not blacklist workers; employment records are logged in service books. BKMEA Senior Vice President Fazlee Shamim Ehsan added that workers are only removed if investigations prove misconduct such as sabotage, arson, theft, or other crimes.
The draft also prohibits forced overtime, compulsory repayment of loans through labour, and all forms of coercive work.
Expanded leave benefits
The draft proposes raising annual festival leave from 11 to 13 days. Maternity leave, currently eight weeks pre- and post-delivery (16 weeks total), is proposed to increase to 60 days each, totalling 120 days.
Tea garden workers' leave will change from one day every 22 days to one day every 18 days, and factory workers' leave from one day every 15 days to one day every 14 days.
Foreign-owned companies seek equal benefits
Foreign-owned companies operating in Bangladesh have requested the same benefits as 100% export-oriented factories, seeking a change to the rule requiring them to contribute 5% of profits to the Workers' Welfare Fund.
An inter-ministerial meeting on the matter was held on Monday with officials from the US company Chevron. Senior representatives from both the ministries of labour and finance attended the discussion.
According to sources at the meeting, 100% export-oriented factories do not deposit 5% of profits into the fund. Instead, they contribute 0.03% of total export earnings directly to the central fund, which is deducted by banks at the time of export value repatriation.
A senior official present at the meeting told TBS that the labour ministry is reviewing the request and considering extending this facility to foreign investors in response to their demand.
