Private sector employees deserve a safety net: A policy blueprint for Bangladesh

More than 70 million people work in Bangladesh. Only about 1.3 to 1.5 million, two% of them, work as government employees. Thus, approximately 98% of those who generate the vast majority of the country's direct taxes for the NBR, and the rest of whom produce 72% of GDP in the private sector, have virtually no protection in terms of a formalised, coherent, comprehensive, or legally binding framework at work.

Singapore has 98% of its workforce covered by social security. Malaysia has 76%. Even Vietnam has 52%. The 2025 Mercer Global Pension Index ranks Singapore, Sweden and the Netherlands at Grade 1. Bangladesh is structurally significantly behind.

This gap was not created by accident. It is the result of policy neglect. I have been highlighting this issue for years through newspaper columns and public forums. As positive news, BNP has committed in its election manifesto to creating a viable pension scheme for private-sector employees, and reports indicate that the government is developing a policy framework for the same purpose. While I support both initiatives, a single pension promise will not be sufficient. A full-scope protection framework is required, from employment commencement to retirement. Below is what that framework must include.

Pay structure and profit sharing

Government employees receive more than 64 additional benefits on top of their base salary, including house rent allowance, medical allowance, education allowance, transport allowance, festival bonuses, and the Bangladeshi New Year bonus, most of which continue into retirement. A private-sector employee receives only a basic salary and two festival bonuses.

Sector-specific wage boards must be created and revised every two years, with basic salary, house rent allowance, medical allowance and provident fund contributions made mandatory in every appointment letter. Salary ranges must be listed on every job advertisement, as is currently done in Ontario, Canada.

Bangladesh's labour law already includes a Workers' Profit Participation Fund provision requiring five% of net profits to be distributed among workers in an 80:10:10 ratio across participation, welfare and foundation funds. The difficulty lies in enforcement, which remains deeply inconsistent. The new policy must make this mandatory in both word and deed, and also require that 25% of annual bonuses be deposited directly into employees' pension or provident fund accounts.

Gratuity and end-of-services benefits

Gratuity and death benefits are part of the Labour Act, and must be paid by an employee after they have worked for 30 days as pay for each year of work, but can rise to 45 days if the employee has been working for 10 years or more. Death benefits will be provided to an employee who has worked for three or more years. However, this is not practised commonly. In India, the Payment of Gratuity Act (1972) states that gratuity is a legal obligation upon completion of the fifth year of consecutive service. This is true throughout South Asia. The gratuity is still optional in Bangladesh. Therefore, the new policy must make gratuity obligatory through legislation.

Pensions and provident funds

All civil servants receive monthly pensions, cash payment for unused leave entitlements, gratuity and a family pension from the date of death. There is no similar provision for private sector employees. Data from the World Bank indicate that poverty among the elderly members of Bangladesh's private sector workforce is above 40%. By comparison, poverty among Australian seniors is less than 6%.

As stated in the current Labour Act, an employer must establish a provident fund unless at least three-quarters of its employees write to him requesting one. The new policy must require an employer to set up a provident fund. Employees will need to contribute 5% of their salaries, employers 10%, and the state will provide a further 2% contribution. Similar arrangements exist in Singapore (CPF) and Malaysia (EPF). Workers may then access their accumulated wealth via a portable digital pension book linked to their National ID Card. Consequently, accumulated wealth will remain with the individual regardless of how many times they switch employers. Currently, workers withdraw all their savings when switching employers.

Job Security, termination notices and unemployment insurance

Under current law, there is only a requirement of one month's notice before dismissal. A tiered system of termination notice periods should be implemented: three months' notice for workers employed for up to five years; four months' notice for those employed between five and ten years; five months' notice for workers employed between ten and twenty years; and six months' notice for those employed for longer than twenty years. When employers go into liquidation, the last three months of wages and gratuity must be guaranteed by a government-administered insolvency fund, similar to Germany's Insolvenzgeld scheme, funded by a small tax on all employers.

Long-service awards could be made compulsory at ten-, twenty- and thirty-year service intervals, providing an incentive for workers to stay rather than switch jobs. Presently, it is financially advantageous for workers to move jobs rather than stay in one, as this harms both workers and organisations.

Healthcare, daycare and family

Government employees and their families have free access to public hospitals, with medical allowances continuing through retirement. For private sector workers, illness is a financial emergency. Group health insurance must be made compulsory once a minimum employee threshold is met.

Reliable daycare is one of the primary reasons talented women leave the workforce. Female labour force participation in Bangladesh stands at only 36%. In France, where the state supports a national childcare system, it is 82%. Employers above a minimum size must either operate an on-site daycare centre or provide a childcare allowance.

The Labour Act already provides 16 weeks of maternity leave, but many private employers ignore this. Termination on grounds of taking maternity leave must be made a punishable offence. Paternity leave, bereavement leave and adoption leave should become statutory rights rather than matters of employer discretion.

Work Hours, home working and the right to disconnect

Sector-specific caps on weekly working hours must be introduced, with all overtime paid at least 1.5 times the regular rate. In the post-Covid era, working from home is no longer a perk and should be recognised as a legal right, particularly in IT, banking and services. Bangladesh's pervasive WhatsApp and email culture has made working hours effectively round the clock. France legislated the right to disconnect in 2017, and Portugal imposes fines on employers who contact workers outside working hours. Bangladesh's labour law needs a similar provision.

Mental Health, equal pay and platform workers

Globally, the World Health Organisation (WHO) reports an estimated 1.2 billion working days lost every year due to depression and anxiety. In its 2023 Survey of Private-Sector Employees in Bangladesh, BRAC found that 68% of respondents experienced burnout at work. For large employers (ie employers with 100 or more employees), there will be a requirement to provide at least five paid days off from work per year for mental health purposes, as well as to have an employee counsellor available to assist employees. The employer can claim a 50% tax credit for half of the costs associated with the employee counsellor.

As reported in the International Labour Organisation's (ILO) 2022 Global Wage Report, the average gender pay gap for equivalent jobs in Bangladesh is approximately 21%. Annual equal pay audits – similar to those used by Iceland's Equal Pay Certification System – are greatly needed.

Over one million individuals who serve as independent contractors or platform workers for businesses such as Pathao, Uber, Foodpanda and Daraz are excluded from virtually all protections under labour laws. Establishing a Platform Worker Welfare Board – utilising a fee collected per transaction – and funding it to provide a safety net for these workers, much like the Singapore government did starting in 2025, would be beneficial.

Private sector professionals in Bangladesh bear the largest share of the direct tax burden and drive the engine of this economy. Yet the state offers them nothing in return. Singapore, Japan and Germany have shown that strong private sector rights do not conflict with economic growth; they reinforce it.

The dream of improved workforce protections is standing at the door of policy. It is time to open it.

Subail Bin Alam is an Economic Growth Technical Specialist, Email: contact@subail.com. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.