Establish your presence globally with Neeyamo as we help you go beyond borders to manage your international payroll system and hire new talent in Sri Lanka.
Overview
Sri Lanka not only possesses a highly-skilled population but also has one of the highest literacy rates in South Asia at a little over 92%, second only to Maldives, whose population happens to be just a mere fraction of Sri Lanka.
Sri Lanka is a country located in the continent of Asia, bordered by India and Maldives. The industries in the country include agriculture, textile, apparel, tea export, and tourism.
Do your organization’s expansion plans require you to hire employees in Sri Lanka? Do you lack a physical entity in the country – a key requisite to hire local talent? Neeyamo – Global Payroll Services, assists organizations worldwide with onboarding and managing employees in Sri Lanka, payroll processes, handling payroll risks and controls, managing local compliance requirements, benefits, and more.
Facts And Stats
Capital
Colombo/ Sri Jayawardenepura Kotte
Currency
Sri Lankan Rupee (LKR)
Official Language
Sinhala
Fiscal Year
1 April - 31 March
Date Format
DD/MM/YYYY
Country Calling Code
+94
Other languages
Tamil, English
Time Zone
UTC + 05:30
Global Payroll
Overview
Handling payroll for a widespread workforce can pose a significant challenge for any organization, and the added complication of compliance can make things worse. If companies spend more time processing payroll, it directly impacts day-to-day operations and their overall productivity. The solution to this is using payroll management services like Neeyamo – International payroll providers.
Over the years, Neeyamo has observed these complexities and strived to provide a global payroll solution through a single technology platform - Neeyamo Payroll
Neeyamo Global Payroll Providers acts as an employer's payroll tax calculator, ensuring adherence to local regulatory requirements using multi-level controls. Benefits of the payroll system include providing timely and accurate payroll - courtesy of our experts worldwide and using a tech-based integrated smart helpdesk solution with seamless support experience manned by payroll experts - Neeyamo has all your payroll needs covered.
Payroll Taxes
Payroll tax is the percentage amount retained from an employee's salary and paid to the government to invest in the general population's welfare. These are statutory in nature and are levied from both the employer and employee. Additional statutory contributions are made by employers towards aiding both short-term and long-term benefits for their employees.
Employee Taxes
Employees must contribute 8% towards Employee Provident Fund (EPF).
Income Tax rates applicable to individuals (Residents and Non-residents)
| Taxable Income (LKR) | Tax Rate |
| 0 - Rs.500,000 | 6% |
| Rs.500,001 - Rs.1,000,000 | 12% |
| Rs.1,000,000 - Rs.1,500,000 | 18% |
| Rs.1,500,001 - Rs.2,000,000 | 24% |
| Rs.2,000,001 - Rs.2,500,000 | 30% |
| Above Rs.2,500,000 | 36% |
With effect from April 1, 2023, new APIT tax rates for lump-sum payments will be applicable.
Amendment of Inland Revenue Act:
- With effect from May 8, 2023, rules defining withholding taxes on payments to non-residents.
- Distinguishing employment income sourced from within Sri Lanka and the income derived from a resident company.
- With effect from April 1, 2023, mandatory e-filing of tax returns for all taxpayers.
Employer Taxes
Employers make the following contributions:
- Provident Fund: 12%
- Employee Trust Fund: 3%
Payroll Cycle
Overview
Undoubtedly, payroll is a critical process for any organization. The pay cycle in Sri Lanka refers to the period for which an organization pays its employees, which can vary depending on the pay frequency the organization chooses to adopt.
Frequency
Wages in Sri Lanka can be paid on a daily, weekly, fortnightly, or monthly basis. However, a wage period cannot exceed a month.
13th Month Cycle
13th-month payments are not mandatory.
Global Work
Overview
An Employer of Record (EOR) service provider helps you eliminate the hassle of handling complexities while onboarding a new employee in an international location. They help bridge the gap that otherwise mandates organizations to have a locally registered entity and a local bank account before making a job offer to an international hire.
An EOR service provider acts as a legal employer, facilitates salary payments, and manages other statutory requirements such as health insurance, payroll taxes, and employee benefits, ensuring compliance with local tax laws and regulations.
This allows organizations to focus on collaborating with the employee in Sri Lanka for operational tasks, with the knowledge that they have a cost-effective solution to support their global payroll & HR requirements as they continue their global expansion.
HR Mandates and Practices
Minimum Wage
The current minimum wage in Sri Lanka is LKR12,500.00 per month in 2023.
Overtime
Overtime should not exceed 12 hours per week and must be compensated at 150% of the hourly rate.
Overtime in relation to any employment or work means employment or work in excess of the normal working hours. Overtime should not exceed an aggregate of 12 hours in any one week.
No employee is required to work overtime unless they are paid separately for such overtime work in respect of each hour, at a rate not less than 1.5 times the hourly rate of his ordinary remuneration.
The remuneration payable for any part of an hour of overtime work done by him/her will be determined in the proportion that part bears to the hour.
The hourly rate of remuneration for the purpose of computing overtime remuneration is as follows –
- where remuneration is payable at a daily rate, be one-eighth of the daily rate,
- where remuneration is payable at a monthly rate, be one-eighth of the monthly rate divided by thirty,
- where remuneration is payable at a fortnightly rate, be one-eighth of the monthly rate divided by fourteen, and,
- where remuneration is payable at a weekly rate, be one-eighth of the monthly rate divided by seven.
Data Retention Policy
The Director of HR shall ensure that the personal files of employees after termination of employment are stored separately from those currently in service. The maximum retention period for such documents is six (6) years in Sri Lanka.
Hiring and Onboarding Requirements
Onboarding
In Sri Lanka, the following procedure is followed while onboarding an employee:
- The appointee shall be required to sign and accept the Letter of Appointment.
- The appointee must provide the following documents: birth certificate, National Identity Card/Passport, educational certificates, school leaving certificate, Service Letters from previous employers, character certificate, a valid Grama Niladari Certificate, bank passbook, and any other relevant documents.
- It shall be the employee's responsibility to provide all updated information about himself and his past employment records on the standard Application Form.
Probation
The probation period shall not exceed one year in the case of employees in supervisory or technical capacity and six months in the case of any other employee, which may be extended by a further period not exceeding three months. At the end of the probation period, the employee shall be confirmed in his post.
Leave
National Holidays
The employee is entitled to 9 Holidays out of the holidays declared by the gazette.
Every Full Moon Poya Day and every Sunday shall be a public holiday and a bank holiday.
Public Holidays include:
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January 6 - Duruthu Full Moon Poya Day B. P.
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January 15 - Tamil Thai Pongal Day B. P. M.
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January 16 - Special Bank Holiday (In lieu of Tamil Thai Pongal Day which falls on a Sunday)
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February 4 - Independence Day B. P. M.
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November 26 - Ill Full Moon Poya Day B. P.
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December 25 - Christmas Day B. P. M.
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December 26 - Unduvap Full Moon Poya Day B. P.
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August 30 - Nikini Full Moon Poya Day B. P.
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September 28 - Milad-Un-Nabi (Holy Prophet's Birthday) B. P. M.
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September 29, - Binara Full Moon Poya Day B. P.
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October 28 - Vap Full Moon Poya Day B. P.
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November 12 - Deepavali Festival Day B. P.
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May 6 - Day following Vesak Full Moon Poya Day B. P. M.
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June 3 - Poson Full Moon Poya Day B. P.
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June 29 - Id-Ul-Alha (Hadji Festival Day) B. P.
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July 3 - Adhi-Esala Full Moon Poya Day B. P.
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August 1 - Esala Full Moon Poya Day B. P.
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April 13 - Day prior to Sinhala & Tamil New Year Day B. P. M.
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April 14 - Sinhala & Tamil New Year Day B. P. M.
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April 22 - Id-Ul-Fitr (Ramazan Festival Day) B. P.
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May 1 - May Day B. P. M.
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May 5 - Vesak Full Moon Poya Day B. P.
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February 5 - Navam Full Moon Poya Day B. P.
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February 18 - Mahasivarathri Day B. P.
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March 6 - Medin Full Moon Poya Day B. P.
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April 5 - Bak Full Moon Poya Day B. P.
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April 7 - Good Friday B. P.
* B – Bank Holiday P – Public Holiday M - Mercantile Holiday
* All Saturdays and Sundays are Bank Holidays
Sick Leave
In respect of each year of employment during which any person has been continuously in employment in or about the business of any shop or office, that person shall be entitled to take on account of private business, ill-health, or other reasonable cause, leave with full remuneration for a period or an aggregate of periods not exceeding seven days per year. The employer shall allow such leave and will be liable to pay such remuneration.
Maternity Leave
Women with no or one child are entitled to twelve weeks of maternity leave. Two weeks before the delivery date and ten weeks after the delivery date should be taken. Women with two or more children are entitled to six weeks of maternity leave. Two weeks before the delivery date and four weeks after the delivery date should be taken.
Other Leave
Adoption leave: 56 days for adopting 1 child and 70 days for multiple adoptions.
Casual Leave: Employees are entitled to 7 days' paid casual leave in any year except during the first year of employment. During the first calendar year of employment, the employee is entitled to 1 day's paid casual leave for every two months of working.
Paid Time Off: After completing a full year of service, employees are entitled to 14 days of annual leave. Annual leave is accrued based on the date the employee joined the company after the first year.
During the first year of employment during which an employee has been continuously in employment that person shall be entitled to take –
- where the employment commences on or after the first day of January but before the first day of April, a holiday of 14 days with full remuneration
- where the employment commences on or after the first day of April but before the first day of July, a holiday of 10 days with full remuneration
- where the employment commences on or after the first day of July but before the first day of October, a holiday of seven days with full remuneration
- where the employment commences on or after the first day of October, a holiday of 4 days with full remuneration, the employer shall allow such holiday and be liable to pay such remuneration.
- For the second or any subsequent year of employment during which an employee has been continuously in employment, that employment shall be entitled to take a holiday of 14 calendar days with full remuneration, of which not less than seven days shall be consecutive. The employer shall allow such holiday and be liable to pay such remuneration.
Termination
Notice Period
Workers may be retrenched only after giving at least one month's notice. A worker is eligible for this one-month notice only after one year of service. A worker with less than one year of service is not entitled to any notice.
Visa
Overview
Any foreign nationals will need to obtain a visa to enter Sri Lanka. Choosing the right type of visa to apply for depends on the length of time the applicant plans to stay in Sri Lanka, as well as their reason for traveling.
Residence visa: This visa allows foreign nationals to stay in Sri Lanka for up to a year, during which they are free to work and study. Foreign nationals will need to renew their residence visa every year that they plan to stay in the country.
Any foreign employees who plan to move to Sri Lanka to work for your company must obtain a residence visa. Before securing this permit, employees must apply for an entry visa in their country of residence.
Employee Background Checks
Legal and Background Checks
Background verifications and reference checks must be conducted before the employment contract is issued. It will be done for the purpose of obtaining information about the candidate’s behavior and work performance from prior employers.
The process of background verification of the candidates includes four main areas:
Public Utilities Commission of Sri Lanka
- Verification of education details
- Verification of Pre-employment details
- Reference checks
- Criminal verifications (obtaining Police Certificates)
Verification of a candidate’s education details and pre-employment details should be completed for all categories of employees.
Reference checking should be conducted via telephone call or email. The standard Reference Check Form must be used.
All verifications should be conducted upon the employee's consent, and all information acquired must be maintained with the strictest confidentiality.
Last updated on September 26, 2023
If you have any queries or suggestions, reach out to us at irene.jones@neeyamo.com
