EPF and ETF add 23% to every salary you pay in Sri Lanka — 12% employer EPF, 3% employer ETF, and 8% employee EPF. That’s a bigger statutory load than most employers expect from a market this size. Add the Termination of Employment of Workmen Act (TEWA), which makes dismissals genuinely difficult without Commissioner of Labour approval, and you have a market where an EOR earns its fee in compliance alone.
Sri Lanka Employment at a Glance
| Detail | Value |
|---|---|
| Currency | Sri Lankan Rupee (LKR) |
| Official languages | Sinhala, Tamil (English widely used in business) |
| Employment law | Shop and Office Employees Act, Wages Boards Ordinance, TEWA |
| Payroll frequency | Monthly |
| Social security | EPF (Employees’ Provident Fund), ETF (Employees’ Trust Fund) |
| Tax authority | Inland Revenue Department (IRD) |
| Minimum wage | LKR 12,500/month (national minimum, 2023) |
| Standard working hours | 45 hours/week |
| Annual leave (minimum) | 14 days per year |
| Public holidays | Approximately 25 per year (varies annually) |
EPF and ETF: What Your EOR Handles
Both funds are mandatory for all employees. These are the rates your EOR calculates and remits monthly:
| Fund | Employer | Employee | Total |
|---|---|---|---|
| EPF (Employees’ Provident Fund) | 12% | 8% | 20% |
| ETF (Employees’ Trust Fund) | 3% | — | 3% |
| Total | 15% | 8% | 23% |
EPF contributions are remitted to the Central Bank of Sri Lanka. ETF goes to the Employees’ Trust Fund Board. Late payment triggers penalties — your EOR must file by the 15th of the following month.
Key Employment Law Provisions
Leave entitlements
- Annual leave: 14 days per year (after 1 year of service)
- Casual leave: 7 days per year
- Sick leave: 7 days per year (14 days in the first year)
- Maternity leave: 84 working days (roughly 12 weeks) for the first two children
- Poya leave: Every full-moon day is a mandatory holiday (12–13 per year)
Sri Lanka has approximately 25 public holidays per year — more than any other Asian market in this guide. Budget for reduced working days.
Probation and notice periods
Probation typically runs 3–6 months. Notice periods are governed by contract but statutory minimums apply:
- Less than 1 year of service: 2 weeks
- 1–5 years: 1 month
- Over 5 years: 3 months
Termination under TEWA
The Termination of Employment of Workmen Act applies to establishments with 15+ workers. Under TEWA, you cannot terminate an employee who has been employed for more than 6 months without written consent from the employee or prior approval from the Commissioner General of Labour. This makes Sri Lanka one of the most protective markets in Asia for employees. Your EOR navigates this — but understand that even “at-will” expectations don’t translate here.
Compensation on termination: typically calculated as half a month’s salary per year of service, though the Commissioner can set different terms.
Tax Obligations
Sri Lanka applies PAYE (Pay-As-You-Earn) tax. Your EOR withholds monthly:
| Taxable Income (LKR) | Rate |
|---|---|
| Up to 500,000/month | 6% |
| 500,001–1,000,000/month | 12% |
| 1,000,001–1,500,000/month | 18% |
| 1,500,001–2,000,000/month | 24% |
| 2,000,001–2,500,000/month | 30% |
| Above 2,500,000/month | 36% |
How Long Does EOR Onboarding Take in Sri Lanka?
- Standard onboarding: 5–10 business days
- Foreign national (work visa required): 4–8 weeks
Sri Lanka is not a fast onboarding market. Smaller markets see less optimised processes — confirm turnaround times with your EOR before committing to a start date.
Top EOR Providers for Sri Lanka
Sri Lanka is a niche market offered by very few global EORs:
- Remote People — One of the only global EORs offering Sri Lanka. $199/month.
- Multiplier — Covers Sri Lanka, though confirm entity type and support SLAs for this market.
Most major EORs (Deel, Remote, Rippling, G-P) do not list Sri Lanka.
Frequently Asked Questions About EOR in Sri Lanka
Can I terminate an employee in Sri Lanka without cause? Not easily. Under TEWA, any termination after 6 months of service requires either the employee’s written consent or Commissioner of Labour approval. This applies to retrenchment, redundancy, and dismissal. Plan accordingly — Sri Lanka is one of the hardest markets in Asia to terminate in.
How many public holidays does Sri Lanka actually have? Approximately 25 per year, including all Poya (full-moon) days. This is significantly more than regional peers (Singapore has 11, India has 10–15 depending on state). Factor this into productivity planning.
Is the EPF contribution refundable if the employee leaves? EPF balances belong to the employee. They can withdraw upon retirement (55 for women, 55 for men), permanent emigration, or under specific hardship provisions. As the employer, your contribution is a sunk cost.
What’s the real cost of hiring someone at LKR 200,000/month through an EOR? Base salary: LKR 200,000. Add 15% employer statutory (EPF 12% + ETF 3%): LKR 30,000. Add EOR fee: roughly $199/month. All-in roughly LKR 230,000 plus the EOR fee. That’s before any benefits or bonuses.
Do I need a local entity to hire through an EOR in Sri Lanka? No. The EOR’s registered entity is the employer of record. You don’t need BOI registration or a local company.
