Employee Termination Procedure in Bangladesh

Employee termination is one of the most sensitive aspects of Bangladesh’s labour law regime. Whether for redundancy, poor performance or misconduct, ending an employment relationship incorrectly can expose employers to costly disputes and reputational harm. At the same time, employees need clear legal avenues to challenge unfair dismissals and secure owed benefits. This article examines the procedures and legal requirements for termination under the Bangladesh Labour Act, 2006 and its amendments. It also highlights how Kazi Law Chamber, a leading law firm in Dhaka, can assist both employers and employees in navigating termination disputes and ensuring compliance with the law. The firm’s strength lies in blending legal knowledge with practical solutions for Bangladesh‑based businesses and multinational clients.

Legal Framework for Termination

Bangladesh does not operate under a doctrine of at‑will employment; termination must fall within one of several categories defined in the Labour Act. An employer may terminate employees through termination simpliciter (termination without assigning a reason), dismissal for misconduct, retrenchment, discharge for incapacity, lay‑off or resignation. Each type has specific procedures, notice periods and compensation requirements. The Act aims to balance managerial prerogatives with worker protections by prescribing due process and severance pay.

Termination Simpliciter (Section 26)

Termination simpliciter, also called termination without cause, allows an employer to end a permanent worker’s employment without providing a reason. The Labour Act requires a written notice of 120 days for monthly‑rated workers or 60 days for other workers; employers can pay wages in lieu of notice. In addition to notice or wages, the employer must provide compensation equal to 30 days’ wages for every completed year of service or gratuity (whichever is higher). Failure to pay compensation or provide proper notice can render the termination illegal and expose the employer to reinstatement orders or damages. The worker is also entitled to unused leave and other benefits accrued up to the termination date.

Dismissal for Misconduct (Section 23)

Dismissal is termination for proven misconduct, such as theft, fraud or violence. Unlike termination simpliciter, dismissal requires no notice; however, employers must follow stringent procedural safeguards. Allegations must be recorded in writing; the worker must be served a copy of the allegations and given at least seven days to respond, and an inquiry committee with equal representation must investigate the charges. If the charges are unproven, the worker is deemed to have been on duty during suspension and must receive wages for the period. A worker found guilty can be dismissed without compensation, although unpaid wages earned up to dismissal must be paid.

Retrenchment (Section 20)

Retrenchment arises when staff positions become redundant due to business reorganisation or economic downturn. The Act mandates that workers with at least one year of continuous service be given one month’s notice and that the employer serve a copy of the notice to the Chief Inspector of Labour and the collective bargaining agent (if any). Compensation is the same as termination simpliciter: 30 days’ wages for each year of service or gratuity. The principle of last‑in‑first‑out applies, meaning those employed most recently are retrenched first. The employer must also issue a certificate relating to service to help workers obtain future employment.

Discharge for ill‑Health or Incapacity (Section 22)

When a worker can no longer perform duties due to physical or mental incapacity, the employer may discharge the worker. A worker with at least one year of service must receive 30 days’ notice or wages in lieu and compensation equal to 30 days’ wages per year of service or gratuity. Medical evidence is required to justify the discharge. Employers must ensure that discharge is not used to remove workers for misconduct or performance issues; otherwise it may be considered an unlawful dismissal.

Lay‑Off (Section 16) and Retrenchment Variation

The law distinguishes lay‑offs (temporary suspension) from termination. Lay‑offs occur due to fire, catastrophe, shortage of power or raw materials, or economic downturn. Workers with at least one year of service receive compensation equal to half their basic wages plus dearness allowance and full housing allowance for the lay‑off period. After 45 days of lay‑off in a year, the employer may opt to retrench workers following Section 20 requirements. Lay‑offs are thus a cost‑sharing measure during temporary crises; they are not meant to circumvent termination compensation.

Resignation and Voluntary Separation (Section 27)

Employees may resign with 60 days’ notice (monthly‑rated) or 30 days’ notice (others) or wages in lieu. Workers with at least three years of service who resign receive 7 days’ wages per year for the first three years, 15 days’ wages for service over three but less than ten years, and 30 days’ wages per year or gratuity for service beyond ten years. These entitlements recognise long service and discourage employers from pressuring workers to resign. Voluntary resignation must be in writing and accepted by the employer; otherwise, it can be construed as termination.

Automatic Termination and Abandonment

Section 26(6) provides for automatic termination if a worker absents themselves without permission for more than 10 days. The employer must serve a notice requiring the worker to explain within 10 days; failure to respond results in termination. This provision prevents prolonged unauthorised absence and ensures clear communication. However, employers must not misuse it as a substitute for due process dismissal.

Other Grounds and Procedural Nuances

The Rivermate guide lists other termination grounds, including inefficiency, loss of confidence, completion of a project, or abolition of a post. Regardless of the ground, employers must follow the procedures under the Act, including proper notice and payment of benefits. Failure to follow these steps can result in claims of wrongful termination, where courts may order reinstatement or compensation.

Rights and Remedies for Employees

Bangladesh’s legal regime affords employees several remedies when employers do not follow the law. Workers can file complaints to the labour courts for unfair dismissal or termination without notice. Courts can order reinstatement with back wages or award compensation if reinstatement is not feasible. In termination simpliciter cases, employees may challenge termination as mala fide if it disguises a dismissal; the Labour Court can declare such termination illegal. Employers are also required to provide certificates relating to service upon termination or retrenchment, which helps workers secure future employment.

Recent Amendments and 2025 Update

The Labour Rules amended in 2025 reaffirmed existing termination procedures and emphasised final settlement timelines. Employers must complete final settlement within 30 working days of termination. The amendments added clarity on automatic termination, probationers and temporary workers. A probationer can be terminated without notice or benefits if probation has not been successfully completed, while temporary workers can be released at the end of the contract. These updates align with international best practices but do not change core termination requirements.

Practical Considerations and Best Practices

Given the complexity of termination laws, employers should develop clear employment contracts, maintain proper records and implement fair disciplinary procedures. When considering dismissal, companies must document charges, provide opportunity for defence and create an inquiry committee. For retrenchment or lay‑off, businesses should prepare redundancy plans, consult with lawyers, trade unions and government authorities, and ensure timely payment of compensation. Employees should understand their rights, seek legal advice and keep copies of appointment letters, pay slips and communications in case of disputes.

Conclusion

Termination of employment in Bangladesh is governed by a detailed statutory framework that mandates notice, compensation and due process across various scenarios. Failure to follow these procedures can lead to expensive litigation, reputational damage and claims of wrongful dismissal. At the same time, employees must navigate complicated rules and deadlines to secure their rights. Kazi Law Chamber is uniquely positioned to assist both employers and employees in managing termination issues. With deep expertise in Bangladesh’s labour law, our lawyers guide clients through disciplinary investigations, retrenchment plans, severance calculations and labour court litigation. Whether drafting termination notices or challenging unlawful dismissals, Kazi Law Chamber ensures that clients comply with the law while protecting their interests.