--- title: "Hiring in Sri Lanka 2026 | Employer of Record Guide" description: "Hire in Sri Lanka through Teamed's EOR. EPF is 12% employer plus 3% ETF, income tax tops out at 36%, and the Sri Lanka guides take one layer each." canonical: https://www.teamed.global/country-hiring-guides/sri-lanka --- Sri Lanka · Country overview Served by Teamed vetted partner-entity network in Sri Lanka # What do you need to know to hire in *Sri Lanka*? Dismissing a covered worker in Sri Lanka needs the worker's written consent or the Commissioner of Labour's written approval, with no fixed notice counted in days ([TEWA No. 45 of 1971](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html)). Employers also fund three retirement levies on top of pay. Each guide below takes one layer. Last reviewed 13 June 2026 · Sri Lanka guide ## How does Teamed handle Sri Lankan hiring for you? Teamed becomes your legal [employer of record](/lp/employer-of-record) in Sri Lanka for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency. Payroll, contracts, EPF, ETF, and the full Sri Lankan employment law stack run on **one platform**. **Real HR and legal experts** manage every Sri Lankan hire, from the first offer letter to the final settlement. **An actual person**, not a chatbot or a pooled queue, handles your Sri Lankan team alongside EOR, contractor onboarding, and entity payroll on **one platform**. There is **no setup fee** and **no exit fee**. Employer cost **passes through at cost, itemised** on every invoice. A Sri Lankan contractor who converts to employment keeps their record, and that same employee can **graduate** from EOR to your own Sri Lankan entity without re-onboarding. Run the [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator) to see the month the model flips. EOR is the right model for a first Sri Lankan hire, **until it isn't**. Three things you won't find on any other Sri Lanka EOR guide - **Sri Lanka runs two separate retirement funds, not one.** The Employees' Provident Fund takes 12% from the employer and 8% from the worker. The Employees' Trust Fund adds 3% that only the employer pays and that you may not deduct from wages. Most EOR guides quote one number and miss the second fund. - **You cannot simply give notice and dismiss a covered worker.** Under the [Termination of Employment of Workmen Act](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html), an employer of 15 or more workmen needs the worker's written consent or the Commissioner of Labour's prior written approval. [The termination guide](/country-hiring-guides/sri-lanka/termination-and-severance) walks the approval route. - **2026 has an extra paid Full Moon holiday.** The official government calendar gazettes 13 days Full Moon Poya days for 2026 because the year carries an intercalary Poya month. Plan rosters around 13 monthly rest days, not the usual twelve. Answer.cite this Hiring in Sri Lanka adds three employer-side retirement levies on top of pay. EPF is 12% from the employer and 8% from the worker. ETF is a further 3% the employer alone pays. Payroll runs monthly. EPF and ETF for a month must reach the funds by the last working day of the next month. Income tax starts at 6% after a personal relief of LKR 1,800,000/year and rises to 36%. Dismissing a covered worker is not a notice decision. You need the worker's written consent or the Commissioner of Labour's written approval first. Teamed runs Sri Lankan payroll, contracts, and compliance through a vetted local partner entity. This page is the map. Each guide below is the detail. At a glance · Sri Lanka LKR · English · Monthly payroll Currency LKR (Sri Lankan rupee) EPF (employer) 12% Employees' Provident Fund Act No. 15 of 1958 EPF (employee) 8% deducted from salary ETF (employer) 3% employer-only, never deducted from wages Personal relief LKR 1,800,000/year tax-free, from Y/A 2025/2026 Top income tax 36% balance above LKR 2,500,000 taxable Full Moon Poya days 13 days paid; 2026 carries an intercalary Poya EPF/ETF deadline Last working day of the month after payroll ![A warm wide illustration of Colombo at golden hour: the Lotus Tower rising over the harbour skyline, red-tiled colonial rooftops in the Fort district, and palm trees along Galle Face Green in the foreground.](/images/country-guides/sri-lanka-hiring.webp) Sri Lanka · per employee · per month · flat $ 599 Zero FX. No setup fees. 48-hour onboarding. The price your finance team can forecast against without an asterisk. Zero FX Fixed No setup fee No exit fee 48-hour onboard ## How much does it cost to hire an employee in Sri Lanka in 2026? Plan for the salary plus three employer levies. EPF is 12% from the employer and ETF adds 3%. The worker also pays 8% EPF from their own salary. All three sit on contributory monthly earnings. Employer EPF runs at 12% of monthly contributory earnings under the Employees' Provident Fund Act. ETF adds 3% that only the employer pays. You cannot recover the ETF amount from the worker's wages. The worker contributes 8% EPF, deducted at source. Teamed's Sri Lanka fee sits inside the total cost envelope, not outside it. Teamed's Sri Lanka price is a starting rate, with zero FX in any currency pairing. No setup fees. No exit fees. Salaries, taxes, and contributions passed through at cost on every invoice. The full breakdown, with worked examples at current rates, is in the cost guide. [Read the full Sri Lanka cost breakdown](/country-hiring-guides/sri-lanka/cost-breakdown) ## Do you need a Sri Lankan entity to hire employees in Sri Lanka? No. An Employer of Record runs Sri Lankan payroll and contracts from day one. Your own Sri Lankan entity starts to pay off only once headcount and salary climb past the cost of running it locally. Registering a Sri Lankan company means incorporation, EPF and ETF employer registration, and tax registration with the Inland Revenue Department, followed by monthly contribution filings for every worker. An [Employer of Record](/lp/employer-of-record) is faster and cheaper at low headcount. Teamed runs Sri Lankan payroll, contracts, and compliance from day one through a vetted local partner entity. The crossover point depends on Sri Lankan salary levels and your local accounting costs. The EOR vs entity guide runs those numbers for your headcount. Most EOR providers will not tell you when you have crossed it. We do, and we help you move. You progress from contractor to EOR to your own Sri Lankan entity on **one platform** under Teamed's Graduation Model, with tenure preserved. [Read the full Sri Lanka EOR vs entity guide](/country-hiring-guides/sri-lanka/eor-vs-entity) ## What changed in Sri Lankan employment law recently? Income tax was rebuilt for the 2025/2026 year of assessment. The personal relief rose to LKR 1,800,000/year. The tax-free relief and revised bands took effect on 1 April 2025 under the Inland Revenue (Amendment) Act No. 02 of 2025. The [Inland Revenue (Amendment) Act No. 02 of 2025](https://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/666/PN_IT_2025-01_26032025_E.pdf) raised the annual personal relief to LKR 1,800,000/year from the 2025/2026 year of assessment, effective 1 April 2025. The progressive bands now start at 6% on the first taxable LKR 1,000,000, then 18%, 24%, and 30% on each next slice, reaching 36% on the balance above LKR 2,500,000. The termination-approval regime under the Termination of Employment of Workmen Act remains in force unchanged. The compliance and hiring guides cover each current rule in detail. [Read the full Sri Lanka tax and payroll guide](/country-hiring-guides/sri-lanka/tax-and-payroll) ## What benefits must you provide Sri Lankan employees in 2026? Shop and office employees get 14 days paid annual holiday after a full year of service. They also get 7 days paid casual leave a year, which covers sickness as there is no separate sick-pay scheme. The [Shop and Office Employees Act](https://www.niosh.gov.lk/images/pdfs/downloads/acts_and_cerculars/shop_and_office_employees_2.pdf) sets 14 days of paid annual holiday after a full year of service, with at least seven taken in a row. It adds 7 days of paid casual leave a year for private business, ill health, or other reasonable cause. There is no separate statutory paid sick-leave scheme, so sickness sits inside that casual-leave allowance. Workers also get one whole rest day plus one half-day each week. 2026 carries 13 days paid Full Moon Poya days because the year holds an intercalary Poya month. Maternity rights run under the Maternity Benefits Ordinance, and Sri Lanka has no statutory private-sector paternity leave. The benefits guide covers each entitlement in full. [Read the full Sri Lanka hiring guide](/country-hiring-guides/sri-lanka/hiring-guide) ## What are payroll taxes in Sri Lanka in 2026? Two retirement funds sit on every payroll. EPF takes 12% employer and 8% employee. ETF adds 3% that only the employer pays. Income tax then rises from 6% to 36%. Sri Lanka runs two mandatory retirement funds. The Employees' Provident Fund takes 12% from the employer and 8% from the worker on monthly contributory earnings. The Employees' Trust Fund adds 3% of total monthly earnings, paid by the employer alone and never deducted from wages. Contributions for a month must reach the funds by the last working day of the next month. Income tax is progressive. After a personal relief of LKR 1,800,000/year, the first taxable LKR 1,000,000 is taxed at 6%, then 18%, 24%, and 30% on each next slice, reaching 36% on the balance above LKR 2,500,000. Teamed handles EPF, ETF, and tax remittances. The tax and payroll guide sets out every band and threshold. [Read the full Sri Lanka tax and payroll guide](/country-hiring-guides/sri-lanka/tax-and-payroll) ## How do you terminate an employee in Sri Lanka? You need permission, not just notice. Dismissing a covered worker requires their written consent or the Commissioner of Labour's written approval. There is no fixed notice period counted in days for covered workmen under the Act. Under the [Termination of Employment of Workmen Act](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html), an employer of 15 or more workmen cannot dismiss a covered worker without that worker's prior written consent or the Commissioner of Labour's prior written approval. The Act fixes no day-count notice. Compensation is set by the Commissioner using a formula published by Gazette, not by the Act itself, and the Commissioner's award is capped at a maximum the Gazette sets. Separately, gratuity is payable where the employer has 15 or more workmen and the worker completes at least five years of service. For monthly-rated workmen it is 0.5 months of the last-drawn wage for each completed year. A worker who believes a dismissal was unjust may apply to a Labour Tribunal, which makes whatever order it finds just and equitable, with no statutory cap. The termination guide runs the full process. [Read the full Sri Lanka termination and severance guide](/country-hiring-guides/sri-lanka/termination-and-severance) ## What should you know before hiring in Sri Lanka? Two things catch US buyers out. The first is that you cannot dismiss a covered worker by giving notice alone. The second is that there are two retirement funds, not one, and the second is funded entirely by the employer. **Termination is a permission process, not a notice process.** For an employer of 15 or more workmen, dismissing a covered worker needs the worker's written consent or the Commissioner of Labour's prior written approval. Build that step into any exit plan from day one, because there is no day-count notice route around it. **Budget for the second fund.** Beyond the 12% employer EPF, the Employees' Trust Fund adds 3% that you pay on top and may never deduct from the worker. A worker who completes five years with a 15-plus employer also earns gratuity of 0.5 months of last-drawn wage per completed year. The cost breakdown and termination guides both run the numbers. [Read the full Sri Lanka cost breakdown](/country-hiring-guides/sri-lanka/cost-breakdown) ## Frequently asked questions How much does it cost to hire an employee in Sri Lanka? Plan for the salary plus three retirement levies. The employer pays 12% EPF and 3% ETF, and the worker pays 8% EPF from their own salary. Teamed's Sri Lanka fee is one flat number per employee per month, with zero FX mark-up in any currency pairing. The cost breakdown guide has worked examples. Can a US company hire in Sri Lanka without an entity? Yes. An Employer of Record like Teamed runs Sri Lankan payroll, contracts, and compliance through a vetted local partner entity. You direct the work. Teamed becomes the legal employer of record. Setup takes 48 hours once terms are confirmed. Registering your own Sri Lankan company is slower and needs EPF, ETF, and Inland Revenue registration plus ongoing monthly filings. How do you terminate an employee in Sri Lanka? For an employer of 15 or more workmen, you cannot dismiss a covered worker by notice alone. You need the worker's written consent or the Commissioner of Labour's prior written approval under the Termination of Employment of Workmen Act. The Act fixes no day-count notice. A worker who believes a dismissal was unjust may apply to a Labour Tribunal. What retirement contributions are mandatory in Sri Lanka? Two funds. The Employees' Provident Fund takes 12% from the employer and 8% from the worker. The Employees' Trust Fund adds 3% that only the employer pays and that may never be deducted from wages. Contributions for a month must reach the funds by the last working day of the following month. Is a 13th-month salary required in Sri Lanka? No. Sri Lankan law has no general 13th-month salary, festival bonus, or holiday subsidy for private-sector employees. Any bonus is set by contract or collective agreement, not by statute. Teamed sets bonuses up as your contract specifies. What paid leave do Sri Lankan employees get? Shop and office employees get 14 days of paid annual holiday after a full year of service and 7 days of paid casual leave a year, which covers sickness as there is no separate sick-pay scheme. 2026 also carries 13 days paid Full Moon Poya days because the year holds an intercalary Poya month. Teamed Legal Operations Sri Lanka surprises new employers in two places. Termination is a permission process under the Workmen Act, not a notice clock you can run down, and retirement cover comes from two funds where the Trust Fund is the employer's alone. Neither is hard once you know it. Both are costly when you find out after the first hire or the first exit. A note from Tom Price-Daniel Sri Lanka makes you ask permission before you dismiss a covered worker, and it funds retirement through two separate levies, not one. Most of the cost and timing surprises come from not reading those rules before the first hire. Read the right Sri Lanka guide before that hire, not after the first Labour Tribunal claim. Tom Price-Daniel · Co-founder, Teamed ## Keep reading - [Sri Lanka hiring guide, offer to payslip](/country-hiring-guides/sri-lanka/hiring-guide)guide - [Sri Lanka employer cost breakdown 2026](/country-hiring-guides/sri-lanka/cost-breakdown)guide - [EOR vs entity in Sri Lanka](/country-hiring-guides/sri-lanka/eor-vs-entity)guide - [Sri Lanka termination and severance](/country-hiring-guides/sri-lanka/termination-and-severance)guide - [Sri Lanka tax and payroll](/country-hiring-guides/sri-lanka/tax-and-payroll)guide - [Employer of Record overview](/lp/employer-of-record)core - The Graduation Modelcore - [Teamed pricing, Zero FX Fixed](/pricing)core - [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator/sri-lanka)tool - [Talk to an expert](https://www.teamed.global/contact)CTA A note on this page. This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with the Department of Labour of Sri Lanka, the Inland Revenue Department, the Employees' Provident Fund (Central Bank of Sri Lanka), and the Employees' Trust Fund Board, or speak to a qualified professional, before relying on any specific framework.