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Compensation & Benefits in LkSri Lanka.








Country Capital

Sri Jayawardenepura Kotte


Sri Lankan rupee (Rs) (LKR)

No matter what country you’re in, you’ll find that employees care about compensation and benefits. If your company stands out from the crowd by providing the best compensation and benefits, you’re likely to attract the most talented employees in Sri Lanka. However, learning Sri Lanka’s compensation laws and putting together a benefits plan isn’t always easy, especially when you’re trying to run multiple different offices.

G-P is available to help through Sri Lanka compensation and benefits outsourcing. We’re a global PEO with subsidiaries in countries around the world, including Sri Lanka. When you work with us, we’ll add your employees to our payroll to compensate them, and we’ll also add them to our benefits plan so that they can receive the statutory minimums and more.

Sri Lanka Compensation Laws

There is no minimum salary under the wages board Act, which we fall into. The minimum salary requirement is for blue color workers.

Guaranteed Benefits in Sri Lanka

Employees in Sri Lanka all need to receive guaranteed benefits required by law. It’s best to start your Sri Lanka benefits management plan with those statutory benefits. The country celebrates 26 national holidays, and it’s up to different industry sectors to decide which days to celebrate. Currently, only eight of those holidays are considered paid time off for certain sectors.

Other typical benefits include:

Annual Leave

Annual leave is ‘earned leave’, hence the employee earns his/her leave for the following year by working in the current year. An employee will not be entitled to any annual leave during the first year of his/her employment. The employee needs to remain in continuous employment to be eligible for annual leave.

Annual Leave depends on the month an employee joins. In respect of each year of employment (for the period January to December, irrespective of the date of joining), an employee can take 14 days of annual leave with pay in the second year of employment, subject to the variation in respect of the first year of employment as follows:

  • 14 days, if employment commenced on or after 1st January but before 1st April
  • 10 days, if employment commenced on or after 1st April but before 1st July
  • 7 days, if employment commenced on or after 1st July but before 1st October
  • 4 days, if employment commenced on or after 1st October

Casual Leave

In respect of each calendar year, an employee is entitled to not more than 7 days of Casual leave in the year. If somebody joins during the year, it is calculated as  0.5 days for every month, heshe completes the work

Maternity Leave

  • In respect of the birth, a female employee is entitled to 84 working days as maternity leave.
    • In the event of a stillbirth / viable fetus (at least 28 weeks gestation), she is entitled to 42 working days on full pay.
  • Up to 14 days of maternity leave can be taken before confinement, and the balance of days after confinement
  • In computing Maternity Leave, the following holidays must be excluded:
    • Poya Days
    • Statutory holidays
    • 1 and ½ days weekly holidays (and not two weekly holidays)
  • No employee who has given notice to the employer that she expects to be confined can be employed or permitted to be employed on any work that may be injurious to her or her child during the period of notice.
  • The employment of a female cannot be terminated by reason of her pregnancy confinement or any illness consequent to her pregnancy or confinement.

Sick Leave and Paternity Leave are not statutory requirements

Sri Lanka Benefits Management

When you’re ready to put your Sri Lanka benefits management plan into place, we recommend considering additional benefits that you can provide beyond the statutory minimums. These benefits can entice employees to choose your open positions and also encourage them to stay with your company longer. For example, Sri Lanka currently does not have any mandates about paid paternity leave, so you could provide a few days as an incentive for employees to sign on with your company. Other common supplemental benefits include performance-based bonuses, private health care plans, and additional paid time off.

Restrictions for Benefits and Compensation

The biggest restriction for companies expanding to countries such as Sri Lanka is establishing a subsidiary. You’ll need your own entity if you’re going to work in Sri Lanka legally. That structure is a prerequisite to important tasks such as hiring, dispersing compensation and benefits, and setting up a payroll.

You won’t have the same requirement if you work with G-P, fortunately. Our team will work with you and use our existing infrastructure to help you run your company abroad. We’ll handle Sri Lanka compensation laws, and we’ll also shoulder all benefits and compensation requirements through Sri Lanka benefits and compensation outsourcing.

Growing your company in Sri Lanka requires several planning needs, including benefits. If you’re looking to build a team in this South Asian country, prepare for the process by learning about employment law and the labor market.

About Your Sri Lanka Employee Benefits Plan

Benefits are a valuable tool for your company’s growth, so it’s essential to plan them carefully. With the right benefits plan, you can draw in more job seekers during recruitment and increase retention rates in the workplace. Over time, competitive employee provisions can help you build an experienced team and save on onboarding costs.

Possible benefits include:

  • Private health insurance
  • Holiday bonuses

Required Benefits in Sri Lanka

Certain provisions also play a role in your company’s compliance. The country’s labor regulations require employers to provide these benefits at a minimum:

  • Paid annual leave – If an employee has carried forward leave at the time of resignation, the company can either let him use it for the notice period or encash it. Carrying forward AL too is the discretion of the company.
  • Paid leave on public holidays ·      – Paid leave on public holidays If an employee works on a holiday, the best is to give a lieu leave. Employees who work for private sector organizations, only get Mercantile to leave, which is less than the no. of PL days
  • Provident fund contributions – Mandatory
  • Paid maternity leave – Mandatory

Designing Sri Lanka Employee Benefits Plans

When you’re in a new country, you’ll need to account for new market standards and laws. Even so, you can follow the same fundamental steps to create a plan anywhere.

1. Assess Your Finances

Benefits require spending, so you need to understand your existing revenue and budget. How will these new benefits packages fit into the overall financial picture?

2. Research the Market

Becoming competitive is a matter of understanding market standards. Research other employers to uncover the most commonly offered benefits. These will inform job seekers’ expectations.

3. Choose Benefits

With the information you’ve gathered, you can choose benefits strategically. Allocate your budget to required provisions first and use the remaining funds to cover other perks.

Average Cost of Benefits

With every employer paying a different amount for benefits, an overall average might not be a helpful metric. Several factors can affect how much an employer is willing to pay for benefits plans, like size, location, and industry.

Instead of using an average to gauge your spending, you should create a budget unique to your earnings. The best way to set this budget is to dedicate a percentage of your revenue. With this approach, your offering always scales with your company.

How to Calculate Employee Benefits

While many benefits have a straightforward calculation, others are more complex. Provisions like monthly allowances and holiday bonuses are simple. In these instances, you can set an amount and distribute it accordingly.

Calculations for benefits like commuter stipends are trickier. Employees may use various amounts in gas expenses, so you might set a fuel limit to control costs. The best is to give an X value per KM, where the employee has to submit his actual travel mileage. It will be a reimbursement.

You can find guidance for calculating the required benefits in the labor laws. For trust fund contributions, employers contribute 3% of employee salary.

How Are Employee Benefits Taxed in Sri Lanka?

The country recognizes all forms of remuneration received for employment as income. This remuneration includes benefits, which should be counted with their actual monetary value. It also includes the cost of travel reimbursements, rent for housing provided by the employer, and any other prescribed benefits.

Employers are responsible for calculating income tax and deducting the necessary amounts for Sri Lanka’s tax authority. It’s essential to include all benefits in your calculation. Currently, employees can file their own taxes, which is beneficial as there are certain allowable expenses they can deduct from the taxable income. However, this is likely to change from 1st October 2022. It is not yet gazetted.

Employee Health Benefits

The country has a universal healthcare system, but most companies opt to provide their own comprehensive health insurance scheme.

How G-P Can Help Scale Your Team in Sri Lanka

G-P’ global employment platform helps you build and scale an international team quickly and easily, ensuring all benefits offered to candidates are compliant and in line with local regulations. Learn more about our platform and request a proposal today.


THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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