Establishing and managing payroll in Sri Lanka
Sri Lanka is a unique and fascinating country, located close to India. It has a diverse population of more than 20 million people, and its varied colonial past as a colony of several European countries means many languages and cultures are active throughout the nation. This diversity, along with the potential for economic growth, make Sri Lanka an exciting destination for foreign organizations looking to expand their operations.
If your organization is interested in establishing a presence in Sri Lanka, an important step will be hiring locally and setting up a Sri Lanka payroll. This process can be difficult to follow for many organizations, and this can cause significant delays.
At Horizons, we specialize in helping businesses expand internationally, including into Sri Lanka. Our Sri Lanka payroll outsourcing setup and management service is designed specifically to give clients a faster, more reliable route of entry into Sri Lankan employment, ensuring you operate in full compliance with local regulations, whether or not you have an entity in the country.
Why choose the Horizons payroll solution?
If you have an entity
Does your organization have an established entity in Sri Lanka? We can help you to create and run your payroll in Sri Lanka, leaving you to focus all of your efforts on the job of expansion.
If you don’t have an entity
If your organization does not yet have a registered entity in Sri Lanka, we can provide our Sri Lanka PEO to act as employer of record for your hirees. Additionally, we can handle the setup and management of your payroll.
This is a low-risk and flexible option, leaving the difficult compliance and administrative work to us and freeing your organization to focus on a successful expansion.
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Payroll in Sri Lanka Regulations
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What are the withholding and taxation rules in Sri Lanka?
Sri Lankan income tax operates on a progressive system, so higher earners must pay a higher percentage of their salary. The rate ranges from 6% up to 18%. Residents are taxed on worldwide income, whereas non-residents are only taxed on Sri Lankan income. The Pay As You Earn (PAYE) system means that taxes are deducted before salaries are paid.
Additionally, the country has social security schemes that both employers and employees must pay towards. This is generally a rate of 12% and 8% of salary respectively.
The standard corporate tax rate is 28%, but there are also rates of 14% and 40% for certain types of businesses.
|
Sickness & Maternity
|
5.25% |
|
Disability & Death
|
1.75% |
|
Retirement
|
2.00% |
|
Layoff and Retirement Benefits
|
1.75% |
|
Child Care
|
1.00% |
|
Work Related Accidents (depends on the state)
|
0.50% – 3.00% |
|
Housing Tax
|
5.00% |
|
Payroll State Tax (depends on the state)
|
0.50% – 3.00% |
|
Total Employment Cost
|
up to 22.75% |
|
Sickness & Maternity
|
5.25% |
|
Disability & Death
|
1.75% |
|
Layoff and Retirement Benefits
|
3.15% |
|
Total Employee Cost
|
10.15% |
|
Sickness & Maternity
|
5.25% |
|
Disability & Death
|
1.75% |
|
Layoff and Retirement Benefits
|
3.15% |
|
Total Employee Cost
|
10.15% |
|
Up to 6,942.35 Pesos
|
1.92% |
|
6,942.35 – 58,922.27 Pesos
|
6.40% |
|
58,922.27 – 103,550.51 Pesos
|
10.88% |
|
103,550.51 – 120,372.95 Pesos
|
16.00% |
|
120,372.95 – 144,119.39 Pesos
|
17.92% |
|
144,119.40 -290,667.83 Pesos
|
21.36% |
|
290,667.83 – 458,132.39 Pesos
|
23.52% |
|
458,132.39- 874,650.11 Pesos
|
30.00% |
|
874,650.11 – 1,166,200.11 Pesos
|
32.00% |
|
1,166,200.11 – 3,498,600.11 Pesos
|
34.00% |
|
Over 3,498,600.11 Pesos
|
35.00%
|
Entitlement and termination rules in Sri Lanka
When hiring employees in Sri Lanka, we advise that you always provide a written contract of employment that clearly states all the entitlements and termination terms for each employee.
By law, workers are entitled to one month of notice upon termination after one or more years of employment. There may also be a requirement to pay severance, but the requirement and amount depend on a range of factors.
The regulations surrounding terminations in Sri Lanka are laid out in the Termination of Employment of Workmen (TEWA) Act.
How to establish Sri Lanka payroll outsourcing
In general, any organization trying to set up payroll in Sri Lanka is required to establish an entity in the country. This process can be very complicated and time-consuming, and it is important to stick to the regulations to avoid fines and legal issues.
Alternatively, you can outsource your payroll setup and management to Horizons.
We can provide our Sri Lanka PEO & Employer of Record for your new employees, so you don’t even need to have a registered entity in Sri Lanka. Additionally, we can establish your payroll and handle all the ongoing administration and compliance work, giving you the freedom to expand into the country more efficiently.
All-in-one solution for Sri Lanka payroll outsourcing
Horizons’ Sri Lanka PEO and employer of record services enable your business to quickly and compliantly begin trading in Sri Lanka. This allows your business to commence operations in Sri Lanka in as little as 48 hours, and has the potential to save you up to 82% in expansion costs, whether or not you have a legal entity in the country.
Horizons can also manage your company’s payroll, benefits, and expenses in Sri Lanka. Additionally, we can oversee HR duties, as well as employment and tax compliance. And as the only global PEO with an in-house recruitment team, Horizons will source, hire, and onboard your local workforce.
Manage payroll in Sri Lanka
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.
