Sri Lanka has no single labour code. Employment is governed by several laws, including the Shop and Office Employees Act, the Wages Boards Ordinance, the National Minimum Wage of Workers Act and the Termination of Employment of Workmen Act. Here is what employers need to know about leave, pay, tax and ending employment.
Leave depends on which law covers the employee. Office and shop staff are covered by the Shop and Office Employees Act, while many industrial and plantation workers are covered by Wages Board decisions. The figures below are for shop and office employees.
With full pay from the second year of employment, at least 7 of them consecutive. In the first year it is 4–14 days, depending on the start date.
Paid leave for private business, ill health or other reasonable cause. In the first year it accrues at 1 day for every 2 months.
84 working days for a live birth under the Shop and Office Employees Act (14 days before and 70 after). 12 weeks under the Maternity Benefits Ordinance.
One whole day and one half-day off each week, paid for employees who worked at least 28 hours that week.
There is no statutory paternity leave for private-sector employees, although many employers offer a few days. There is no separate statutory sick leave for shop and office staff: illness is covered by casual leave, and many employers and collective agreements add medical leave.
Set up annual, casual and maternity leave in IceHrm with their own accrual and approval rules, including the pro-rata first-year entitlement. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
The National Minimum Wage of Workers Act sets a floor for all private-sector workers. Wages Boards set higher minimum rates for many industries, and those rates take precedence where they apply.
From 1 January 2026, or LKR 1,200 a day for daily-paid workers (up from LKR 27,000 and LKR 1,080 from April 2025).
A statutory monthly allowance for private-sector employees under the Budgetary Relief Allowance of Workers Acts.
Shop and office employees are paid at least one and a half times their normal hourly rate for hours beyond the normal maximum.
Under the Shop and Office Employees Act, normal working hours are 8 hours a day and 45 hours a week, excluding meal breaks. Wages Board decisions set hours and overtime rules for the industries they cover.
Capture attendance and overtime in IceHrm and feed the hours straight into payroll, so overtime reflects what was actually worked. Time & attendance →
Employers deduct Advance Personal Income Tax (APIT) from employment income every month using the tax tables issued by the Inland Revenue Department (IRD), and pay it over by the 15th of the following month. The year of assessment runs from 1 April to 31 March.
| Taxable income (after relief) | Rate |
|---|---|
| First LKR 1,000,000 | 6% |
| Next LKR 500,000 | 18% |
| Next LKR 500,000 | 24% |
| Next LKR 500,000 | 30% |
| Balance | 36% |
Terminal benefits such as gratuity and compensation for loss of office are taxed under separate APIT tables, with concessionary rates for approved schemes.
Sri Lanka's main payroll contributions are the Employees' Provident Fund (EPF), managed by the Central Bank and the Department of Labour, and the Employees' Trust Fund (ETF), which only the employer pays.
Of total monthly earnings, paid monthly.
Deducted from the employee's earnings and paid over with the employer's share.
Of total monthly earnings, paid by the employer only.
Under the Payment of Gratuity Act, employers with 15 or more workers must pay a gratuity of half a month's salary for each completed year of service to employees who leave after at least 5 years, for any reason other than serious misconduct. Plan for this as a long-term liability.
Build Sri Lankan pay the way you already structure it, with your own salary components, deductions and formula columns, such as EPF, ETF or the budgetary relief allowance. Want to know how well IceHrm handles payroll calculations for Sri Lanka? Contact us or see Payroll →
Employers with 15 or more workmen are covered by the Termination of Employment of Workmen (Special Provisions) Act. They cannot end a workman's employment for non-disciplinary reasons, such as redundancy, without the workman's written consent or the approval of the Commissioner General of Labour, who can order compensation.
There is no general statutory notice period; notice is set by the contract of employment. Compensation for non-disciplinary termination under the Act is calculated using a formula gazetted by the Minister, based on length of service and subject to a maximum. Disciplinary dismissals should follow a fair inquiry, and employees can challenge unfair dismissals before a Labour Tribunal.
On leaving, employees can claim their EPF and ETF balances, and eligible employees must be paid their gratuity within 30 days.
Sri Lanka's holidays follow Buddhist, Hindu, Muslim and Christian calendars, so most dates change every year and are gazetted annually. Every full moon (Poya) day is a public holiday. Shop and office employees get a paid holiday on each Poya day and on the public holidays declared for them under the Act.
Leave groups give each office its own holiday calendar, so you can load each year's gazetted Poya and festival dates once and every employee gets the right days off automatically. Holiday calendars →
Employers should issue a written letter of appointment setting out the terms of employment. Terms can improve on, but never fall below, the minimums in the Shop and Office Employees Act, Wages Board decisions and the national minimum wage.
There is no general statutory limit on probation; periods of 3–6 months are common and should be stated in the letter of appointment.
Send letters of appointment for e-signing, store them on the employee's record, and track onboarding with task lists so EPF and ETF enrolment is never missed. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for Sri Lanka, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for Sri Lanka? Talk to us.
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