.png)
Sri Lanka has 12% employer EPF (on basic wages) + 3% ETF (on gross), progressive APIT income tax, mandatory gratuity for 5+ year employees, and a highly cost-competitive English-speaking tech workforce. Rippling EOR handles EPF, ETF, IRD, and Sri Lanka labour law compliance.
Sri Lanka is a South Asian island economy with a large, educated, English-speaking technology outsourcing sector in Colombo. Sri Lanka's LKR depreciation since 2022 has made tech talent highly cost-competitive for USD/EUR/GBP-paying employers. EOR is popular for UK, Australian, and US companies accessing Sri Lanka's professional workforce. EPF (12%) and ETF (3%) on basic wages are the primary statutory costs.
Setting up a Sri Lankan Pvt. Ltd. requires Registrar of Companies registration, EPF/ETF/IRD employer registration. EOR is recommended for 1–10 employees or where the basic/gross salary structure management for EPF, APIT personal relief calculations, and gratuity accrual tracking are complexities.
EPF employee: 8% on basic wages (to individual EPF account). Income tax (APIT): progressive 6–36% on monthly income; withheld monthly. Personal relief: LKR 3,000,000/year reduces taxable income significantly for most professional-level employees.
.svg)
EPF employer: 12% on basic wages (key statutory cost; on basic, not gross). ETF employer: 3% on gross salary. Total employer on-cost approximately 15% of gross (dependent on basic/gross ratio). Gratuity: accruing liability from year 5 (1/2 month's wages per year of service) — direct employer obligation on termination.
APIT progressive: 6% (up to LKR 500,000/month); 12% (500,001–750,000); 18% (750,001–1,250,000); 24% (1,250,001–1,750,000); 30% (1,750,001–2,500,000); 36% (above 2,500,000). Personal relief: LKR 3,000,000/year. Monthly APIT withholding to IRD.
Annual leave: 14 days per year. Sick leave: 7 days paid. Maternity: 84 working days (12 weeks) fully paid (first 2 children; 42 days for third). Public holidays: ~25 days (vary by religion and region).
Notice: 1 month. Gratuity (5+ years): 1/2 month/year — paid on termination. Industrial Disputes Act reinstatement protection. Termination board approval may be required for collective dismissals. Rippling EOR manages full termination process.
Non-Sri Lankan nationals require work permits from the Department of Immigration and Emigration. Processing: 4–8 weeks. Rippling EOR supports permit applications through its Sri Lankan entity.
Statutory: EPF 12% employer (on basic wages), ETF 3% employer (on gross), 14 days annual leave, maternity 84 days paid (first 2 children), gratuity for 5+ year employees. Market standard: private health insurance, transport allowance, meal allowance, performance bonus, attendance bonus. Colombo is the primary market.
Rippling EOR Sri Lanka operates through a local Sri Lankan entity. Key Sri Lanka-specific handling: EPF employer contributions (12% on basic wages), ETF employer (3% on gross), APIT income tax withholding with personal relief, gratuity accrual tracking from year 5, and Industrial Disputes Act termination management.
EPF contributions are on basic wages (not total gross salary). Employers should ensure employment contracts clearly distinguish basic salary from allowances (transport, meal, housing). EPF employer: 12% of basic; ETF employer: 3% of gross. For a tech employee with LKR 100,000 basic + LKR 30,000 allowances: EPF = LKR 12,000; ETF = LKR 3,900.
Gratuity is Sri Lanka's mandatory end-of-service payment for employees completing 5+ years of continuous service: 1/2 month's wages per year of service. No accrual fund — it is a direct employer liability paid on termination, retirement, or resignation. Rippling EOR tracks gratuity accrual from year 5 and calculates the full obligation on termination.
Sri Lanka's LKR has depreciated significantly since the 2022 economic crisis, making Sri Lankan talent highly cost-competitive. Mid-level developers in Colombo now earn USD 500–1,500/month equivalent in LKR. Sri Lanka has a large English-speaking tech talent pool, strong IT outsourcing history, and improving economic stability since 2023 IMF support programs.
Notice: 1 month standard. Gratuity (5+ years): 1/2 month's wages per year of service — paid on termination. Industrial Disputes Act provides reinstatement protection for unjust dismissal. Termination board approval may be required for collective dismissals. Rippling EOR manages full termination process.
