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Employer of Record (EOR) in Sri Lanka

VERDICT: The leading Sri Lanka Employer of Record in 2024 is Horizons. With strong local talent networks and expert support on the ground, Horizons is the leader in Sri Lanka hiring. 

Key Takeaways

  • Sri Lanka Employers of Record (EORs) hire and pay employees in Sri Lanka, on behalf of international businesses.
  • Partnering with a Sri Lanka EOR saves companies time and money, and ensures full compliance with Sri Lanka labor and tax laws. 
  • The top 5 Sri Lanka EOR companies in 2024 are Horizons, Remunance, Source One, Atlas and Globalization Partners

Sri Lanka has a diverse economy, known for the production and export of tea, coffee, rubber, and coconuts. Sir Lanka is also strategically located at the crossroads of major shipping routes that connect South Asia to East Asia. This has led to Sri Lanka’s role as a significant trade hub in the region. 

The unique location and economic advantages of Sri Lanka make it a popular location for international hiring. In this guide, we look at the most popular Sri Lanka hiring solution, the Employer of Record

What Is a Sri Lanka EOR?

An Employer of Record (EOR) in Sri Lanka is a service used by companies to simplify the process of hiring and managing employees in Sri Lanka without establishing a legal entity there. This service is particularly beneficial for companies looking to expand their operations into Sri Lanka or hire local talent for specific projects.

The EOR acts as the official employer on paper, taking responsibility for all legal and regulatory compliance related to employment. This includes handling employment contracts, payroll, taxes, benefits administration, and ensuring adherence to local labor laws. By using an EOR, foreign companies can navigate the complexities of the Sri Lankan employment landscape more easily and with reduced risk.

For the employees, the arrangement is transparent. They perform their roles for the foreign company as if they were direct hires, but their legal employment is with the EOR in Sri Lanka. This structure provides a layer of security and local support for the employees, as the EOR ensures that their employment rights are protected according to Sri Lankan law. For the hiring company, this means reduced administrative burden and lower risk of non-compliance with local regulations.

An EOR in Sri Lanka can be a strategic tool for businesses looking to test the market, start a project quickly, or hire specific expertise without the commitment of establishing a full-fledged subsidiary. This flexibility and ease of management make the EOR model increasingly popular among companies expanding internationally.

A Sri Lanka EOR is similar to a Sri Lanka Professional Employer Organization (PEO) — a professional HR company that becomes the local co-employer of your workforce in Sri Lanka. 

Top 5 Sri Lanka EORs

  1. Horizons: Horizons is a global PEO with an established presence and long experience in South Asia, including in Sri Lanka. Horizons offers tailored employment and HR solutions, including payroll, visas, and recruitment, alongside its core EOR solution. Horizons is our pick for No 1 Sri Lanka EOR
  2. Remunance: Remunance is an international EOR with strong Sri Lanka expertise. An advantage of working with Remunance is that they also provide subsidiary incorporation services for companies that require a distinct legal entity in Sri Lanka.  
  3. Source One: Source One are a leading regional EOR offering strong outsourcing support in Sri Lanka, Nepal and the Philippines. In addition to EOR services, Source One can also support you with virtual staffing agency and business process outsourcing services. 
  4. Atlas: Atlas EOR services provide payroll, HR, tax, and compliance for businesses looking to hire local teams in Sri Lanka. As the world’s most expansive Direct EOR, they only hire through their own subsidiaries, instead of sub-contracting. 
  5. Globalization Partners: As a leading EOR provider, Globalization Partners streamlines global hiring through its suite of global HR and payroll solutions. In Sri Lanka, they will take care of your HR, payroll, benefits management and recruitment. 

What Are the Benefits of a Sri Lanka EOR Solution?

Using an Employer of Record (EOR) in Sri Lanka offers several significant benefits for companies seeking to expand their operations or hire employees in the country:

  1. Compliance with Local Laws: The EOR is well-versed in local labor laws, tax requirements, and employment standards, reducing the risk of legal issues or penalties for non-compliance.

  2. Quick Market Entry: Companies can quickly enter the Sri Lankan market without the need to establish a legal entity in the country. This allows for a faster start to operations and the ability to test the market with a lower initial investment.

  3. Simplified Recruitment and Hiring: The EOR manages all aspects of recruitment, hiring, and onboarding processes. This includes contract negotiations, background checks, and ensuring that employment contracts meet local standards.

  4. Reduced Administrative Burden: Managing employees in a foreign country requires significant administrative effort. An EOR relieves the hiring company of these tasks, allowing them to focus on their core business activities.

  5. Risk Mitigation: The EOR assumes the legal responsibility for employment-related issues, which mitigates risks for the company, especially in areas related to employment law, tax, and compliance.

  6. Flexibility and Scalability: Companies can scale their workforce up or down in response to business needs without the complexities of adjusting a legal entity’s structure.

  7. Cost-Effective Solution: For many companies, using an EOR is more cost-effective than establishing and maintaining a legal entity, especially when the operation in the country is not large enough to justify the expense and effort of setting up a subsidiary.

Overall, an EOR in Sri Lanka offers a practical, flexible, and compliant way for companies to expand their presence and hire local talent, without the complexities and risks associated with establishing a foreign legal entity.

Sri Lanka EORs File Employee Income Tax Returns

Employee income tax

How a Sri Lanka EOR Helps with Labor Contracts

A Sri Lanka Employer of Record (EOR) plays a crucial role in managing local employment contracts, ensuring that they are compliant with the country’s employment laws and practices. Here’s how an EOR assists in this process:

  1. Drafting Compliant Contracts: The EOR is responsible for drafting employment contracts that comply with Sri Lankan labor laws. This includes adhering to regulations regarding working hours, leave entitlements, termination procedures, and other employment standards. Since the EOR is well-versed in local laws, they ensure that the contracts meet all legal requirements, reducing the risk of legal issues.

  2. Cultural and Legal Insights: The EOR provides valuable insights into local business practices and cultural norms, which can be crucial in structuring contracts that are not only legally compliant but also culturally appropriate. This understanding helps in creating contracts that are fair and acceptable to local employees, fostering better employer-employee relationships.

  3. Updating Contracts as Needed: Employment laws and regulations can change. An EOR stays updated on these changes and can revise employment contracts accordingly. This ensures that the contracts remain compliant over time and adapt to any new legal requirements.

  4. Expert Advice and Support: The EOR offers expert advice on best practices in employment contracts and can provide support in case of any disputes or misunderstandings regarding the contract terms.

  5. Risk Mitigation: By ensuring that contracts are legally compliant and clearly articulated, the EOR mitigates risks related to employment disputes, legal challenges, and non-compliance penalties.

Sri Lanka Labor Law

Sri Lankan labor law is designed to regulate the relationship between employers and employees, ensuring fair treatment, safety, and well-being of workers. Here is a summary of the main components:

  1. Working Hours and Overtime: The standard working hours in Sri Lanka are generally 45 hours per week, spread over five days. Overtime is permitted under specific conditions and is usually paid at a higher rate than the normal wage.

  2. Minimum Wage: Sri Lanka has a national minimum wage which all companies must pay, currently set at 12500 LKR/Month.

  3. Leave and Holidays: Employees are entitled to annual leave, sick leave, and public holidays. Maternity leave is also provided, with a minimum period of 12 weeks

  4. Employment Contracts: Contracts of employment are crucial and must clearly outline terms of employment, including job responsibilities, salary, benefits, and termination conditions. Both parties must adhere to these terms.

  5. Termination and Severance: The law outlines specific procedures and conditions for termination of employment. This includes notice periods and, in some cases, severance pay, depending on the length of service and the reason for termination.

  6. Health and Safety: Employers are required to provide a safe working environment. This includes adhering to health and safety regulations, providing necessary training, and ensuring that equipment and facilities meet safety standards.

  7. Social Security and Benefits: Employees in Sri Lanka are entitled to certain social security benefits, including pensions and provident funds. Employers are required to contribute to these funds on behalf of their employees.

  8. Non-Discrimination: The law prohibits discrimination in employment based on race, religion, sex, or other protected characteristics. This includes hiring, promotion, and termination practices.

  9. Union Rights and Collective Bargaining: Employees have the right to form and join trade unions and engage in collective bargaining. Employers are required to recognize these rights and negotiate in good faith with legally established unions.

  10. Dispute Resolution: The labor law provides mechanisms for resolving disputes between employers and employees. This includes mediation, arbitration, and, if necessary, litigation through labor tribunals.

Video — Termination Laws in Sri Lanka

Choose a Sri Lanka EOR

A Sri Lanka EOR solution is a great option for international companies that wish to hire a team or do business in Sri Lanka, but don’t wish to spend the time and money on setting up a local entity. When deciding on a Sri Lanka EOR solution, it is crucial to work with a reliable provider. We recommend Horizons, Remunance, Source One, Atlas and Globalization Partners as the top Sri Lanka EORs. 

Sri Lanka and South Asia Business Guides

Frequently Asked Questions

Employer of Record (EOR) companies in Sri Lanka typically offer a range of services aimed at facilitating the employment of staff in the country for foreign companies. These services include handling local employment contracts, ensuring compliance with Sri Lankan labor laws, managing payroll and tax filings, administering employee benefits, and offering guidance on local employment practices. Additionally, they may assist with the recruitment process and provide ongoing HR support and advice, especially in terms of navigating local cultural and legal nuances.

Yes, one of the primary functions of an EOR in Sri Lanka is to enable foreign companies to hire employees in Sri Lanka without the need to establish a legal entity in the country. The EOR acts as the official employer for legal and compliance purposes, allowing the foreign company to have a workforce in Sri Lanka without the complexities and costs associated with setting up a subsidiary or branch office.

An EOR in Sri Lanka ensures legal compliance by staying updated with the latest local employment laws and regulations. They take responsibility for legal aspects of employment, including contract terms, employee rights, working hours, minimum wage standards, health and safety regulations, and tax obligations

Travis is a global business development advisor. He has spent the last 14 years supporting business establishment and development in North America, Southeast Asia, and throughout the world. With multiple degrees from the University of Oregon, Travis currently splits his time between the US, and Bali, Indonesia. At RemotePad, Travis writes about remote work, hiring internationally and PEO/EOR business models.