How to Hire an Employee in Sri Lanka, Understanding Statutory Contributions

When hiring an employee in Sri Lanka, it’s essential to understand the legal requirements surrounding the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF). Both contributions are mandated by law to ensure employee welfare and security.

EPF and ETF Contributions

EPF:

• Employers must contribute 12% of the employee’s total monthly earnings.
• Employees contribute 8% of their total monthly earnings.

ETF:

• Employers must contribute an additional 3% of the employee’s total monthly earnings.

Exemptions

There are specific exemptions to these contributions, including:

1. Household Employees: Domestic workers are exempt from EPF contributions.
2. Certain Social Service Organizations: Organizations providing technical training for minor offenders, destitute, deaf, and blind individuals may be exempt.
3. Charity Organizations: Charitable organizations with fewer than ten employees are also exempt.

Legal Consequences

Non-compliance with EPF and ETF regulations can lead to serious legal consequences. Employers are responsible for remitting these contributions, and failure to do so can result in penalties and legal action by the Labour Department.

Steps to Comply

1. Register with EPF and ETF: Within 14 days of hiring the first employee, employers must register with the EPF and ETF by submitting the required forms to the nearest Labour Office or the Commissioner of Labour.
2. Calculate Contributions: Ensure the correct percentage of the employee’s total monthly earnings is calculated for both EPF and ETF contributions.
3. Remit Contributions: Make monthly contributions on or before the last working day of the following month to avoid surcharges.

Complying with these regulations not only ensures legal adherence but also protects the financial welfare of your employees. Ready to take the next step in hiring in Sri Lanka?