Labour Laws in Sri Lanka: A Guide for IT Professionals and Employers

Employment relationships in Sri Lanka are governed by several Acts, Ordinances, regulations and administrative decisions rather than one single labour-law code.

The legislation applicable to an employee can depend on the nature of the employer's business, the employee's role, the type of employment and the relevant statutory definitions.

For many employees working in software development companies, IT service providers, business process outsourcing companies and other technology businesses, the Shop and Office Employees (Regulation of Employment and Remuneration) Act is particularly relevant.

Other important legislation includes:

• Industrial Disputes Act
• Termination of Employment of Workmen (Special Provisions) Act
• Employees' Provident Fund Act
• Employees' Trust Fund Act
• Payment of Gratuity Act
• Wages Boards Ordinance
• National Minimum Wage of Workers Act
• Maternity Benefits Ordinance
• Employment of Women, Young Persons and Children Act

These laws address different aspects of employment, including remuneration, working conditions, statutory benefits, termination and employee protection.

1. Working hours, overtime and holidays

Working hours are among the most frequently misunderstood aspects of employment in Sri Lanka's IT industry.

Technology professionals may work under different arrangements, including standard office schedules, flexible working hours, shifts, night operations and overseas-client support schedules. However, flexible working arrangements do not automatically remove statutory employment protections.

Normal working hours

The Shop and Office Employees Act contains provisions governing working hours for employees covered by the legislation. The commonly applicable limits are eight hours per day and 45 hours per week, subject to the Act's provisions and applicable exceptions.

Overtime

Overtime generally refers to work performed beyond the applicable normal working hours. The legal entitlement and overtime rate depend on the legislation applicable to the employee.

For employees covered by the Shop and Office Employees Act, overtime is generally payable at not less than one-and-a-half times the ordinary hourly rate, subject to the statutory conditions.

This is particularly relevant to IT professionals who are regularly asked to:

• Work late to accommodate overseas clients.
• Attend weekend deployments and production releases.
• Resolve incidents outside normal working hours.
• Provide overnight technical support.

An employer should not assume that an employee's monthly salary automatically includes unlimited overtime.

Weekly holidays and public holidays

Employees covered by the Shop and Office Employees Act have statutory provisions relating to weekly holidays, annual holidays, casual leave, Poya days and specified public holidays.

The exact entitlements and conditions should be checked against the employee's applicable employment legislation.

2. Annual leave, casual leave and public holidays

Leave entitlements are another important area for employees in the IT industry.

Companies often provide additional leave benefits as part of their HR policies. However, statutory leave entitlements should be distinguished from additional benefits offered voluntarily by employers.

For employees covered by the Shop and Office Employees Act, the main entitlements include:

• Annual leave: Generally 14 days in each subsequent year of employment. The entitlement during the first year depends on when employment commenced.
• Casual leave: Up to seven days per year, subject to statutory conditions.
• Weekly holidays: One full holiday and one half-holiday per week, subject to the applicable provisions.
• Poya holidays: Full Moon Poya Day holidays, subject to statutory exceptions.
• Public holidays: Specified public holidays declared for the purposes of the Act.

The first-year annual leave entitlement is calculated according to the employee's commencement date. It is not automatically 14 days for every new employee.

3. EPF and ETF contributions

Employees' Provident Fund (EPF) and Employees' Trust Fund (ETF) are important statutory employment benefits in Sri Lanka.

Employees' Provident Fund (EPF)

The standard contribution rates are:

The employee's 8% contribution is deducted from their applicable earnings, while the employer is responsible for contributing an additional 12%.

Employees' Trust Fund (ETF)

Employers are required to contribute 3% of the applicable monthly earnings towards ETF. This contribution is borne entirely by the employer and must not be deducted from the employee's salary.

An important consideration for IT professionals is that EPF obligations are not necessarily limited to permanent employees. Employment arrangements such as temporary, casual, apprenticeship and contract-based work may also fall within the scope of the EPF legislation, depending on the actual relationship and circumstances. Simply describing someone as a contractor does not automatically settle their legal employment status.

Employees should periodically verify their contributions rather than relying exclusively on salary slips or employer statements.

4. Minimum wages and salary payments

Sri Lanka has a national minimum wage framework applicable to workers across industries and services.

Under the National Minimum Wage of Workers (Amendment) Act, No. 11 of 2025, the national minimum wage increased to:

These rates replaced the transitional rates of Rs. 27,000 monthly and Rs. 1,080 daily that applied from April to December 2025.

The 2025 amendments also addressed the treatment of existing budgetary relief allowances and their incorporation into the wage calculation. Employers should refer to the amended legislation when calculating statutory payments, rather than simply comparing an employee's basic salary with the minimum wage.

For technology professionals, the national minimum wage is unlikely to determine the salary of most skilled IT positions. Nevertheless, it remains relevant to all employers, including companies employing support staff, administrative personnel and other workers.

5. Employment contracts, probation and fixed-term employment

Employment contracts establish the terms and conditions of the employment relationship.

In Sri Lankan IT companies, employment agreements commonly include:

• Job designation and responsibilities.
• Salary, allowances and payment arrangements.
• Working hours and overtime arrangements.
• Probation period and confirmation conditions.
• Annual leave and other benefits.
• Confidentiality and intellectual property obligations.
• Notice periods and resignation procedures.
• Termination conditions.
• Non-compete, non-solicitation and training bond provisions, where applicable.

Probation periods

Probation is commonly used by employers to assess an employee's suitability for a role. However, employees should not assume that being on probation means they have no employment rights.

The applicable statutory protections and contractual conditions must be considered together.

Fixed-term employment

Some technology companies engage professionals for specific projects, temporary requirements or defined periods.

A fixed-term contract should clearly identify its duration, conditions for renewal and what happens when the agreed period expires.

A contract ending on its agreed expiry date is not necessarily the same as an employer terminating an ongoing employment relationship.

Training bonds

Training bonds are particularly common in the IT industry. Some companies require employees to agree to remain employed for a specified period after receiving training, certifications or other development opportunities.

Employees should carefully review the conditions, repayment amounts, calculation methods and circumstances under which repayment may be required.

The enforceability of a particular bond or contractual restriction depends on its wording and applicable law. A signed agreement should not automatically be treated as proof that every clause is legally enforceable.

6. Resignation and termination of employment

Resignation and termination are among the most important employment matters for IT professionals.

Resignation

Employees should follow the notice requirements stated in their employment agreements and applicable legal provisions.

Before resigning, employees should review:

• Required notice period.
• Conditions relating to early release.
• Outstanding salary and other payments.
• Unused leave entitlements and their treatment.
• Training bond or other contractual obligations.
• Return of company property and access credentials.

Employers should also ensure that resignation procedures are handled professionally and that employees receive their outstanding statutory and contractual payments.

Termination by employers

The Termination of Employment of Workmen (Special Provisions) Act, No. 45 of 1971, provides important protections against certain employer-initiated terminations.

The Act generally requires prior written consent from the employee or prior written approval from the Commissioner of Labour for covered terminations.

However, it does not apply universally to every employee and every termination. Among its important coverage conditions are:

• Private-sector employment.
• An average of at least 15 employees at the workplace, assessed under the statutory test.
• At least 180 days of service during the first year of employment.

There are also exclusions and specific provisions relating to disciplinary dismissals, resignations and other circumstances.

An important distinction is that the Termination of Employment Act does not mean an employer can never terminate an employee without their consent. Its application depends on the statutory requirements and circumstances.

Employees who believe their termination violates the law should seek advice from the Department of Labour or a qualified legal professional promptly.

7. Gratuity payments

Gratuity is a statutory payment that may become due when employment ends.

Under the Payment of Gratuity Act, an employer who has employed 15 or more workmen on any day during the preceding 12 months is generally required to pay gratuity to an employee who has completed at least five years of service.

For monthly-paid employees, the general calculation is half a month's salary for each completed year of service.

For example, an eligible monthly-paid employee with 10 completed years of service would generally be entitled to five months' salary as gratuity, subject to the statutory calculation rules.

Gratuity can become payable upon different forms of termination, including resignation, dismissal, retirement and death, subject to the Act's conditions.

It is important to understand that gratuity and EPF/ETF are separate statutory benefits. Receiving EPF or ETF does not automatically replace an eligible gratuity payment.

8. Maternity benefits and employment protections

Maternity benefits are governed primarily by the Maternity Benefits Ordinance and the Shop and Office Employees (Regulation of Employment and Remuneration) Act, depending on the employee's coverage.

The Department of Labour identifies the following statutory entitlements:

These provisions also include protections and facilities relating to breastfeeding and the welfare of mothers and children.

Employers should identify which legislation applies to their employees rather than assuming the same calculation applies to everyone.

9. Night shifts and employment in IT companies

Night-shift employment is particularly relevant to Sri Lanka's technology industry because many companies provide services to clients in different time zones.

The Shop and Office Employees (Regulation of Employment and Remuneration) (Amendment) Act, No. 28 of 2024, introduced a specific provision allowing women aged 18 and above to be employed in certain institutions engaged in:

• Information technology.
• Knowledge process outsourcing (KPO).
• Business process outsourcing (BPO).
• Administration, accounts and related back-office work for institutions situated abroad.

The amendment permits such employment before 6.00 a.m. or after 6.00 p.m.

It also provides for regulations concerning employee welfare, including security, transportation and rest facilities for women working between 10.00 p.m. and 6.00 a.m.

This is an important legislative development for Sri Lanka's IT and outsourcing sectors. Employers should examine the full amendment and applicable regulations before implementing night-shift arrangements.

10. Internships, trainees and entry-level employment

Internships and trainee positions are common entry routes into Sri Lanka's technology industry.

However, the terms intern, trainee, apprentice and employee are not necessarily interchangeable from a legal perspective.

Sri Lanka has specific legislation and provisions dealing with the employment of trainees in the private sector, alongside the general employment framework.

Employers should clearly establish:

• Whether the arrangement is a genuine training programme or an employment relationship.
• The duration and objectives of the training.
• Whether an allowance or salary is payable.
• Working hours and supervision arrangements.
• Applicable EPF and ETF obligations.
• Whether the arrangement is subject to specific trainee legislation.

Students and graduates should also understand that calling a position an internship does not automatically remove the employer's legal obligations.

11. Remote work and overseas employment

Remote work has become increasingly common among Sri Lankan IT professionals.

However, working remotely does not automatically remove the employee's rights and obligations under applicable employment legislation.

Working remotely for a Sri Lankan employer

An employee working from home for a locally registered technology company will generally remain subject to the applicable Sri Lankan employment framework. Remote working policies may establish additional arrangements, but they do not automatically replace statutory obligations.

Working for an overseas employer from Sri Lanka

The legal position can be more complex when a professional works directly for a foreign company. The employment contract, employer's legal presence, nature of the relationship and applicable laws need to be considered.

Working as an independent contractor or freelancer

Independent contractors may operate under commercial service agreements rather than conventional employment contracts. However, the label used in an agreement is not necessarily decisive if the actual relationship has the characteristics of employment.

IT professionals accepting overseas remote opportunities should carefully examine payment arrangements, taxation, termination conditions, intellectual property ownership and dispute resolution provisions.

12. Workplace conduct, harassment and employee welfare

A professional technology workplace should provide a safe and respectful environment for employees.

IT companies should establish appropriate policies covering:

• Workplace harassment and inappropriate conduct.
• Discrimination and equal treatment.
• Employee complaints and grievance procedures.
• Workplace health and safety.
• Protection of employee information.
• Appropriate working conditions and employee welfare.

The legal framework may involve different legislation depending on the nature of the issue. Employers should not rely solely on internal HR policies as a substitute for statutory obligations.

For IT companies, this is particularly relevant in hybrid workplaces, international teams, client-facing environments and workplaces with employees working irregular shifts.

13. Where employees can seek assistance

Employees who have concerns about their employment rights or believe their employer is not complying with applicable labour laws can approach the relevant authorities.

• Department of Labour: Employment rights, wages, leave, termination and labour complaints.
• EPF Division: EPF registration, contribution records and benefits.
• Employees' Trust Fund Board: ETF contributions and claims.
• Labour Tribunal: Employment disputes falling within its jurisdiction.
• Qualified labour-law practitioners: Advice on complex employment agreements, disputes and legal proceedings.

Employees should retain relevant documents, including appointment letters, employment agreements, salary slips, EPF records, resignation letters and written communications with employers.

Official information and complaint procedures are available through the Department of Labour.

14. Frequently asked questions

Can an IT company require employees to work on weekends?

This depends on the applicable employment legislation, working arrangements, statutory holiday provisions and overtime requirements. An employer should not assume that a general employment contract removes all statutory restrictions.

Can an employer deduct training costs when an employee resigns?

This depends on the training agreement, the circumstances and the enforceability of the relevant contractual provisions. Employees should review any repayment clause carefully.

Are probationary employees entitled to EPF and ETF?

Probationary status does not automatically exclude someone from EPF or ETF. Applicable contribution obligations depend on the statutory definition of employment and relevant circumstances.

Is an employee entitled to gratuity after resigning?

Yes, resignation can trigger gratuity entitlement when the requirements of the Payment of Gratuity Act are satisfied.

Can an employer terminate an employee without notice?

The answer depends on the employment agreement, applicable legislation and reason for termination. Different rules may apply to disciplinary dismissal and other forms of termination.

Are software engineers entitled to overtime payments?

Job title alone does not determine overtime entitlement. The applicable legislation, coverage and nature of the employment arrangement must be examined.

Does working remotely for a foreign company mean Sri Lankan labour laws do not apply?

Not necessarily. The legal position depends on the actual employment relationship and relevant jurisdictional considerations.

Are interns entitled to EPF and ETF?

This depends on the legal nature of the internship and whether the person falls within the relevant statutory definitions. The word intern alone does not determine entitlement.

15. Official legislation and useful resources

Readers should use primary legislation and official government publications when researching their employment rights.

• Department of Labour – Labour legislation, Acts and regulations.
• Department of Labour – Salary, Wages and Leave – Information on wages, holidays and leave.
• Termination of Employment Branch – Termination procedures and related information.
• EPF Division – EPF contributions and benefits.
• Employees' Trust Fund Board – ETF contributions and benefits.
• Ministry of Labour and Department of Labour – Legislative information and amendments.

Important notice

This guide is intended for general educational and informational purposes. It is not a substitute for legal advice or an official interpretation of Sri Lankan employment legislation.

Employment rights and obligations may vary depending on the applicable legislation, employment arrangement, industry, nature of work and individual circumstances.

Readers should consult the relevant legislation, the Department of Labour or a qualified legal professional before making decisions concerning employment disputes or legal obligations.

Last reviewed: November 2026. This article should be reviewed whenever relevant legislation, regulations or official guidance changes.