Based on our extensive experience in conducting internal audits on behalf of Japanese companies in Bangladesh, this series provides basic knowledge that may be useful for those in charge of conducting internal audits in Bangladesh (internal auditors and auditors, management posted to Bangladesh, global management at headquarters, and external auditors who need to conduct site visits as part of a group audit).The fourth issue of this series will introduce basic knowledge that may be useful for those audit firms that need to conduct site visits to Bangladesh sites as part of group audits.
In the fourth part of this series, we will discuss lump-sum severance pay and pension plans.
Lump-sum severance payment plans
Gratuity funds, which are seen in other countries as a retirement benefit system, are not a legal obligation in Bangladesh, but are generally introduced by companies on a voluntary basis.In such cases, it is managed based on internal rules and labor contracts (e.g., a lump-sum payment (usually 15 days to 1 month of basic salary x years of service) is given to employees who have worked for the company for 5 years or more upon retirement).Gratuity that meets certain conditions is tax-exempt (up to 1,000,000 Taka).If the plan is established as a corporation and reflected in employment contracts, etc., it must be treated as an allowance in the financial statements.
Retirement Savings Plan
Provident Funds (company savings funds), which are found in other countries, are not a legal obligation, but are generally introduced by companies on a voluntary basis.Registration is mandatory, and each company is required to set up its own trust fund.For both employees and employers, a minimum of 10% of salary is common, invested by the Trust (investments are limited to government bonds and other safe assets), and fully refunded upon retirement or termination of employment.An approved PF (Recognized Provident Fund) provides income tax deductions on contributions and tax-free (with requirements) refunds upon retirement.If the plan is established as a corporation and reflected in employment contracts, etc., it must be treated as an allowance in the financial statements.