Service Rules under the Labour Act 2006: Why an Employer Wants Them, What They May Say, the 90-Day Approval by DIFE, and a Model Structure

In this guide: What service rules can do, and the floor they cannot go below · The Rule 4 procedure and the 90-day clock · What DIFE strikes out · A model structure · Staff outside the Act: contracts and handbooks · Keeping the rules alive

The short answer

Decide first whether you need them. If your staff are all outside the worker definition (a small professional office of managers and professionals), the Act’s Chapter II does not reach them and your employment contracts and an HR policy manual govern; no approval is needed. If you employ workers, Chapter II governs them whatever your handbook says, and the handbook binds only to the extent it is at least as favourable; to make your own code enforceable, submit it under s.3. Draft it as an expansion of the Act: take each Chapter II subject (classification, probation, appointment, leave, hours, wages, discipline, grievance, separation, retirement), restate the statutory minimum, then add what the Act leaves open (code of conduct, harassment, confidentiality, IT and data, travel, performance, transfer, benefits). File it with the Inspector General with a covering letter, the participation committee’s or union’s comments where one exists, the trade and DIFE licences and a board resolution; DIFE acknowledges in ten days, queries or approves within ninety, and the rules take effect thirty days after the approval stamp. Then display them, give every worker a copy in Bangla, and keep the approved set with the appointment letters, which should refer to them. Our employer’s guide to the Act has the statutory floor every clause is measured against.

What service rules can do, and the floor they cannot go below

Section 3(1) says an establishment may have its own service rules on the conditions of employment of its workers, provided they are not less favourable than the provisions of Chapter II; s.3(2) to (5) make approval the condition of validity. The Labour Court applies three consequences. First, where the rules are silent, Chapter II fills the gap; where the rules are more generous, the rules apply; where the rules are less generous, that clause falls and the Act applies, even if the worker signed the rules. Second, “less favourable” is tested clause by clause and worker by worker, not on the balance of the whole document: a longer annual leave does not buy a shorter termination notice. Third, approval does not cure illegality; DIFE’s stamp is strong evidence that the rules meet the floor, not a bar to a worker arguing a clause does not. The practical list of what the rules may add: a code of conduct and the discipline it attracts within the s.23 categories; a harassment policy and the complaint committee s.332 now requires; confidentiality, intellectual property and conflict-of-interest terms; IT, data and social-media use; travel, expenses and allowances; performance appraisal and increment policy; transfer between the employer’s establishments with notice and relocation terms; training bonds limited to recovering actual cost; benefits above the floor (leave, bonus, medical, provident fund, gratuity beyond s.2(10)); a grievance ladder below the s.33 statutory route. What they may not do: extend probation beyond six months for clerical or three for other workers (s.4); make permanent workers “contractual” to avoid s.26; shorten the employer’s notice or lengthen the worker’s beyond s.27; reduce any leave or holiday; add grounds of dismissal outside s.23(4); authorise deductions outside s.125; forfeit earned wages, leave or gratuity; or oust the Labour Court.

The Rule 4 procedure and the 90-day clock

Two points about the clock. There is no deemed approval in s.3: if the 90 days pass in silence the rules are not in force, and the remedy is a reminder, then the appeal route, not implementation. And the 90 days run from a complete submission; a file returned for missing documents restarts them. In practice DIFE’s divisional office reads the draft against a checklist of Chapter II, sends a query letter listing the clauses that fall below the floor or that it does not understand, and approves once they are corrected; a clean draft that tracks the Act’s own order comes back faster than a translated foreign HR manual. Government-owned or managed establishments are exempt from approval (s.1(4) read with s.3); EPZ enterprises submit to BEPZA under the EPZ Labour Act 2019 instead.

What DIFE strikes out

The query letters we see repeat the same objections. Fixed-term contracts for permanent work: a clause making all workers “contractual employees” renewable yearly, which the Act treats as permanent after probation regardless; DIFE requires the s.4 classes. Probation longer than the Act, or “extendable at the company’s discretion” without the s.4 limit of a further three months for skilled workers. Termination at will or “either party may terminate on one month’s notice”, which cuts the employer’s 120 days under s.26 and removes the compensation; the rules must restate s.26 and s.27 or improve on them. Misconduct lists that add “any act prejudicial to the company” or “loss of confidence” as grounds for dismissal; dismissal lies only for the s.23(4) grounds after the s.24 procedure, and the rules may define conduct within those grounds, not beyond them. Forfeiture: loss of gratuity or leave encashment on dismissal or on failing to serve notice; the Act allows the employer to recover notice pay from a resigning worker, not to forfeit earned benefits. Transfer anywhere in the country or to any group company at the employer’s discretion; DIFE wants notice, the same terms and a relocation allowance, and transfer to another legal entity needs the worker’s consent. Bonds beyond actual training cost recovery. Deductions for uniforms, tools, shortages or damage outside ss.125 to 129. Arbitration or “final decision of the Managing Director” clauses that purport to oust the Labour Court. And silence on maternity, on the harassment committee, on the grievance procedure and on the Act’s leave, which DIFE reads as an attempt to avoid them. A draft that restates the floor explicitly in each chapter draws few queries.

A model structure

The Bangla text is the operative one; DIFE approves the Bangla and an English translation is for the employer’s convenience. Every chapter should begin with the statutory entitlement and then state the employer’s addition, so that the inspector, the worker and the Labour Court can see at a glance that the floor is met.

Staff outside the Act: contracts and handbooks

Managers, administrators and supervisors are outside the worker definition and therefore outside Chapter II; their terms are a matter of contract, the Contract Act 1872 and the general law, and service rules approved under s.3 do not bind them unless the rules say they apply to all staff and the contract adopts them. Most employers run one document for everyone: the approved service rules for workers, and the same rules adopted by reference in the employment contracts of non-workers, with a separate schedule for executive terms (notice, bonus, non-compete within the limits the courts enforce, which in Bangladesh is narrowly). Two cautions. The classification must be real: calling a clerk an “officer” to take her outside the Act fails on the function test, and the 2025 Ordinance’s attempt to bring officers inside the Act, reversed by the 2026 Act, shows the direction of pressure. And the handbook for non-workers is still a contract: unilateral changes need consent or a variation clause, and dismissal without the agreed notice is a breach claim in the civil court rather than a s.33 complaint, with damages measured by the notice period. Our appointment letter guide has the clause set for both groups.

Keeping the rules alive

Approved rules go stale. The 2013, 2018, 2025 and 2026 amendments each moved a figure that older rules state wrongly (sick leave from half to full pay, festival holidays from 11 to 13, maternity from 112 to 120 days, the resignation benefit tiers, the harassment committee), and a rule that states a lower figure than the Act is simply displaced, which means the employer is applying a document that is wrong in places without knowing which. Review the rules after every amendment of the Act or Rules and after any change in the business (a new establishment, a new class of staff, a provident fund set up), file the amendment under the same s.3 route, and re-issue the Bangla copy to workers. Keep the approval letter, the stamped copy and the acknowledgement of each worker’s receipt in the file the DIFE inspector and the Labour Court will ask for. For establishments inside an EPZ, the EPZ Labour Act 2019 and BEPZA’s instructions govern instead; for a group with units inside and outside a zone, two sets of rules are needed.