Sri Lanka labour law changes 2026: minimum wage, EPF and overtime

Last verified against the primary sources on 15 October 2026.

The National Minimum Wage of Workers (Amendment) Act No. 11 of 2025 raised the national minimum monthly wage to Rs 30,000 and the daily wage to Rs 1,200 from 1 January 2026 [1]. For employers, the downstream effects of this single change extend well beyond updating one payroll line: EPF contributions, ETF contributions, overtime, gratuity provisions and maternity benefit all move with the wage base.

This guide covers what changed, what it means for each statutory obligation, and what employers need to do to reach and maintain compliance.

The minimum wage revision: core figures

Under the National Minimum Wage of Workers (Amendment) Act No. 11 of 2025 [1]:

• From 1 April to 31 December 2025: Rs 27,000 a month or Rs 1,080 a day
• From 1 January 2026: Rs 30,000 a month or Rs 1,200 a day

The January 2026 step is a further 11 percent rise within nine months. Employers who updated payroll in April 2025 had to update again.

Coverage: the minimum wage is a floor for private sector workers. Where a Wages Board decision or the individual contract specifies a higher wage, the higher figure applies.

The budgetary relief allowance was folded in from 31 March 2025, not in 2026. The budgetary relief allowances payable on 31 March 2025 were absorbed into the minimum wage, and the separate allowance was discontinued from that date by the Budgetary Relief Allowance of Workers (Amendment) Acts No. 9 and No. 10 of 2025 [2]. An employer may not reduce a worker's total pay to absorb the increase [1]. Employers who still show a separate BRA line on payslips should restructure: the consolidated figure is the wage.

EPF recalculation

EPF contributions are calculated on "earnings" as defined by the Employees' Provident Fund Act [3]. The statutory rates are unchanged:

• Employee: 8 percent of total earnings
• Employer: 12 percent of total earnings

What changes is the base.

Practical scenario: an employee on Rs 27,000 a month had monthly EPF of:

• Employee contribution: Rs 2,160
• Employer contribution: Rs 3,240
• Total EPF: Rs 5,400

From 1 January 2026, the same employee at the new minimum of Rs 30,000:

• Employee contribution: Rs 2,400
• Employer contribution: Rs 3,600
• Total EPF: Rs 6,000

Where an employer used to pay a lower basic plus a separate Rs 3,500 BRA and left the BRA out of the EPF base, the consolidation means EPF is now due on the full consolidated wage, so the EPF cost rises by more than the wage increase. Audit the payroll structure to see whether this applies to you.

Remittance deadline: EPF contributions are due by the last day of the following month [3]; the EPF Department asks for payment by the last working day [4]. Overtime and incentive or bonus payments are outside the EPF base [4].

ETF recalculation, and electronic payment from July 2026

ETF is an employer-only contribution of 3 percent of total earnings, due by the same date as EPF [5].

For an employee at the Rs 30,000 minimum wage, the employer's ETF contribution is Rs 900 a month (up from Rs 810 at Rs 27,000). Employers with large workforces at or near the minimum wage will see a material increase.

The second 2026 change: employers with 15 or more employees must pay ETF and submit returns electronically from the July 2026 contributions (due by 31 August 2026). Cheques, money orders, cash and manual returns are no longer accepted from them [6].

Overtime pay: recalculation under the revised wage base

The Shop and Office Employees Act and the Factories Ordinance govern overtime in different employment settings. Both base overtime on the employee's ordinary rate, so as the minimum wage rises, the minimum overtime payment rises with it.

Under the Shop and Office Employees Act (office and shop staff):

• Normal hours: 8 a day and 45 a week [7]
• Overtime on normal working days: 1.5 times the ordinary hourly rate
• Work on a Full Moon Poya day: not less than 1.5 times the normal daily rate [7]

Calculating the hourly rate: a common payroll approach for salaried staff divides the monthly salary by 240. Some Wages Board decisions and contracts set their own divisor; use that where it exists.

For an employee on Rs 30,000 a month using that approach:

• Hourly rate: Rs 30,000 ÷ 240 = Rs 125
• Overtime rate: Rs 125 × 1.5 = Rs 187.50 an hour

Factories and Wages Board trades: follow the Factories Ordinance and the Wages Board decision for the trade, which set their own hours and overtime triggers.

Maternity benefits: how the wage base affects entitlement

Maternity pay is calculated on the employee's wages, so the higher wage base increases the cost of maternity leave. There are two regimes:

• Maternity Benefits Ordinance (women workers outside shops and offices, excluding casual work): 12 weeks if she has fewer than two children, 6 weeks if she has two or more or for a still birth, with Sundays and holidays counted within the period [8], paid at six-sevenths of the daily wage [9].
• Shop and Office Employees Act: 84 working days where she has no child or one child, and 42 working days where she has two or more or for a still birth, on full remuneration [7].

Where the employee receives paid leave, EPF and ETF continue on the earnings paid.

The relevant point for 2026: an employee at or near the minimum wage who takes maternity leave after 1 January 2026 is entitled to benefit calculated on the Rs 30,000 base. If payroll was not updated in January, this creates an underpayment that must be put right. Our maternity leave guide has the detail.

Gratuity: impact of the wage revision on long-service calculations

Under the Payment of Gratuity Act No. 12 of 1983, an employer who employed 15 or more workmen on any day in the 12 months before a termination must pay gratuity to a workman with at least five completed years of service, within 30 days of termination, whatever the reason for leaving [10]. The amount is:

• half a month's last wage or salary for each completed year, for monthly-rated staff
• 14 days' wage for each completed year, for others

As wages rise, the gratuity entitlement for long-serving employees rises. An employer who has not updated the wage base may be holding an understated gratuity liability, which matters for provisioning in the financial statements and for cash flow.

The Shop and Office Employees Act: what remains unchanged

These provisions are unchanged in 2026 but are often misapplied as workforces grow [11]:

Hours: 8 a day and 45 a week [7].

Annual leave: 14 days in the second and subsequent years. In the first year the entitlement depends on the quarter of joining: 14 days (January to March), 10 days (April to June), 7 days (July to September) and 4 days (October to December).

Casual leave: up to 7 days a year, for private business, ill health or other reasonable cause. The Act has no separate sick leave entitlement.

Rest days: one whole day and one half-holiday a week.

Wage records and payroll documentation

Keep payroll records complete, accurate and accessible: Labour Department inspectors, the EPF Department and the IRD can all ask for them. Following the January 2026 revision, an underpaid worker can complain to the Department of Labour, and the shortfall since 1 January 2026 is the employer's exposure.

What employers need to do right now

If you have not already taken these steps, they need immediate attention:

1. Update payroll to the Rs 30,000 minimum wage. No private sector worker should receive less than Rs 30,000 a month, or Rs 1,200 a day for daily-rated workers, from 1 January 2026 [1].

2. Recalculate EPF and ETF on the revised base. Check whether any former BRA amount left out of the EPF base now forms part of the consolidated wage.

3. Move ETF to electronic payment if you have 15 or more employees [6].

4. Review and update employment contracts. Where contracts state the minimum wage as an amount, update it. Where the wage structure named a BRA component, amend the description.

5. Recalculate downstream amounts: overtime rates, maternity benefit, gratuity provisions and holiday pay all flow from the revised base.

6. Communicate the changes to employees. The Rs 30,000 minimum wage has been widely publicised, and an employer who has not updated payroll is likely to face complaints before any inspection.

7. Retain documentation of the transition. Keep the payroll records showing the old and new wage structures, the effective date and the recalculated EPF and ETF amounts.

Looking ahead

Wages Board reviews: individual Wages Boards may issue new decisions that set wages above the national minimum for their trades. Employers in covered trades should watch for them.

Talk to us. If you want your payroll structure checked against the 2026 minimum wage and your EPF and ETF recalculated, our payroll team can review it with you; book a consultation at our contact page.

This guide is general information on the law as at 15 October 2026 and is not advice on your specific situation.

Related: Labour law guide in Sri Lanka for employers.

References

1. Parliament of Sri Lanka. National Minimum Wage of Workers (Amendment) Act No. 11 of 2025, minimum monthly and daily wage, no reduction of total pay. https://www.documents.gov.lk/view/acts/2025/7/11-2025_E.pdf . Primary. Accessed 15 October 2026.

1. Department of Labour. Budgetary Relief Allowance and National Minimum Wage amendments, 2025, summary of Acts No. 9, 10 and 11 of 2025. https://labourdept.gov.lk/wp-content/uploads/2025/07/Budgetary-Relief-Min-Wages-Ammend.pdf . Primary. Accessed 15 October 2026.

1. Central Bank of Sri Lanka. Employees' Provident Fund Act No. 15 of 1958 (reprint), ss.10 and 47. https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/acts/en/epf_act.pdf . Primary. Accessed 15 October 2026.

1. Employees' Provident Fund Department. Frequently asked questions for employers, questions 3 to 5. https://epf.lk/?p=811 . Primary. Accessed 15 October 2026.

1. Employees' Trust Fund Board. Employees' Trust Fund Act No. 46 of 1980, s.16. https://etfb.lk/wp-content/uploads/2021/03/ETF-Act.pdf . Primary. Accessed 15 October 2026.

1. Employees' Trust Fund Board. Notice: mandatory electronic payment of ETF contributions, citing Gazette Extraordinary 2311/39 of 22 December 2022. https://etfb.lk/wp-content/uploads/2026/04/NOTICE-Mandatory-Electronic-Payment-English.pdf . Primary. Accessed 15 October 2026.

1. Department of Labour, Labour Code. Shop and Office Employees (Regulation of Employment and Remuneration) Act No. 19 of 1954, ss.3, 18B and 18C and the Poya day rule. https://labourdept.gov.lk/downloads/labour_code/20.pdf . Primary. Accessed 15 October 2026.

1. Department of Labour, Labour Code. Maternity Benefits Ordinance, ss.3(1), 5(8) and 21. https://labourdept.gov.lk/downloads/labour_code/36.pdf . Primary. Accessed 15 October 2026.

1. Department of Labour, Labour Code. Maternity Benefits Regulations, reg 1. https://labourdept.gov.lk/downloads/labour_code/37.pdf . Primary. Accessed 15 October 2026.

1. Parliament of Sri Lanka. Payment of Gratuity Act No. 12 of 1983, ss.5(1) and 6(2). https://www.parliament.lk/uploads/acts/gbills/english/3120.pdf . Primary. Accessed 15 October 2026.

1. Department of Labour. Salary, Wages & Leave, Shop and Office Employees leave entitlements. https://labourdept.gov.lk/salary-wages-leave/ . Primary. Accessed 15 October 2026.