Payroll in Sri Lanka involves more than paying an employee’s basic salary. Employers must correctly calculate gross earnings, EPF, ETF and APIT, meet payment deadlines and maintain reliable payroll records.
Minimum Wage in Sri Lanka
From 1 January 2026, the national minimum wage is:
| Wage type | Minimum amount |
|---|---|
| Monthly wage | Rs. 30,000 |
| Daily wage | Rs. 1,200 |
Employers must also check whether a higher wage applies under a Wages Board decision, collective agreement or employment contract.
EPF and ETF Contributions
The standard contribution rates are:
| Contribution | Rate | Paid by |
|---|---|---|
| Employee EPF | 8% | Deducted from the employee |
| Employer EPF | 12% | Employer |
| Employer ETF | 3% | Employer |
EPF and ETF should be calculated separately using the earnings included under their respective rules. Employers should not automatically calculate both contributions on the employee’s entire gross salary.
EPF earnings generally include salary, wages, allowances, holiday pay, food allowances, commissions and qualifying piece-rate or contract payments. Overtime, reimbursable travel expenses, incentives and bonuses are excluded from the EPF contribution calculation.
ETF is paid entirely by the employer at 3% of the employee’s earnings as defined under the ETF legislation.
EPF and ETF Deadlines
Monthly EPF and ETF contributions must generally be paid by the last working day of the following month.
For example, contributions relating to January payroll must be paid by the last working day of February.
The late-payment surcharge brackets are:
| Delay | Surcharge |
|---|---|
| Up to 10 days | 5% |
| More than 10 days, up to one month | 15% |
| More than one month, up to three months | 20% |
| More than three months, up to six months | 30% |
| More than six months, up to twelve months | 40% |
| More than twelve months | 50% |
These are fixed surcharge brackets, not monthly compounding charges.
APIT on Employment Income
Employers must deduct Advance Personal Income Tax from employees who are liable and remit it to the Inland Revenue Department by the 15th of the following month.
Under the latest published IRD APIT tables:
- personal relief is Rs. 1,800,000 annually;
- the equivalent monthly relief is Rs. 150,000; and
- the applicable rates are 6%, 18%, 24%, 30% and 36%.
These tables apply to resident employees and non-resident employees who are Sri Lankan citizens, subject to the relevant primary-employment declaration. Separate tables apply to non-resident, non-citizen employees, secondary employment, lump-sum payments and other special situations.
Is Employee EPF Deductible Before APIT?
No. The employee’s 8% EPF contribution should not be deducted before applying the APIT table.
The Rs. 150,000 monthly personal relief is already incorporated into the table, and the IRD requires employers to calculate APIT without first deducting EPF or another amount from employment profits.
Gross and Net Pay
Employers should calculate each component separately:
Total earnings
Basic salary + allowances + overtime + holiday pay + bonuses and other applicable payments
Employee net pay
Total cash earnings − employee EPF − APIT − other authorised deductions
The contribution base used for EPF or ETF may differ from total cash earnings.
Overtime calculations depend on the applicable employment legislation, Wages Board decision, collective agreement or employment contract. A single divisor should not be presented as applying to every employee.
Annual and Casual Leave
For employees covered by the Shop and Office Employees Act, first-year annual leave depends on the commencement date:
| Employment commenced | First-year annual leave |
|---|---|
| January to March | 14 days |
| April to June | 10 days |
| July to September | 7 days |
| October to December | 4 days |
From the second year onwards, qualifying employees receive 14 days of annual leave, including at least seven consecutive days.
Casual leave is limited to seven days annually. During the first year, it is calculated at one day for every completed two months of service.
Ready to Save with Finzdox Accounting in Sri Lanka?
Payroll errors can lead to incorrect employee payments, tax issues and substantial EPF or ETF surcharges.
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Current as of July 2026. Based on guidance from the Inland Revenue Department, Department of Labour, Employees’ Provident Fund and Employees’ Trust Fund Board. Requirements may differ depending on the employee category, industry, and applicable Wages Board. General information only and not tax or legal advice.