Can Sri Lanka Become the Next Global Outsourcing Hub?

Global outsourcing is shifting beyond traditional hubs such as India and the Philippines, as businesses seek new, cost-efficient markets with strong talent. Sri Lanka is increasingly on the radar, backed by a highly educated workforce, competitive salaries, and a strategic time zone.

Why Sri Lanka Is on the Radar

Sri Lanka’s outsourcing sector has been growing rapidly, supported by a multilingual, degree-qualified workforce in IT, business, and finance. With a strong English proficiency, the country offers a deep pool of service-oriented professionals for global employers.​

Labour costs remain significantly below those in Western markets while remaining competitive with other Asian hubs, offering organisations attractive value for roles such as software developers and IT managers. Sri Lanka’s GMT+5:30 time zone also enables overlapping support for Asia-Pacific, Europe, and parts of North America, supporting “follow-the-sun” service models.​

Labour and Compliance Challenges

Sri Lanka’s labour framework is protective and rules-based, which benefits workers but can be complex for foreign employers to interpret and apply consistently. Employment contracts must comply with statutory minimums on working hours, paid leave, cessation of employment, and benefits, and any less favourable terms are treated as invalid.​

Employers must also manage detailed rules on working time, overtime, and record-keeping, including weekly hour limits, prescribed overtime rates, and mandatory rest periods. On-time payment of wages and statutory contributions such as EPF and ETF is critical, as non-compliance can lead to penalties and reputational risk.​

Cessation of employment requires particular care, since Sri Lanka does not follow an employment-at-will model and certain dismissals may need justification or regulatory approval. In unionised environments or where collective agreements apply, employers must align statutory standards with negotiated terms, adding another layer of compliance to manage.​

The Choice Between Employer of Record or Global Payroll Outsourcing

Source: thicha2707 on Freepik

For organisations exploring Sri Lanka, Employer of Record (EOR) and global payroll outsourcing (GPO) provide two complementary ways to manage hiring and payroll compliance.

Employer of Record (EOR)

• Acts as the legal employer in Sri Lanka, handling contracts, benefits, payroll taxes, and labour-law compliance while you direct day-to-day work.
• Best when you do not have a local entity or want to test the market with minimal setup and lower compliance risk.

Global Payroll Outsourcing (GPO)

• Manages payroll calculations, statutory deductions, filings, and salary disbursements across one or more countries.
• Ideal when you already have a local entity and want to streamline payroll operations and ensure consistent compliance.

Think of EOR as focused on hiring and employment compliance, where you lack an entity, and GPO as focused on accurate, compliant payroll, where you already operate. Many organisations combine both: using EOR to hire in Sri Lanka and GPO to centralise payroll for all employees, including those engaged through EOR.

Partnering with BIPO in Sri Lanka

A partner like BIPO helps HR teams maintain visibility over onboarding, contracts, payroll, and statutory obligations while reducing administrative load. BIPO’s HR Management System, global payroll outsourcing, and EOR capabilities support compliant hiring and timely payments in Sri Lanka and across the region.​

Stay ahead of the curve with BIPO. Connect with our in-country experts to explore how our solutions can support your expansion and workforce strategy in Sri Lanka.