Employer of Record in Pakistan

Hiring in Pakistan for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in Pakistan in the following three ways:

• Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in Pakistan.
• Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with Pakistan’s labor laws and tax regulations.
• Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Businesses can only operate smoothly in Pakistan if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Pakistan below, to avoid any compliance issues.

Employment Contract Requirements

Employers with more than 20 employees in Pakistan are mandated to provide a written employment contract outlining essential terms such as:

• Identification of both parties
• Commencement date (including employment duration for temporary contracts)
• Job location
• Job description, duties, and responsibilities
• Leave entitlement
• Notice periods

Onboarding Process

We can help you get a new employee started in Pakistan quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Pakistan

In Pakistan, the standard working hours are 45 hours per week, allowing employees to work up to 9 hours per day.

Overtime in Pakistan

In Pakistan, work exceeding standard weekly hours is considered overtime and regulated by employment contracts or collective agreements. Overtime is compensated at 200% of the salary for hours beyond 9 in a day, while overtime on public holidays is compensated at 300% of the regular pay.

Probation Period in Pakistan

In the private sector in Pakistan, probation periods typically last from 3 to 6 months, while in the public sector, they may extend up to 2 years. During this period, employers are not obligated to provide notice or reasons for terminating employment.

Fiscal Year in Pakistan

1 January- 31 December is the 12-month accounting period that businesses in Pakistan use for financial and tax reporting purposes.

Payroll Cycle in Pakistan

The payroll cycle in Pakistan is usually monthly, with employees being paid as stipulated in the employment contract.

Minimum Wage in Pakistan

The minimum wage for employees in Pakistan is typically 192.71 PKR per hour, amounting to ~37,000 PKR per month for a typical 45 hour work week.

Bonus Payments in Pakistan

Employers are not legally required to make 13th-month salary payments in Pakistan.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 13.33% plus 150 PKR per month on top of the employee salary in Pakistan.

Employee Payroll Tax Contributions

In Pakistan , the typical estimation for employee payroll contributions cost is around 1%.

Individual Income Tax Contributions

Individual income tax in Pakistan varies from 0% to 35%, calculated using progressive rates based on factors such as household status and the number of children.

Pension in Pakistan

Employers contribute 5%, employees contribute 1% towards old-age pensions. Eligibility starts at the government mandated retirement age of 60 for both men and woman.

Mandatory Leave Entitlement in Pakistan

The annual leave entitlement in Pakistan is 14 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Pakistan

Pakistan observes a total of 16 national holidays, along with 22 regional holidays, varying based on the employee's location. Some of the national public holidays include:

Paid Time Off in Pakistan

In Pakistan, employees receive 14 fully paid annual leave days after 12 months of continuous service, which must be taken consecutively. Up to 14 days of unused leave can be carried over to the next year.

Maternity Leave In Pakistan

In Pakistan, female employees receive 180 days of paid maternity leave for their first child, 120 days for the second child and 90 days for the third child. Job security is ensured during maternity leave, contingent on 180 days of contributions in the year before the expected birth.

Paternity Leave In Pakistan

Fathers are entitled to one month of leave after the birth of their first three children

Sick Leave In Pakistan

Employees in Pakistan receive 10 days of fully paid casual sick leave for sudden illnesses, in addition to their annual leave entitlement. Those requiring extra sick or medical leave, up to 16 days, receive 50% of their salary and must provide a medical certificate.

Parental Leave In Pakistan

Pakistan does not have a separate shared parental leave policy.

Termination Process in Pakistan

Termination procedures depend on the employment and collective agreements, as well as the contract type and reason for dismissal. Both parties must give written notice, and the cause for dismissal needs to be justified. Accepted terminations include:

• Voluntary resignation by the employee
• Termination by mutual agreement
• Poor work performance
• Expiration of the contract

Notice Period in Pakistan

In Pakistan, both employees and employers are required to give a one-month notice period to terminate an employment contract. Temporary workers are exempt from this requirement. If notice isn't provided, the employer must pay a monthly salary in lieu of notice.

Severance in Pakistan

Employees in Pakistan typically receive severance pay equivalent to 30 days' wages for each year of completed service, except in cases where termination was due to misconduct.