Hire Employees in Pakistan

Your own entity is normally a private limited company registered with the SECP. It commits you to Pakistani corporate tax, monthly withholding to the Federal Board of Revenue and registration with EOBI and the relevant provincial social security institution.

An Employer of Record inverts the sequence: the Pakistani entity issues the appointment letter under the applicable provincial ordinance, registers the employee with EOBI and the correct provincial ESSI, withholds income tax and provisions gratuity — while you direct the day-to-day work.

Labour law is provincial, not federal. The 18th Amendment devolved it, so Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan each legislate separately. Where the employee works determines which rules apply, and that is a threshold question rather than a detail.

Pakistan is unusual in that contributions are calculated on the minimum wage rather than on actual salary. EOBI is 5% of the applicable minimum wage from the employer and the provincial ESSI about 6%, so an engineer on PKR 400,000 a month and a clerk on PKR 40,000 generate broadly the same contribution. For professional hires the statutory cost is often under 3% of gross — among the lowest anywhere.

Labour law is provincial, not federal. The 18th Amendment devolved it, so Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan each set their own minimum wage, ESSI rate, leave entitlements and in places their own gratuity formula. Registering an employee with the wrong province's institution is a genuine compliance failure, not a technicality, and it is the error a foreign employer is most likely to make.

The real accruing liability is gratuity at 30 days' wages per completed year, payable after five continuous years. A provident fund may be operated instead, but it must deliver at least what gratuity would have.

Pakistan's IT services export sector is substantial and English-language, which is what draws foreign employers. The constraint is administrative rather than financial: four provincial regimes, three separate registrations, and a gratuity liability that needs provisioning from the first month rather than the fifth year.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a small Pakistani entity somewhere between 15 and 20 employees. Model both before committing — see EOR vs Entity for the full comparison, and plan any later migration so employees keep seniority.

Contributions are calculated on the minimum wage, not on actual salary, which makes Pakistan structurally unlike anything else in this guide. EOBI is 5% of the applicable provincial minimum wage and the provincial ESSI typically 6% — so an engineer on PKR 400,000 a month and a clerk on PKR 40,000 generate broadly the same contribution.

For a professional hire that is often under 3% of gross. The employee contributes 1% of the minimum wage to EOBI, again as a fixed amount rather than a percentage of pay.

The real accruing liability is gratuity at 30 days’ wages per completed year, payable after five continuous years. A provident fund may be operated instead, but the employer contribution must deliver at least what gratuity would have — a test employers who pick a convenient percentage frequently fail.

Pakistan calculates contributions on the minimum wage rather than actual salary, which changes the arithmetic entirely. EOBI is 5% employer and 1% employee, but both apply to the statutory minimum wage regardless of what the employee earns — so a developer on PKR 500,000 a month still attracts roughly PKR 2,000 of employer EOBI. Provincial social security at about 6% is employer-only and likewise capped. The effective employer rate therefore falls toward zero as salary rises: at PKR 300,000 a month, total mandatory contributions come to around 1.5% of salary. Quoting Pakistan as a percentage of pay will overstate it substantially for any professional role. Location matters twice: the minimum wage is PKR 40,000 in Punjab, Sindh and KPK but PKR 37,000 in Balochistan and Islamabad, and Islamabad has no provincial social security institution at all, so employers registered there pay EOBI alone.

Four representative profiles, costed with the 2026 contribution rates above. Salaries are illustrative market midpoints, not GX operating data — use them to see how the on-cost percentage behaves as pay rises, not as a salary benchmark for a specific role. For real market data on your roles, ask for a costing.

Watch the on-cost percentage rather than the absolute figure. 3 of the charges here are capped and 2 are not, so the effective employer rate falls as salary rises — but it flattens rather than disappearing. The senior rows below show where it settles.

Four representative profiles costed on 2026 statutory rates. Salaries are illustrative market midpoints, not GX operating data.

Payroll runs monthly in rupees. Income tax is withheld under the PAYE system and remitted to the FBR by the fifteenth, EOBI and provincial ESSI on their own cycles.

Income tax is progressive from 0% to 35%, with annual income up to PKR 600,000 exempt for salaried individuals. A surcharge applies above PKR 10 million of taxable income, reduced from 10% to 9% in the FY2026-27 budget presented on 12 June 2026.

Medical and conveyance allowances carry partial or full income tax exemption within limits, so package structure has a real effect on the employee’s net without changing employer cost. Structuring the package deliberately is worth more here than a headline salary increase.

Thresholds and ceilings are uprated periodically, so a figure correct in January may not hold later in the year. Where a row below is flagged, published sources disagreed and the conflict is recorded rather than resolved.

Thresholds move on a local cycle that does not always fall in January, so a figure correct at the start of the year may not hold through it. Where a row below carries a flag, published sources disagreed and the conflict is recorded rather than resolved — there are 2 such rows on this page.

There is no single national labour code. Following the 18th Amendment each province legislates separately, so the Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan regimes differ on minimum wage, leave, notice and in places the gratuity formula. Federal law still governs EOBI and income tax, which is why an employer deals with both a federal and a provincial layer for every hire.

A written appointment letter is standard and expected, governed by the applicable provincial Shops and Establishments Ordinance or Standing Orders. English is widely used and enforceable.

Probation is customary at three months, extendable by agreement, and is set by provincial standing orders rather than a single national rule. Statutory registrations apply from day one regardless of probationary status.

Because the provinces legislate separately, leave entitlements, notice periods and in places the gratuity formula itself differ between them. A national employment template applied across a distributed team will be wrong somewhere.

Eight hours a day and 48 a week, reduced during Ramadan in most provinces. Overtime is paid at double the ordinary rate, and weekly rest of one full day is mandatory.

Overtime is where payroll disputes usually start. Record hours from day one even where the role is salaried and the expectation is that overtime will not arise — reconstructing records after a complaint is far harder than keeping them.

Overtime is where payroll disputes usually begin, and the burden of proving hours worked generally sits with the employer. Record hours from the first day even for salaried roles where overtime is not expected — reconstructing a record after a complaint is considerably harder than keeping one.

Public holidays sit on top of the annual leave entitlement. Where a holiday falls at a weekend, practice varies — some markets move it, some grant a substitute day and some do neither, so check the position before assuming a day in lieu.

The 15 dates below are the statutory position. Employers in many markets grant more by policy or collective agreement, and sector agreements sometimes add local or patronal days that do not appear in a national list.

Pakistan observes 15 paid public holidays in 2026. Dates that fall at a weekend and any substitution rules are set out below; entitlement is separate from annual leave.

Maternity: Varies by province; commonly 16 weeks for the first child — Full pay, employer-funded. Sindh and Punjab legislated separately in recent years. Paternity: Up to 30 days under recent provincial legislation — Paid; availability and duration differ by province. Sick leave: 16 days a year — At half pay under most provincial ordinances, with more under company policy. Casual leave: 10 days a year — Full pay.

Note on variation: Entitlements are provincial — Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan each legislate separately.

The question that matters for budgeting is who funds each entitlement. Where the state or a social insurance fund pays, the employer carries administration but not cost; where the employer pays, it is a direct charge that headcount models routinely omit. Both patterns appear above.

Gratuity is 30 days' wages for each completed year of service, payable to employees with more than five continuous years, with any period over six months rounding up to a full year. The formula varies between provinces, so the applicable provincial ordinance governs rather than a single national rule.

Notice is generally one month for permanent employees, or payment in lieu. Termination without cause exposes the employer to challenge before the provincial labour courts, which take a protective view of employees and are willing to order reinstatement.

Where a provident fund is operated in place of gratuity, the employer contribution must match what gratuity would have delivered. Employers who set the fund contribution at a convenient percentage without testing it against the gratuity entitlement create a shortfall that surfaces at exit.

The final settlement should also cover accrued leave and any outstanding provincial entitlements, which differ by jurisdiction.

A foreign national needs a work visa, and employment of a foreigner requires approval from the Board of Investment. A business visa is not a substitute, and relying on one for what is in substance employment risks refusal and penalties.

Allow two to three months. The BOI approval precedes the visa application and is assessed against sector and role criteria, so it is the step that determines the timeline.

Special Technology Zones operate streamlined approvals, which is material for technology operations given that Pakistan’s IT services export sector is the principal draw for foreign employers.

Registering an employee with the wrong province’s institution is a genuine compliance failure, not an administrative slip, and it is the error a foreign employer is most likely to make. Each province operates its own ESSI with its own rate and minimum wage.

Calculating contributions on actual salary rather than the minimum wage is the second recurring error, and it runs the other way — substantial over-payment across the workforce.

Practical controls: confirm the province of employment before the first payroll, calculate EOBI and ESSI on the applicable minimum wage, open the gratuity provision from month one rather than year five, and test any provident fund against the gratuity value it must at least match.

Work backwards from the start date. For a Pakistani national through an EOR, one to two weeks is realistic. A foreign national needs Board of Investment approval before the work visa, adding two to three months.

Confirm before making an offer: which province the employee will work in, since it sets the ESSI institution, the minimum wage and therefore the contribution amount; whether gratuity or a provident fund will apply, and that the fund matches the gratuity value if the latter; and that payroll calculates on the minimum wage rather than actual salary.

EOBI registration and provincial ESSI registration are separate and both precede the first payroll. Open the gratuity provision from month one — the five-year vesting point makes it easy to defer, and the liability accrues from the start regardless.