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Hiring in Pakistan

Hiring employees compliantly in Pakistan means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Pakistan so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Pakistan; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Need assistance hiring in Pakistan? Contact us about our International EOR Service

Labor Laws in Pakistan

Employee Probation Period

  • In accordance with the Standing Orders Ordinance, probation period is of 3 months’ duration only. (S.O. 1 of Standing Orders Ordinance, 1968)
  • In the public sector, the probationary period is generally between 1 and 2 years.
  • In private sector, this probationary period is usually three to six months.

Annual Leave in Pakistan

  • An employee is entitled to 14 calendar days paid annual leave, after completion of 12 months of continuous service. 
  • A worker is paid his daily wages while he is on annual leave.
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Holidays in Pakistan

Here is the full list of public holidays in Pakistan:

Kashmir Solidarity Day 5th February
Pakistan Day 23rd March
Labor Day 1st May
 Eid al-Fitr   
Eid al-Adha  
Independence Day of Pakistan 14th August
Ashura  
Prophet's Birthday 28th to 29th October
Quaid-e-Azam's Birthday 25th December

 

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Maternity Leave Pakistan

  • According to the Maternity and Paternity Leave Act, 2020
    • Mothers are entitled to 6 months of paid maternity leave on the birth of first baby
    • 4 months on the second birth and
    •  3 months on the third birth from the date of commencement thereof.

Paternity Leave Pakistan

  • Fathers are entitled to 3 one-month paid leave for the duration of the service during times of childbirth

 

Sick Leave in Pakistan

  • Every employee is entitled to 10 days’ casual leave with full pay and a further 16 days of sick or medical leave with 50% of pay. 
  • Casual leave is granted upon certain situations such as sudden illness. 
  • Sick leave requires a medical certificate.

Working Hours in Pakistan

  • According to the law, normal working hours per day are 8-9 hours and these should not be more than 48 hours per week. 
  • By including the lunch and prayer time in hours of work, working hours should not be greater than 9 hours a day.

Overtime in Pakistan

  • Extra pay for overtime has to be paid to the worker, who works for more than nine hours in any day or for more than 48 hours in any week.
  • Extra pay is given at twice the rate of an employee’s ordinary salary.

Termination of Employment in Pakistan

  • Termination of an employment contract may be either termination simpliciter, which is termination on grounds other than misconduct after a notice (S.O. 12) or termination on account of misconduct (S.O. 15).
  • Notice of termination, for termination simpliciter, is mandatory for permanent employees.
  • A notice of one month must be served before severing the employment relationship or payment of one month’s wages in lieu of notice may be provided (Section 12.1).
  • Termination can also be categorized in the following three categories.
    • The first type is “automatic termination” where an employment contract is terminated automatically in circumstances such as death of an employee or completion of the project/end of contract for which a worker was hired.
    • Second is termination of employment by the employee through resignation. An employee may resign from employment to avail some better work opportunity or when the work circumstances are not supportive and there is material breach of contract on the part of employer.
    • Third is the termination initiated by an employer, which may be based on fair or unfair grounds.
  • In accordance with the provisions of Standing Orders Ordinance, a worker whose employment has been terminated for any reason other than misconduct is entitled to a “severance pay or gratuity” which is equivalent to 30 days’ wages for every completed year of service or any part thereof in excess of 6 months (e.g., five years and 8 months is counted as 6 years).

Notice Period in Pakistan

The West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 states that upon terminating the employment of a permanent workman, the employee must be provided with one month's notice or the payment of one month's wages in lieu of notice.

Severance in Pakistan

  • In accordance with the provisions of Standing Orders Ordinance, a worker whose employment has been terminated for any reason other than misconduct is entitled to a “severance pay or gratuity” which is equivalent to 30 days’ wages for every completed year of service or any part thereof in excess of 6 months (e.g., five years and 8 months is counted as 6 years). 
  • An employer may substitute a provident fund (type of pension) for gratuity

Pakistan Salary and Wages

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13th / 14th Month Salary in Pakistan

  • No
  • There is no statutory requirement to pay the 13th or the 14th month salary.
  • However, employees are entitled to 14 days leave after working for 12 months.
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Income Tax in Pakistan

  • Residents are taxed on their Pakistan and foreign-source income. 
  • Determination of taxable income of an individual varies according to the tax residential status of the individual in Pakistan during the tax year (1 July through 30 June).
  • Total worldwide income of a resident is subject to tax in Pakistan except where particular income is not to be taxed in Pakistan under an Agreement for Avoidance of Double Taxation.
  • A non-resident individual is taxed only on Pakistan-source income, including income received or deemed to be received in Pakistan or deemed to accrue or arise in Pakistan.

The following tax rates apply where income of the individual from salary exceeds 75% of taxable income:

Taxable Income (PKR)

Rate (%)
Up to 600,000 0%
600,001 –1,200,000 2.5% of amount exceeding 600,000
1,200,001 –2,400,000 15,000 + 12.5% of amount exceeding 1,200,000
2,400,001 –3,600,000 165,000 + 20% of amount exceeding 2,400,000
3,600,001 –6,000,000 405,000 + 25% of amount exceeding 3,600,000
6,000,001 –12,000,000 1,005,000 + 32.5% of amount exceeding 6,000,000
Amount exceeding 12,000,000 2,955,000 + 35% of amount exceeding 12,000,000

The following tax rates are applicable in other cases (for individuals an association of persons):

Taxable income

Rate (%)
Up to 600,000 0%
600,000 to 800,000 5%
800,000 to 1,200,000 12.5%
1,200,000 to 2,400,000 17.5%
2,400,000 to 3,000,000 22.5%
3,000,000 to 4,000,000 27.5%
4,000,000 to 6,000,000 32.5%
Over 6,000,000 35%
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Social Security in Pakistan

  • Under EOB Scheme, Insured Persons are entitled to avail benefit like, Old-Age Pension (on the event of retirement), Invalidity Pension (In case of permanent disability), Old-Age Grant (an Insured Person attained superannuation age, but does not possess the minimum threshold for pension) Survivor's Pension (in case an Insured Person is expired)
  • EOBI does not receive any financial assistance from the Government for carrying out its Operations.
  • A contribution equal to 5% of minimum wages has to be paid by the Employers of all the Industrial and Commercial Organizations where EOB act is applicable.
  • Contribution equal to 1% of minimum wages by the employees of said Organizations.

Contribution

Employer 

Employee

EOB

5%

1%

Immigration Pakistan

  • To promote domestic and foreign investment, enhance Pakistan’s international competitiveness, and contribute to economic and social development, Pakistan has a liberal visa policy.
  • A work visa allows the foreign national to exercise employment in Pakistan in the entity for which the visa is granted.
  • Such employment can be exercised for the period for which the visa is valid. A renewal of the visa allows the foreign national to remain employed.
  • The work visa does not entitle the foreign national to work for another employer without submitting a new application and obtaining permission for employment with the other employer.
  • The visa of a foreign national found to be engaged in activities other than employment with the approved employer is canceled and the foreign national is deported.
  • No written policy allows a foreign national to begin work in Pakistan while his or her application for a work visa is in process.
  • However, as a result of the liberal policy followed by Pakistan, no serious exception is taken for beginning work before the issuance of a work visa if the foreign national has a valid business visa and if his or her application for a work visa is ultimately approved and business visa conversion instructions are issued by the MOI.
  • Business Visa is granted for the following activities
    • Attend business meetings
    • Negotiate and sign contracts 
    • Attend exhibitions, displays, conferences, symposiums, workshops and similar events 
    • Conduct training of short duration 
    • Deliver lectures, make presentations and engage in similar activities 
    • Provide technical services of short duration, including removal of faults during the warranty period of equipment supplied by foreign suppliers, installation of software, troubleshooting to correct faults in software, software training and transfer of technical know-how 
    • Visiting project sites to obtain information, technical specifications or material required for executing a contract for the supply of goods or providing of technical or consultancy services to an entity in Pakistan 
    • Setting up of a branch office or a local company for doing business in Pakistan 
    • Hiring of local personnel for utilizing their services in a Pakistan project or a Pakistan entity 
    • Inspection of the goods that the entity intends to purchase from Pakistan
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Type of Visa/Permit

Documentation

Validity

Eligibility
Work Visa
  • Properly completed application signed by the person authorized by the employer.
  • Employment contract signed by both parties or job letter stating the term, designation and salary.
  • Latest passport-size photographs of employee.
  • Photocopy of passport of employee, including pages with the picture and particulars of the passport holder. A copy of the visa page is also required if the person is already in Pakistan. The visa page is not required if the person is not in Pakistan.
  • Local and international address of the applicant.
  • Qualification.
  • Professional experience.
  • Certificate of incorporation or certificate of registration, if the entity is a local company or a subsidiary of a nonresident company in Pakistan, or a permission letter issued by the BOI to a foreign company for opening the branch office where the applicant will be employed.
  • National tax number of entity for which the employment will be exercised.
  • Power of attorney in favor of the person or firm authorized to represent the entity with respect to the handling of the visa applications.
  • Company’s profile.
  • Processing fee of USD100 (or equivalent in PKR) per applicant for a one-year work visa, or USD200 (or equivalent in PKR) for a two-year work visa, payable in the form of a money order or demand draft made out to Board of Investment, Government of Pakistan.
 1 year (can be extended)
  • Work Visa can be granted to foreign individuals with an employment contract
Business Visa
  • Two sets of the properly completed application signed by the applicant.
  • Two latest passport-size photographs.
  • Two sets of photocopies of the visitor’s passport, including pages with the picture and particulars of the passport holder, and the visa page.
  • Invitation letter from the employer.
  • Documents showing substantial investment, exports or imports during the preceding year.
  • Business documents, such as a letter from the Chamber of Commerce and Industry (CCI) or Registrar of Companies, partnership deed or articles of association, or, in special cases only, a copy of CCI membership documents.
 Permanent
  • Attend business meetings
  • Negotiate and sign contracts
  • Attend exhibitions, displays, conferences, symposiums, workshops and similar events
  • Conduct training of short duration
  • Deliver lectures, make presentations and engage in similar activities
  • Provide technical services of short duration
  • Visiting project sites to obtain information
  • Setting up of a branch office or a local company for doing business in Pakistan
  • Hiring of local personnel for utilizing their services in a Pakistan project or a Pakistan entity
  • Inspection of the goods that the entity intends to purchase from Pakistan
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Value Added Tax (VAT) in Pakistan

  • Pakistan introduced a mini budget in 2023 that increased GST from 17% to 18%
  • Export of goods is subject to sales tax at 0%.
  • Sales tax on services is levied by all four provinces, Islamabad Capital Territory, Gilgit-Baltistan, Azad Jammu, and Kashmir at rates ranging from 13% to 16%.
  • Commercial import of goods is subject to VAT at 3%, in addition to the sales tax payable at the standard rate at the import stage.
  • Further tax of 3% is applicable in case of supplies to in-active taxpayers subject to certain conditions.

VAT

Standard Rate

Group 1083

18%
Reduced Rate Group 1083 16%
Reduced Rate Group 1083 13%
Reduced Rate Group 1083 3%
Exempt Group 1083 0%
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Mandatory Benefits in Pakistan

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits
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Mandatory Benefits overview

  • Probationary period

  • Annual Leave

  • Public Holidays

  • Maternity Leave

  • Paternity Leave

  • Sick Leave

  • Overtime Pay

  • Notice Period

  • Severance Pay

  • Social Security Benefits

Payments And Invoicing

  • The tax year in Pakistan for all individuals is from 1 July to 30 June.
  • Individuals must obtain special permission from the Federal Board of Revenue in Pakistan to select a different accounting year-end.
  • All individuals must file their income tax returns by 30 September following the tax year-end.
  • Non-salaried individuals must also file their income tax returns by 30 September following the tax year-end.
  • Employers must withhold taxes from the salaries of their employees.
  • Individuals other than employees having taxable income of PKR1 million or more must pay advance tax in four equal installments on 15 September, 15 December, 15 March and 15 June.
  • Tax due after adjustment for both advance tax payments and tax paid at source must be paid with the tax return

Payroll Accrual in Pakistan

Country Accruals Additional Information

Social Security  5.00%
Sick leave 3.84%
Maternity leave 12 weeks
Vacations 7.95%
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Description

Employers pay a contribution equal to 5% of the minimum wage while employees pay 1% of minimum wage.

Payroll Accruals Additional Information

 

 

Employment Accruals
Annual Leave An employee is entitled to 14 calendar days paid annual leave, after completion of 12 months of continuous service. This equals 3.83% (14/365 days) of annual income
Maternity Leave Mothers are entitled to 180 days of paid maternity leave on the birth of first baby  This equals 49.3% (180/365 days) of annual income
Paternity Leave Fathers are entitled to paid paternity leave of 3 months This equals 25% (3/12 months) of annual income
Sick Leave Every employee is entitled to 10 days’ casual leave with full pay and a further 16 days of sick or medical leave with 50% of pay. This equals 2.7% (10/365 days) of annual income. Plus 50% of 4.4% (16/365 days)
Overtime Extra pay for overtime has to be paid to the worker, who works for more than nine hours in any day or for more than 48 hours in any week.
Extra pay is given at twice the rate of an employee’s ordinary salary.		 Depends on the number of overtime hours worked
Severance In accordance with the provisions of Standing Orders Ordinance, a worker whose employment has been terminated for any reason other than misconduct is entitled to a “severance pay or gratuity” which is equivalent to 30 days’ wages for every completed year of service or any part thereof in excess of 6 months (e.g., five years and 8 months is counted as 6 years). This equals 8.22% (30/365 days) of annual income
Social Security Employers msut make the following contributions: - Employees’ Old Age Benefits PKR 780 per month; Provincial Employees’ Social Security (Sindh) 6% of monthly salary of up to PKR16,200; Workers’ Children (Education) PKR 100 annually This equals PKR 17,080

Accrued Benefits in Pakistan

Christmas Bonus % 0%
Christmas Bonus Over Vacations % 0%
Severance per Year%

Employees are entitled to severance pay equal to one month's pay after completion of one year of employment (8.33% of annual salary)

 8.33% of annual salary
Vacations %

Employees are entitled to 14 days of annual leave (4.12% of annual salary)

 4.12%
Of annual
salary
Notice %

Employees are entitled to a 1 month of notice period for one year of service or more (8.33%)

 8.33%
Christmas Bonus Over Notifications % 0%
Vacations Plus % 0%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per anum are equal to 20.69%

20.69%

Why use Global Expansion to hire in Pakistan

Establishing a branch office or subsidiary in Pakistan can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Pakistan labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Pakistan law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Pakistan. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Pakistan Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

 

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