Mercans CountryIntel ® Pakistan Payroll And HR Insights
Pakistan is strategically located to support Asia’s trade, energy and transport sectors. It is the gateway to the energy-rich Central Asian states, the financially successful Gulf States and the economically advanced Eastern countries. The Law of Special Economic Zones was made to attract foreign direct investment, enhance productivity and reduce the cost of doing business for economic development.Download PDF
Since 2016, almost 300 reforms have been implemented to improve the investment climate. Pakistan has been recognized as the top reformer in South Asia and sixth reformer in the world. A number of things have been made much easier including registering property, obtaining construction permits, paying taxes, getting electricity and trading across borders.
Entity Registration and Incorporation Requirements
Setting up a new business or expanding an existing one in Pakistan is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.
Banking Hours: Monday- Friday from 9 am- 6 pm
The standard working week is from Monday to Friday from 8 am - 6 pm
Under the constitution, labor is the responsibility of both the Federal and Provincial governments. The Industrial and Commercial Employment (Standing Orders) Ordinance 1968 addresses the relationship between employer and employee as well as the contract of employment. The Ordinance applies to all industrial and commercial establishments that employ 20 or more workers.
Fertilizer, cement, edible oil, steel, sugar, chemicals, tobacco, machinery, and food processing among others
Dates & Numbers
Official State Name
Islamic Republic of Pakistan
Pakistani Rupee ₨
International Dialing Code
The Payment of Wages Act 1936 regulates the payment of wages to certain classes of industrial workers. It applies to workers whose monthly wages do not exceed Rs. 3,000 and are employed in factories, railways, plantations and workshops. Companies who manage multi-country payroll should take note, however, that the provisions of the Act can be extended to other classes of workers by the Provincial Governments with three months notice to the employers of their intent to do so.
It is acceptable to provide employees with online payslips
16 days of sick or medical leave with 50% of pay
3 months of paid maternity leave and 1 month of paid paternity leave
Maternity & Paternity Leave
Notice period is 1 month
13th month salary payments are not legally required
13th month salary
17,500 PKR per month
Double the rate of the individual’s ordinary pay
30 days’ wages for each year of completed service
Tax is regulated by the Federal Board of Revenue, Revenue Division. All income is broadly divided into five heads of income, that is, salary, income from property, income from business, capital gains and income from other sources. The Ehsaas program, an umbrella initiative of over 288 policies and programs, seeks to create a ‘welfare state’ and taps on a whole-of-government multi-sectoral collaboration to uplift marginalized people.
An individual’s gross salary is Pakistan-source income and taxable in Pakistan if earned from employment in Pakistan. Foreign-source income of returning expatriates (citizens of Pakistan who were not resident in Pakistan during the preceding four tax years) are exempt from tax in the tax year of return and the succeeding tax year.
Corporate Income Tax
Personal Income Tax
Ehsaas has 34 agencies of the federal government and all federating units tasked with implementation, addressing state capture, social protection, livelihoods and human capital development.
Social Security Rate
Social Security Rate for Employers
Social Security Rate for Employees
Recruitment is subject to regulations and requirements for work permits. The Labour Act prohibits discrimination that prejudices equal opportunity employment and equal access to jobs. Employment contracts can be classified as permanent, probationary, temporary, apprentices and contract workers.
Within an industrial or commercial establishment, a formal appointment letter is required to be issued at the time of employment of an individual. All employment contracts must state the names of both parties, employment start date, the job title, place of work, wages, terms relating to the days of work as well as the notice period for termination.
Under the Factories Act, conditions of work of industrial labor apply. Similarly, The Shops and Establishments Ordinance regulates workers employed in shops and commercial establishments. During Ramadan (the fasting month), special reduced working hours are observed across manufacturing, commercial and service organizations.
Various categories of leave are available for paid leave, maternity and other entitlements. In addition to leave entitlements, workers also enjoy festival holidays as declared by the Federal Government.
A permanent worker cannot be terminated for any reason other than misconduct unless one month’s notice or wages in lieu thereof is provided. Other categories of workers are not entitled to notice or pay in lieu of notice. Terminations of service in any form must also be documented in writing stating the reasons for the termination.
Minimum notice period for terminating an employee
Total number of public holidays
Working hours per week
Total number of days for Compassionate & Bereavement Leave
Pakistan operates an online visa system and different visas may be granted to eligible applicants. 18 visa categories have been reduced to 11 including Business Visa, Work Visa (for work, domestic aide or journalist), NGO/INGO, medical visa and more.
Typically, a security clearance is not required for an entry work visa. There are two types of visas: first time (new) and extension. An entry work visa is valid for up to three months. Once granted, the applicant can also seek an extension for up to two years with multiple entries.
Work Permit validity
The employee’s passport
A photograph of the employee
The employer company’s SECP (Securities & Exchange Commission of Pakistan) registration letter
A letter of recommendation by the BOI (Board of Investment) / MOI (Ministry of Interior) for an extension
The applicant’s contact details
A letter of undertaking by the employer on company letterhead
The employee’s cover letter
A cover letter by the employer on the company letterhead
The employer’s company’s profile
The employment agreement
The employer’s FBR (Federal Board of Revenue) NTN (National Tax Number) certificate
Build the best team and hire top talent compliantly in Pakistan. Get in touch with Pakistan payroll outsourcing & PEO specialists for a free consultation!