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Employer of Record and Payroll Services in Pakistan Pakistan flag

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Global Payroll Team
Written by Global Payroll Team
Last updated May 1, 2026
Expert Reviewed
Pakistan map

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Mercans offers complete payroll, PEO and HR services in Pakistan

Pakistan is strategically located to support Asia’s trade, energy and transport sectors. It connects South Asia with Central Asia, the Gulf region and wider international markets. Special Economic Zones and broader investment reforms continue to support foreign direct investment, industrial growth and business development.

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Doing Business in Pakistan

Pakistan has introduced a range of reforms over recent years to improve the business environment, including measures affecting business registration, tax administration, investment facilitation and digital government services. Companies entering Pakistan should still assess federal and provincial compliance requirements carefully, particularly for labour, tax and immigration matters.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Pakistan is relatively straightforward. Businesses can operate through a range of entity types depending on their ownership structure, commercial objectives and sector.

Banking

Banking hours vary by institution, although banks generally operate from Monday to Friday during standard business hours, with digital banking widely used for payroll and commercial transactions.

Working Week

The standard working week is commonly Monday to Friday, although actual hours depend on the applicable law, establishment type and internal policy.

Labor Law

Under Pakistan’s constitutional framework, labour is primarily regulated at federal and provincial level. Employment relationships are governed by a combination of standing orders, factories and shops laws, social security rules and tax regulations, depending on the employer’s location and business activity.

Main Industries

Textiles, fertilizer, cement, edible oil, steel, sugar, chemicals, tobacco, machinery and food processing

GDP Growth

3.0%

Dates & Numbers

dd/mm/yyyy

Official State Name

Islamic Republic of Pakistan

Population

241.5 million

Capital

Islamabad

Major Languages

Urdu, English

Currency

Pakistani Rupee ₨

Internet Domain

.pk

International Dialing Code

+92

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Pakistan
Islamabad, PK
7:22 pm, May 4, 2026
24°C
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51 %
Wind Gust: 21 mph
Clouds: 94%
Sunrise: 5:16 am
Sunset: 6:52 pm

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Payroll

Payroll in Pakistan requires employers to manage salary payments, tax withholding, statutory leave, overtime, gratuity or social security obligations where applicable, and province-specific labour compliance. Employers should also account for current minimum wage notifications issued at provincial level, as these differ from older thresholds and may change through new notifications.

It is acceptable to provide employees with online payslips

Payslip

14 days

Annual Leave

16 days of sick or medical leave with 50% of pay

Sick Leave

Federal law now provides up to 180 days of maternity leave and 30 days of paternity leave for eligible employees

Maternity & Paternity Leave

Notice period is 1 month for permanent workers

Employee Termination

13th month salary payments are not legally required

13th month salary

40,000 PKR per month is the current notified minimum wage in major provinces for unskilled workers

Minimum Wage

Double the rate of the individual’s ordinary pay

Overtime

30 days’ wages for each year of completed service

Severance Pay

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Tax and Social Security

Tax is regulated by the Federal Board of Revenue. Income is broadly divided into the heads of salary, property, business, capital gains and other sources. In addition to tax withholding, employers in Pakistan may also need to account for EOBI and provincial social security obligations depending on the workforce and business coverage.

Tax

An individual’s salary earned from employment in Pakistan is generally taxable in Pakistan. Employers should withhold salary tax under the current FBR withholding regime and stay aligned with the latest Finance Act updates for the relevant tax year.

29%

Corporate Income Tax

35%

Personal Income Tax

18%

Sales Tax

18%

VAT

Social Security

Pakistan does not use a single nationwide social security contribution model. Employers may be subject to EOBI and provincial employees’ social security schemes, depending on eligibility and local law.

6%

Social Security Rate

5%

Social Security Rate for Employers

1%

Social Security Rate for Employees

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Employment Law

Recruitment is subject to local labour and immigration rules. Employment contracts can be classified as permanent, probationary, temporary, apprentices and contract workers. Pakistan’s labour framework includes federal and provincial laws that regulate wages, leave, working time, dismissal and social protection.

Employment Agreement

Within an industrial or commercial establishment, a formal appointment letter is generally required at the time of employment. Employment contracts should state the names of both parties, employment start date, job title, place of work, wages, terms relating to working days, and notice provisions.

Working condition

Working conditions depend on the applicable law and type of establishment. During Ramadan, reduced working hours are commonly observed across manufacturing, commercial and service organisations.

Leaves

Various categories of leave are available, including annual leave, sick leave, maternity leave and festival holidays. Statutory entitlements can vary by province, sector and the law governing the employer.

Employment termination

A permanent worker generally cannot be terminated other than for misconduct unless one month’s notice or wages in lieu thereof is provided. Terminations should also be documented in writing and handled in accordance with the applicable labour law.

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1 month

Minimum notice period for terminating an employee

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Varies annually

Total number of public holidays

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48

Working hours per week

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–

Total number of days for Compassionate & Bereavement Leave

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Immigration

Pakistan operates an online visa system and work visas are available to eligible applicants through the Pakistan Online Visa System. Employers hiring expatriates should ensure that the visa category, sponsorship documents and extension process are handled correctly.

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Residency permits

Work visas are available as first-time entry visas and extensions. Under the current online system, work visas can be granted for up to two years with multiple entries, subject to the supporting documentation and approval process.

Work Permit validity

Up to two years

Required Documents

The employee’s passport

A photograph of the employee

The employer company’s SECP registration letter

A letter of recommendation by the BOI or Ministry of Interior where required for 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 profile

The employment agreement

The employer’s FBR NTN certificate

Compliant, reliable, error-free and touchless payroll in Pakistan

Build the best team and hire top talent compliantly in Pakistan. Get in touch with Pakistan payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Pakistan and how does it work for foreign companies?

    An Employer of Record in Pakistan, provided by Mercans, serves as the legal employer for your workforce in the country. Mercans manages employment contracts, payroll processing, taxation, social security, and compliance with local labor laws, allowing foreign companies to hire employees in Pakistan without establishing a legal entity.

    Why should businesses use an EOR instead of setting up a legal entity in Pakistan?

    Partnering with Mercans as your EOR in Pakistan eliminates the need to establish a local company, saving time, cost, and administrative complexity. This solution ensures immediate compliance with Pakistani employment and tax regulations and enables businesses to expand efficiently while Mercans handles all HR and payroll responsibilities.

    How does payroll outsourcing in Pakistan ensure compliance with labor and tax regulations?

    Mercans ensures full compliance with Pakistan’s labor and tax requirements through precise payroll processing, tax withholdings, social contributions, and statutory filings. Payroll operations are managed according to the latest local regulations, minimizing risks of non-compliance and guaranteeing accuracy and transparency.

    Can an Employer of Record in Pakistan hire employees and manage work permits for international companies?

    Yes. Mercans can hire employees on behalf of international companies and manage all procedures related to visas, work permits, and residence authorizations for foreign nationals. This allows companies to hire both local and expatriate professionals in Pakistan with complete legal and regulatory compliance.

    What are the main benefits of using EOR and payroll services in Pakistan for global expansion?

    Key benefits include rapid access to Pakistan’s skilled workforce without forming a local entity, full compliance with employment and tax laws, reduced legal exposure, and access to Mercans’ local HR and payroll expertise. Businesses gain flexibility and scalability while focusing on strategic growth and expansion.

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