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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 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.

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Doing Business in Pakistan

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

Working Week

The standard working week is from Monday to Friday from 8 am - 6 pm

Labor Law

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.

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Main Industries

Fertilizer, cement, edible oil, steel, sugar, chemicals, tobacco, machinery, and food processing among others

GDP Growth


Dates & Numbers


Official State Name

Islamic Republic of Pakistan


220.9 million



Major Languages



Pakistani Rupee ₨

Internet Domain


International Dialing Code


Islamabad, PK
6:30 pm, June 14, 2024
temperature icon 40°C
clear sky
Humidity 25 %
Wind Gust: 9 mph


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


14 days

Annual Leave

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

Sick Leave

3 months of paid maternity leave and 1 month of paid paternity leave

Maternity & Paternity Leave

Notice period is 1 month

Employee Termination

13th month salary payments are not legally required

13th month salary

17,500 PKR per month

Minimum Wage

Double the rate of the individual’s ordinary pay


30 days’ wages for each year of completed service

Severance Pay


Tax and Social Security

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


Sales Tax



Social Security

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


Employment Law

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.

Employment Agreement

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.

Working condition

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.

Employment termination

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.


1 month

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.


Residency permits

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

Two years

Required Documents

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

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!

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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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