Payroll in Pakistan

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Mercans is your premier partner for top-tier payroll services in Pakistan, offering both Managed and SaaS solutions. Our steadfast commitment to delivering exceptional payroll solutions in Pakistan, combined with extensive industry experience, ensures accurate and compliant payroll services. Trust Mercans as your dedicated payroll provider in Pakistan, offering timely and precise transactions, including multi-currency payments tailored to the local market. With a team of in-country specialists well-versed in local laws, we provide comprehensive support for a seamless payroll experience aligned with your business needs.

Everything you need to know before running payroll in Pakistan

Working Hours and Overtime

In Pakistan, working hours are governed by the relevant labour law for the establishment and may vary by sector and province. Under the Factories Act, the general weekly limit is 48 hours for adult workers, and provincial labour legislation may set additional rules for shops and commercial establishments. Overtime and rest-day rules are also governed by the applicable law.

Minimum Wages

Minimum wages in Pakistan are set through the latest applicable federal or provincial notification, and employers should apply the current rate for the province or territory where the employee works.

13th Month Salary

There is no general statutory obligation to provide a 13th-month salary in Pakistan. Bonuses may be provided by contract or company policy.

Payroll Cycle

In Pakistan, employees are generally paid on a monthly basis, although payroll may be processed more frequently by agreement or policy.

Company Formation in Pakistan

Company registration in Pakistan is handled by the Securities and Exchange Commission of Pakistan (SECP). The incorporation process begins with name reservation and then proceeds through SECP’s online incorporation workflow or the relevant physical filing route.

Choose the appropriate company structure.
Reserve the company name through SECP.
Prepare incorporation documents and constitutional documents.
Submit the incorporation application and supporting records.
Complete post-incorporation registrations as required.

Payroll Compliance in Pakistan

Statutory Filings and Contributions

In Pakistan, employers are obligated to submit the following statutory filings. Mercans assists you in completing the necessary filings as per Pakistani local laws.

Taxable Income (PKR)	Tax Rate
Up to 600,000	0%
600,001 – 1,200,000	1% of amount exceeding 600,000
1,200,001 – 2,200,000	6,000 + 11% of amount exceeding 1,200,000
2,200,001 – 3,200,000	116,000 + 23% of amount exceeding 2,200,000
3,200,001 – 4,100,000	346,000 + 30% of amount exceeding 3,200,000
Above 4,100,000	616,000 + 35% of amount exceeding 4,100,000

Payroll Taxes in Pakistan

Social Security in Pakistan

Social security in Pakistan is administered through provincial schemes, and contribution rules differ by province. For example, the Punjab Employees Social Security Institution states that employers contribute 6% of employee wages.

Personal Income Taxes in Pakistan

Pakistan’s Federal Board of Revenue (FBR) publishes the current withholding tax rate card for Tax Year 2026, updated up to 30 June 2025. Salaried income is taxed under the current FBR rate card and employers must use the latest applicable rates for payroll withholding.

Statutory Body	Report / Declaration	Filing Frequency	Due Dates	Purpose
Federal Board of Revenue (FBR)	Income Tax (Withholding – Salary Payment / Challan)**	Monthly	Within 7 days of salary payment	Deposit withheld income tax (PAYE)
Federal Board of Revenue (FBR)	Withholding Tax Statement (Biannual)**	Biannual	31 July (Jan–Jun) / 31 January (Jul–Dec)	Report salary and tax deducted
Federal Board of Revenue (FBR)	Annual Income Tax Return (Employer / Individual)**	Annual	30 September (may extend)	Declare annual income and taxes
Employees Old-Age Benefits Institution (EOBI)	EOBI Contribution Payment	Monthly	By 15th of following month	Pension/social security contributions
Employees Old-Age Benefits Institution (EOBI)	EOBI Return (Form PR-02)**	Quarterly	Within 15 days after quarter end	Employee contribution reporting
Provincial Social Security Institution (PESSI / SESSI / etc.)	Social Security Contribution	Monthly	By 15th of following month	Employee social security (medical, injury, etc.)
Federal Mortgage / Housing (if applicable)	(Usually not mandatory payroll filing)	—	—	Not standard payroll compliance

Regarding withholding requirements:

Employers are generally required to withhold tax from salary payments and remit it in line with FBR rules and applicable filing deadlines. Other withholding rates for goods, services, and contracts are also published by FBR and should be checked against the current rate card.

Employee Benefits in Pakistan

Employee benefits in Pakistan depend on the applicable federal or provincial labour law, the nature of the establishment, and the employment contract. Common statutory and policy-driven benefits may include social security coverage, worker compensation, gratuity, provident fund, medical benefits, and leave entitlements.

Statutory benefits:

Social Security
Worker’s Compensation
Gratuity
Provident Fund
Life Insurance

Discretionary benefits:

Health Insurance
Employee Training and Development
Flexible Working Hours

Employee Benefits Laws in Pakistan:

Workmen’s Compensation Act, 1923:
- Applicable to commercial businesses and industries.
- Covers compensation for work-related injury or death.
Provincial Employees Social Security Ordinance, 1965:
- Applies according to the relevant provincial scheme and employer registration rules.
- Coverage and contribution thresholds vary by province.
The Standing Orders Ordinance, 1968:
- Sets out employment terms, disciplinary processes, and service conditions for covered establishments.

Types of Employee Benefits in Pakistan:

Injuries and Disabilities:
- Compensation for workplace injuries.
Sickness:
- Sickness benefits where covered by the relevant scheme.
Maternity:
- Maternity leave and benefits where applicable.
Medical:
- Medical benefits coverage for employees and dependents where applicable.

Leave Benefits in Pakistan

Leave entitlements such as annual leave, casual leave, sick leave, and maternity or paternity leave depend on the applicable law for the province, the type of establishment, and the employment contract.

Leave Type	Eligibility	Compensation	Duration
Annual Leave	After 12 months of service	Paid	14 days per year
Casual Leave	As per company policy	Paid	10 days per year
Sick Leave	Medical reason	Paid / partially paid	8–10 days per year
Maternity Leave	Female employees	Paid	12 weeks (84 days)
Paternity Leave	Male employees (public sector mainly)	Paid	10 days
Public Holidays	All employees	Paid	As per government notification
Unpaid Leave	Employer approval	Unpaid	As agreed

Benefits of Payroll Outsourcing in Pakistan

Achieving Compliance with Complex Regulations: Outsourcing payroll services in Pakistan ensures meticulous adherence to intricate labour laws and regulations.
Enhancing Scalability and Flexibility: Payroll outsourcing offers the flexibility to support business growth and changing workforce needs.
Access to Advanced Technologies and Expertise: Leveraging payroll technology helps improve accuracy, reporting, and data security.
Cost Savings and Competitive Pricing: Outsourcing can reduce administrative overhead and internal processing costs.
Supporting Business Growth: Accurate payroll processing supports employee trust and business continuity.
Emphasizing High Safety Standards: Incorporating industry-leading security measures helps safeguard sensitive data.
Ensuring Adequate and Sustainable Performance: Consistent and sustainable performance helps meet the dynamic demands of payroll services.
Flexibility and Scalability Tailored to You: Services can be adapted to evolving client needs.
Utilizing Collaborative Cloud Tools: Cloud-based workflows can improve accessibility and collaboration.

Payroll Solutions in Pakistan

Streamline Payroll Processing in Pakistan with Mercans’ Global Solutions. Our adaptable models ensure local compliance, facilitate multi-currency transactions, and seamlessly integrate with HCM and ERP systems for accurate payments.

Explore Our Flexible Solutions:

SaaS (Software as a Service): Tailored for enterprise businesses managing payroll across multiple countries with diverse complexities.
Managed Services: Customized for mid-sized and large enterprises handling multi-country payroll, delivering on-demand HR expertise for security, reliability, and compliance.

Streamline Payroll with Mercans’ Technology and Integrations

Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowess here
Integrations: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integration here.
Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here.

Outsource to Payroll Company in Pakistan

In Pakistan’s dynamic business landscape, Mercans stands out as the top choice for tackling local intricacies. Our unwavering commitment to compliance, profound understanding of labour laws, and wide array of services make us the perfect partner for business success. Rely on Mercans to ensure seamless operations, regulatory compliance, and sustainable growth in the region.

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

How do you ensure compliance with Pakistan’s social security (EOBI, Social Security) and tax regulations?

Mercans ensures compliance with Pakistan’s social security and tax regulations by accurately calculating and remitting employer and employee contributions to the Employees Old-Age Benefits Institution (EOBI) and provincial social security institutions, while adhering to the Federal Board of Revenue (FBR) tax regulations within the prescribed timelines.

What strategies do you employ to manage Pakistan’s payroll tax structure, including income tax and provincial taxes?

We utilize automated payroll systems and in-country expertise to navigate Pakistan’s progressive income tax rates and provincial taxes, ensuring accurate withholding and timely filings in full compliance with local regulations.

How do you handle payroll for remote or international employees in Pakistan?

Mercans manages payroll for remote and international employees in Pakistan by ensuring compliance with local tax laws and social security contributions, while maintaining alignment with global payroll standards.

What challenges have you encountered when integrating payroll data from various departments and international offices, and how did you overcome them?

We address integration challenges by centralizing payroll data within a unified platform that streamlines reporting and ensures consistent payroll workflows across departments and international offices.

How do you manage currency conversions and fluctuations in global payroll processing in Pakistan?

Mercans utilizes real-time exchange rates and multi-currency payroll capabilities to manage currency conversions and mitigate the impact of fluctuations, ensuring accurate and timely payments to employees.

What payroll software or systems do you recommend for managing compliance in Pakistan?

We recommend using HR Blizz, Mercans’ global payroll platform, which is fully compliant with Pakistani tax laws and social insurance regulations, ensuring accurate and timely payroll processing.