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, the standard workweek spans from Monday to Friday, with working hours typically from 9am to 6pm. While Friday is the official weekend day, certain industries may operate on Saturdays.
Employment laws mandate that the maximum weekly working hours should not exceed 48, with a daily limit of nine hours. Sundays are generally non-working days. During Ramadan, employees are expected to work six hours a day and 36 hours a week, excluding break times.
Employees working beyond regular hours or during weekends are entitled to overtime pay, calculated as their hourly wage plus an additional 50% of their monthly wage.
Here’s a summary of the working hour regulations:
- Workdays: Monday to Friday, with Saturday and Sunday as the official weekend days.
- Weekly Working Hours: Maximum of nine hours per day, with a one-hour break.
- Maximum Stay at Workplace: 12 hours per day.
- Ramadan Working Hours: Six hours per day.
- Total Maximum Working Hours: 12 hours per day, including overtime.
Public holidays include Kashmir Solidarity Day, Pakistan Day, Labour Day, Independence Day, Quaid-e-Azam’s Birthday, Eid-ul-Fitr, Eid al-Adha, Ashura, and the Prophet’s Birthday.
Minimum Wages
Effective July 1, 2023, there has been an update to the minimum wages in Islamabad Capital Territory, Pakistan. The national minimum wage for unskilled work has been increased from PKR 25,000 to PKR 32,000 per month.
13th Month Salary
In Pakistan, there is no statutory obligation for employers to provide a 13th-month salary. However, companies with over 20 employees and profits are mandated to offer a bonus to employees with a tenure of at least 90 days.
Payroll Cycle
In Pakistan, employees receive payment at least once per month, with possible frequencies including daily, weekly, bi-monthly, or monthly.
Company Formation in Pakistan
At Mercans, we understand that the process of company formation in Pakistan can seem daunting, but with our expert guidance, you can navigate each step with confidence. Here’s how we can assist you:
- Determine Company Status: The first crucial decision you’ll need to make is regarding the status of your company. Depending on your business goals and future plans, you can choose between a single-member company (SMC), a private company, or a public company. We’ll help you assess your options and determine the most suitable structure for your venture.
- Name Reservation: Once you’ve decided on the company status, the next step is to select a name for your business. We’ll assist you in checking the availability of your preferred name and guide you through the process of filing an application for name reservation. Our team will ensure that all necessary considerations are taken into account before finalizing the name.
- Application for Incorporation: After securing the name reservation, the next phase involves preparing and submitting the required documents for company incorporation. You can choose between online or physical submission, and we’ll provide support every step of the way. Our experts will assist you in completing the necessary paperwork and ensuring compliance with regulatory requirements.
- Submission of Documents: Whether you opt for online filing or physical submission, we’ll facilitate the process by preparing and submitting the required documents on your behalf. From identity documents of promoters to Memorandum of Association and Articles of Association, we’ll ensure that all necessary paperwork is in order. Our goal is to streamline the submission process and expedite approval from the relevant authorities.
With Mercans by your side, registering a company in Pakistan becomes a seamless and hassle-free experience. Our team of experts is committed to providing comprehensive support at every stage of the process, ensuring compliance with legal requirements and facilitating your journey towards business success.
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 the Pakistani local laws.
| Taxable Income (EUR) | Tax Rate (%) | Deductible Amount (EUR) |
|---|---|---|
| Over | Not over | |
| 0 | 7,703 | 13.25 |
| 7,703 | 11,623 | 18.0 |
| 11,623 | 16,472 | 23.0 |
| 16,472 | 21,321 | 26.0 |
| 21,321 | 27,146 | 32.75 |
| 27,146 | 39,791 | 37.0 |
| 39,791 | 51,997 | 43.5 |
| 51,997 | 81,199 | 45.0 |
| 81,199 | 48.0 |
Payroll Taxes in Pakistan
Social Security in Pakistan
The employer’s expenses are typically calculated within the range of 16.7-22.7%, plus additional fees based on the employee’s salary. Breakdown of contributions includes:
Sindh Employees’ Social Security Institution (SESSI) – 6.00%, applicable only for salaries below PKR 30,000.
Gratuity Fund Contribution – 8.33%
Life insurance – PKR 608
EOBI (Employee-Old-Age-Benefit) – PKR 1,250
Festival Bonus/13th Salary – 8.33%
It’s important to note that certain contributions may have limitations, leading to variations in percentages.
Personal Income Taxes in Pakistan
For individuals whose income from salary exceeds 75% of taxable income:
| Statutory Body | Report/Declaration | Filing Frequency | Due Dates | Purpose |
|---|---|---|---|---|
| Federal Board of Revenue (FBR) | Income Tax (Tax Challan) | Varies | Within 7 days of salary disbursement | Report withheld income tax from salaries. |
| Federal Board of Revenue (FBR) | Income Tax (Withholding Tax Statement - Quarterly) | Quarterly | 20th of the following month | Report taxable income and tax withheld for each pay period. |
| Federal Board of Revenue (FBR) | Income Tax (Withholding Tax Statement - Annual) | Annually | July 31 for the fiscal year ending June 30 | Report taxable income and tax withheld for each pay period. |
| Employee's Old Age Benefit Institution | EOBI Registration | As needed | Before generating payment vouchers | Report new joiners and leavers. |
| Employee's Old Age Benefit Institution | EOBI Challan and Payment Voucher | Monthly | 15th of the following month | Report employee and employer contributions for EOBI. |
| Province Social Security Institution | Province Monthly Contribution File | Monthly | 15th of the following month | Report social security contributions. |
For individuals and associations of persons (AOPs) in other cases:
| Taxable Income (PKR*) | Tax on Column 1 (PKR) | Tax on Excess (%) |
|---|---|---|
| Over | Not Over | |
| 0 | 600,000 | 0 |
| 600,000 | 1,200,000 | 2.5 |
| 1,200,000 | 2,400,000 | 15,000 |
| 2,400,000 | 3,600,000 | 165,000 |
| 3,600,000 | 6,000,000 | 435,000 |
| 6,000,000 | - | 1,095,000 |
Regarding withholding requirements:
Generally, the entire tax is deducted at the source upon payment of salary to individuals at the specified rates for salaried individuals. Varying withholding tax (WHT) rates are prescribed for different goods, services, and contracts provided and executed by individuals and AOPs, based on the vendor’s status as an active taxpayer or not.
Employee Benefits in Pakistan
In Pakistan, specific laws have been established to safeguard employees’ rights, acknowledging the pivotal role of employee satisfaction in competitive market positioning. Employee benefits serve as motivational tools and contribute to enhancing work performance. These benefits fall into two broad categories:
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.
- Mandatory for companies with ten or more employees, including railways, road transport services, and mining companies.
- Provincial Employees Social Security Ordinance, 1965:
- Covers full-time employees, daily wagers, and contract-based employees.
- Applies to industrial and commercial businesses with five or more workers.
- Excludes individuals in specific state services and those with wages exceeding defined thresholds.
- The Standing Orders Ordinance, 1968:
- Applicable to all industries and commercial businesses.
- Mandates for establishments with fifty or more employees.
- Social Security Law:
- Provides compensation for loss of earning capacity.
- Replacement earnings offered based on the degree of incapacitation.
- Employee Social Security (Benefit) Regulations, 1967:
- Ensures financial support for individuals facing earning capacity loss.
- Pakistan Compensation Laws:
- Mandates a minimum wage for unskilled employees.
- Requires profit bonuses for businesses with 20 or more workers.
Types of Employee Benefits in Pakistan:
- Injuries and Disabilities:
- Compensation for workplace injuries.
- Enhanced compensation in case of severe disabilities or death.
- Sickness:
- Sickness benefits for employees with qualifying contributions.
- Maternity:
- Maternity benefits for eligible female employees.
- Death:
- Benefits for survivors of deceased insured workers.
- Medical:
- Medical benefits coverage for employees and their dependents.
- Benefits to Survivors:
- Pension benefits for dependents of deceased workers.
Guaranteed Benefits:
- Holidays and paid vacations.
- National and religious holidays.
- Casual and medical leave entitlements.
Calculating Employee Benefits:
- Various criteria determine benefit calculations as per Pakistan’s labor laws, including annual vacations, sick leaves, old age benefits, and social security benefits.
Leave Benefits in Pakistan
Below is a summary table detailing the statutory leave entitlements in Pakistan:
| Taxable Income (PKR) | Tax on Column 1 (PKR) | Tax on Excess (%) |
|---|---|---|
| Over | Not Over | |
| 0 | 600,000 | 0 |
| 600,000 | 800,000 | 7.5 |
| 800,000 | 1,200,000 | 15,000 |
| 1,200,000 | 2,400,000 | 75,000 |
| 2,400,000 | 3,000,000 | 315,000 |
| 3,000,000 | 4,000,000 | 465,000 |
| 4,000,000 | - | 765,000 |
Benefits of Payroll Outsourcing in Pakistan
- Achieving Compliance with Complex Regulations: Outsourcing payroll services in Pakistan ensures meticulous adherence to intricate labor laws and regulations. Our expert professionals adeptly navigate these complexities, minimizing the risk of errors or penalties due to non-compliance, providing peace of mind for businesses.
- Enhancing Scalability and Flexibility: Payroll outsourcing offers unparalleled scalability and flexibility to meet the evolving needs of businesses in Pakistan. Whether expanding the workforce or adapting to changes in employment regulations, outsourcing providers seamlessly adjust their services to meet these demands.
- Access to Advanced Technologies and Expertise: Leveraging cutting-edge software solutions, outsourcing providers streamline processes, enhance data security, and improve efficiency in payroll management in Pakistan. Additionally, professionals possess extensive knowledge of tax regulations, deductions, and reporting requirements, ensuring accurate and timely processing.
- Cost Savings and Competitive Pricing: Outsourcing payroll leads to significant cost savings by eliminating the need to hire and train in-house staff. Furthermore, providers often offer competitive pricing models tailored to the specific needs of businesses, optimizing cost-effectiveness while maintaining quality service.
- Supporting Business Growth:
Overall, outsourcing payroll services in Pakistan enables businesses to focus on core objectives while benefiting from accurate, compliant, and cost-effective management. With specialized expertise, advanced technologies, and scalability, providers play a crucial role in supporting the growth and success of businesses.
- Emphasizing High Safety Standards:
Incorporating industry-leading security measures to safeguard sensitive data, along with ISO 27001 and ISAE3402 certifications, ensures stringent adherence to information security protocols.
- Ensuring Adequate and Sustainable Performance:
Our commitment extends to ensuring consistent and sustainable performance that meets the dynamic demands of payroll services in Pakistan.
- Flexibility and Scalability Tailored to You:
We offer flexibility and scalability to accommodate evolving client needs and adapt to changing business environments in Pakistan.
- Utilizing Collaborative Cloud Tools:
Our collaborative Cloud-based platform promotes efficiency and accessibility across teams, facilitating seamless collaboration and communication. These certifications signify our commitment to the highest standards of information security and operational integrity.
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. Our SaaS model optimizes operations for maximum efficiency.
- Managed Services: Customized for mid-sized and large enterprises handling multi-country payroll, delivering on-demand HR expertise for security, reliability, and compliance.
- HRMS (Human Resource Management System): Ideal for expanding mid to large businesses, offering a comprehensive suite of functionalities, including payroll and benefits, with personalized features for effective solutions.
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 labor laws, and wide array of services make us the perfect partner for business success. Rely on Mercans to ensure seamless operations, regulatory compliance, and prosperous growth in the region.