Employer of Record in Pakistan | Hire, Pay & Manage Teams

Employee Benefits and Compensation in Pakistan

Employee benefits in Pakistan combine statutory requirements with optional perks that companies provide to attract talent. Reviewing the baseline helps when setting up allowances, bonuses, or insurance plans.

Mandatory Benefits

These mandates establish the baseline for eligible employees and organizations operating within the country.

• Statutory Working Hours: Standard time involves 8 hours per day or 48 hours per week, with employers organizing these shifts over five or six workdays.
• Maternity Leave: Female staff receive fully paid leave during the period surrounding childbirth, with time off divided between prenatal and postnatal stages. Depending on the birth order, this leave lasts 180 days for the first child, 120 days for the second, and 90 days for the third.
• Sick Leave: Sick leave provides paid or partially paid time off during health issues. Staff members are generally entitled to 8 to 16 days of sick leave annually, and companies often require medical certificates to verify the absence when it lasts more than two days.
• Overtime Pay: Work beyond daily or weekly limits triggers an enhanced pay rate. Employers calculate this at two times the regular hourly wage for extra time spent on operational duties.
• EOBI (Old‑Age Benefits): This federal program provides retirement pensions, disability compensation, and survivor support. Funding comes from monthly contributions: employers pay 5% of the minimum wage, while staff pay 1%, with coverage rules applied based on establishment size.
• Gratuity / Severance: Companies set aside one month of salary for every completed year of service. This accumulated amount becomes payable to the staff member upon retirement or termination, provided they meet tenure requirements.
• Leave Encashment: Employees who have earned annual paid leave have the right to receive cash for unused days, ensuring that staff receive payment for the time they were entitled to take off but instead dedicated to professional tasks.
• Workplace Injury Compensation: Employers provide financial support or medical coverage if an employee sustains injuries while performing professional duties, ensuring that those affected by workplace accidents receive equitable treatment.

Non Mandatory Benefits

These optional perks help companies stay competitive.

• Private Health Insurance: Private medical coverage provides access to hospital, dental, and medical services beyond basic state provisions. Companies often extend this coverage to family members to retain staff.
• Life Insurance: Group life insurance policies pay out a financial benefit to family members if an employee passes away or suffers permanent disability, providing financial support for their dependents.
• Performance Bonuses: Employers pay performance-based bonuses based on individual results or company revenue goals. These payments reward high-quality work and correlate personal income to company goals.
• Transport / Meal Allowances: Businesses provide monthly fuel payments, transport reimbursements, or cafeteria meals. These payments cover daily commuting expenses and food costs for staff.
• Provident Funds: Provident funds offer a savings plan where the company and the staff member both contribute a percentage of the base salary. The total amount, including employer-matched contributions, becomes available when the employee leaves the company.

Public and National Holidays in Pakistan

Pakistan categorizes holidays into public, bank, and optional groups, offering staff time away from work. Employers may limit this leave based on operational needs, while Islamic event timing relies on moon sightings confirmed by official government announcements.

Probation, Termination & Severance in Pakistan

Navigating employment in Pakistan means following the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 and provincial labor laws. Managing these processes helps firms avoid legal disputes and financial costs.

Probationary Periods

Probation is a trial time to assess performance before confirming permanent status. While not mandatory under federal law, it is a standard practice and must be defined in the employment contract.

• Duration: Industry practice typically ranges from 3 to 6 months.
• Status: Employees on probation have rights like minimum wage, safe working conditions, and mandated rest days.
• Ending Probation: If work is not meeting expectations, the contract can be ended during this time. Check the contract for notice requirements, which are often 7 to 15 days.

Termination of Employment

For permanent employees those who have completed their probation and served 1 year, termination must follow legal steps.

• Written Notice: You must provide one month’s written notice or pay one month’s salary in place of notice.
• Valid Reasons: Termination must be based on a documented reason. Verbal dismissals are not permitted for permanent staff.
• Misconduct: If terminating for misconduct (e.g., theft, fraud, or gross negligence), you must follow the formal disciplinary process. This includes issuing a show-cause notice, conducting an inquiry, and giving the employee a chance to explain.
• Final Settlements: All outstanding dues, including unpaid wages and leave, must be paid by the end of the second working day following the final day of employment.

Severance Pay

Severance is not a mandate, but employees are often owed end-of-service payments depending on the reason for leaving and length of service.

• Gratuity: If the firm does not have a registered provident fund, employees are owed gratuity. This is calculated as 30 days of wages for each completed year of service (or any period exceeding six months).
• Provident Fund: If a provident fund exists, the employee receives the balance of both their contributions and the employer’s contributions.
• Documentation: Always provide a formal service certificate detailing the length of service and position held. Ensure the employee signs a settlement receipt confirming all dues have been received to prevent future claims.

Income Taxes in Pakistan

Pakistan taxes residents on their worldwide income, whereas non-residents are taxed only on income earned within the country. Pakistan-source income includes salary for employment performed within Pakistan, regardless of the payment location, as well as any other income deemed to arise or be received within the country.

Social Security in Pakistan

Social security in Pakistan depends on provincial oversight, federal rules for pension programs, and labor acts. Company costs depend on monthly payments and statutory duties that differ by location, job type, and benefit plans.

Employer Obligations

Employers must handle several mandatory payments to remain compliant with federal and provincial labor laws. These obligations generally include:

• Provincial Social Security: Employers are typically responsible for a contribution of 6% of the monthly wage. This rate is subject to provincial wage ceilings and specific coverage rules that vary by region.
• Federal Pension Scheme (EOBI): Employers must contribute 5% of the relevant minimum wage.
• Gratuity or Provident Fund: Depending on the organization’s internal scheme or the applicable legal framework, employers may need to allocate funds for gratuity accruals or provident fund matching.
• Group Insurance: Permanent staff often require life or disability coverage, mandated either by specific policies, employment contracts, or standard industry practice.
• Payment Deadlines: Monthly remittances for these statutory costs generally fall due by the 15th of the following month.

Employee Contributions

While social security payments are generally an employer-borne cost, other statutory schemes involve shared funding.

• Pension Fund Contributions: The federal pension scheme typically requires a 1% employee contribution, which is deducted from the gross salary and paired with the employer’s 5% share.
• Employer-Funded Benefits: Provincial social security contributions are generally the sole responsibility of the employer, meaning they do not reduce the employee’s take-home pay.

Hiring Costs in Pakistan: A Complete Breakdown

Hiring costs in Pakistan include mandatory statutory contributions, provincial social security variations, and administrative compliance expenses that differ across federal and local regulations.

Summary of Annual Employer Costs

Reference calculation for a gross annual salary of PKR 1,000,000:

• Gross Annual Salary: PKR 1,000,000
• Mandatory EOBI: PKR 22,200 (fixed)
• Variable Statutory Costs: Includes social security, insurance, and gratuity (amount depends on contract and province).
• Total Annual Estimated Cost: PKR 1,022,200 + variable on-costs.

How EORs Help with Onboarding in Pakistan?

Understanding EOR onboarding ensures efficient hiring and regulatory alignment. This process supports collaboration and enables team scaling.

• Before First Day: EORs provide employment contracts covering probation periods and notice terms. They verify professional credentials and perform background checks. This establishes a legal structure and removes potential issues.
• First Day: EORs finalize documentation, including FBR tax registrations, EOBI, and provincial social security enrollments, while activating payroll systems and providing resources so new hires begin work without delays.
• First Week: EORs organize team introductions, stakeholder meetings, and probation definitions. They conduct sessions on leave policies and benefits. Direct support helps limit initial transition challenges.
• Beyond First Week: EORs manage monthly payroll, benefits enrollment, and statutory filings, including gratuity calculations. They provide HR support for inquiries, performance feedback, and dispute resolution.

How to Select the Right EOR Provider in Pakistan?

Selecting an employer of record requires focusing on regulatory reliability, operational accuracy, and transparent costs. Your partner must maintain legal integrity while facilitating your local growth.

• Verify Compliance and Registration: Confirm the provider is registered in Pakistan for FBR tax, EOBI, and provincial social security. Ensure their employment contracts and payslips align with current labor laws, including mandatory contributions and leave requirements.
• Evaluate Payroll Processes: Review how the provider calculates income tax, EOBI, social security, and gratuity. Confirm their ability to execute timely salary payments in PKR to local bank accounts with clear, itemized payslips.
• Assess Service Scope: Determine what is included in the service fee, such as onboarding, benefits administration, and management of government notices or audits. Clarify communication channels for employee inquiries regarding leave and compensation.
• Compare Pricing Structures: Understand the provider’s pricing—whether a fixed per-head fee, a percentage of payroll, or tiered volume pricing. Identify all additional costs, such as setup or termination fees, to calculate the total monthly expense per employee as your headcount grows.
• Review Local Expertise: Prioritize providers with proven experience in the Pakistani market. Request references or case studies relevant to your industry and team size. Evaluate their platform for document storage and reporting, ensuring dashboards provide clear visibility into headcount and costs.
• Confirm Data and Exit Protocols: Clarify your control over hiring, performance management, and day-to-day operations. Confirm clear procedures for transitioning staff to your own entity in the future, including notice periods and potential transfer fees. Ensure their data security standards for employee records meet your internal policies.

Expand Your Team Across Pakistan with HRBS Global

At HRBS Global, we assist businesses in scaling teams in Pakistan without establishing a legal entity. Acting as your Employer of Record, our professionals manage hiring, payment, and contract management, overseeing HR administration, payroll, benefits, and statutory obligations to keep operations fully compliant with FBR, EOBI, and provincial revenue authority regulations.

• Global Reach: With a presence spanning over 100 countries, we bridge the gap between international hiring requirements and local execution. Our team provides expertise, ensuring your organization navigates the complexities of hiring in Pakistan.
• Multi-Currency Payroll: We manage financial transactions by supporting multi-currency funding. This flexibility allows your finance team to manage budgets and reporting in your currency while ensuring staff receive accurate, timely payments.
• Employment Structures: Our team facilitates hiring for your organization. Whether onboarding local leadership, permanent staff, or remote professionals, we include service-level agreements for onboarding and offboarding.
• Regulatory Compliance: We handle mandatory federal and provincial requirements, including income tax withholding, EOBI, social security contributions, and gratuity calculations. We provide filings and documentation for internal audits.
• ISO Certification: We operate under globally recognized quality and information security standards, including ISO 27001, to ensure business excellence and international management best practices.
• Data Security: Our security protocols meet international standards, including GDPR, SOC 1, and SOC 2, to protect sensitive employee records and payroll information, maintaining audit trails for risk management.

Ready to scale your workforce in Pakistan? Reach out us to discuss your hiring goals and learn how we manage local compliance and talent operations.