Employer of Record (EOR) Services in Pakistan

Employee Benefits and Compensation in Pakistan

Employee benefits in Pakistan combine mandatory protections under labor and social security laws with optional perks that employers use to compete for talent. Understanding the statutory baseline is essential before designing additional allowances, bonuses, or insurance plans.

Public and National Holidays in Pakistan

Pakistan observes 12–15 paid public and national holidays annually, with fixed dates for national events and variable Islamic holidays based on lunar calendar.

Provincial governments may also declare additional local holidays (for example, Urs or regional events), and employers operating in multiple cities should follow the holiday notifications for each province.

Working Hours in Pakistan

Working hours in Pakistan are regulated by federal and provincial labor laws, with clear limits on daily and weekly work, rest breaks, and overtime.

• Standard Working Hours: For most full-time employees, standard working hours are 8 hours per day and 48 hours per week. This typically means a 6-day workweek, though many private-sector employers follow a 5.5 or 5-day pattern, while keeping total weekly hours within the 48-hour limit.
• Overtime and Rest: Any hours worked beyond 8 per day or 48 per week are considered overtime and must be paid at a higher rate, usually at least 2 times the regular hourly wage. Employees are entitled to at least one weekly rest day, commonly Sunday, and should receive a rest break if working more than 5 consecutive hours in a day.
• Special Rules for Certain Categories: Factories, shops, and commercial establishments may have slightly different scheduling rules, but the core protections around maximum weekly hours, overtime pay, and weekly rest still apply. Women and young workers can be subject to additional protections, such as restrictions on night shifts or maximum daily hours, depending on sector and province.

Probation, Termination & Severance Pay in Pakistan

Pakistan labor law establishes distinct procedures for probation periods, termination notices, and end-of-service payments that vary based on employee classification and reason for separation. Understanding these requirements helps employers manage employment exits compliantly while protecting workers’ statutory entitlements to notice pay, gratuity, and proper documentation.

Probation Period

Probation is used to assess performance and suitability before confirming an employee as permanent. For operational and supervisory roles, probation is typically capped by policy at a defined period, while senior managers may be placed on a longer, contract-driven probation. Once an employee continues beyond the agreed probation without written extension or confirmation, they are generally treated as permanent for notice, benefits, and protection under standing orders.

Termination 

Termination rules hinge on whether the exit is for performance or business reasons versus proven misconduct. For terminations without cause, employers usually provide written notice or salary in lieu, calculated on average recent earnings, including basic pay and regular fixed allowances. In misconduct cases, employers can move to summary dismissal only after following due process, such as domestic inquiry, written charges, and an opportunity for the employee to respond, or risk reinstatement and back-pay orders from labor forums.

Severance and Gratuity

Where law or company policy grants severance, it is typically linked to completed years of service and is only denied if termination is upheld as for cause following proper procedure. Many Pakistani employers adopt a formula based on 30 days of wages for each completed year or part thereof beyond a set minimum service threshold, aligned with standing orders and local practice. For long-serving employees, gratuity or other end-of-service benefits sit alongside notice pay, and failure to pay on time can lead to wage claims and penalties under wage-protection legislation.

Payroll and Tax Management in Pakistan

Employers in Pakistan must handle complex payroll and tax compliance, including FBR income tax withholding, EOBI contributions, and provincial social security obligations to prevent penalties under labor laws.

Income Tax (PAYE Withholding)

FBR applies progressive income tax rates on annual taxable salary, which includes basic pay, taxable allowances, bonuses, and commissions. Employers calculate tax on an annualized basis, divide it into monthly installments, and withhold this amount from each payroll run, then remit it through the IRIS portal by the statutory deadline each month. All salaried employees must have NTN registration, and higher‑income individuals may be subject to additional surcharges or super tax depending on the applicable Finance Act.

Employer Statutory Contributions

• EOBI: Employers contribute 5% and employees 1% of the updated wage ceiling for pensions and benefits, with monthly filings essential.
• Social Security: Provincial social security institutions (such as PESSI and SESSI) require employers above a minimum headcount to contribute on covered wages up to provincial caps, providing medical care, maternity support, and work‑injury compensation.
• Workers Welfare Fund: Eligible establishments contribute a percentage of income to WWF, which finances housing, education, and welfare projects for workers and their families.
• Workers Profit Participation Fund: Certain companies must allocate a percentage of their annual profits to a fund shared with eligible employees, usually calculated after audited accounts are finalized.

Filing Deadlines and Penalties

Monthly remittances for FBR, EOBI, and social security fall due by the 15th, with late payments facing 0.1% daily FBR penalties, surcharges, and audits. Many employers use specialized payroll systems or EOR providers to automate calculations, generate compliant payslips, maintain ledgers, and keep records ready for internal or external audits.

How Much Does it Cost to Hire Employees in Pakistan?

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

Mandatory Costs

• EOBI contributions: Employers contribute 5% and employees contribute 1% of minimum wage, resulting in fixed monthly contributions per worker regardless of actual salary.
• Provincial social security: Approximately 6% of gross salary paid entirely by the employer, calculated up to provincial caps (typically PKR 50,000-75,000 monthly salary).
• Gratuity accrual: Employees earn one month of basic salary for each completed year of service, effectively costing employers 8.33% of basic salary annually.
• Income tax withholding: Progressive rates up to 35% on annual income above PKR 6,000,000, with zero tax on the first PKR 600,000. Employers withhold and remit this monthly, but it’s deducted from employee salary, not an employer cost.

Additional Cost Considerations

Beyond statutory items, employers also incur recruitment fees, onboarding costs, and payroll administration expenses that raise the overall cost-per-hire above headline gross salary. Using an Employer of Record shifts many of these statutory and administrative burdens to a local specialist, often turning variable compliance costs into a predictable per-employee fee.

How EORs Protect Company IP in Pakistan?

Employer of Record providers in Pakistan add IP protections to contracts and processes under the local legal framework.

• Contracts include non-disclosure agreements, IP ownership clauses under Contract Act 1872 Section 27, and non-compete terms compliant with Pakistan labor laws. All work created belongs to your company, with rules on use after employment ends.
• Onboarding includes IP training on data handling under Copyright Ordinance 1962 and company rules, with signed confirmations before access to projects.
• Employees get access only to needed tools and systems, with logs to track usage meeting Intellectual Property Organization of Pakistan standards.
• At termination, EORs do exit checks, remove system access, and get signed IP confirmations under Patents Ordinance 2000 to stop data leaks.

Benefits of Working with an EOR in Pakistan

Working with an Employer of Record (EOR) in Pakistan reduces legal risk and speeds up hiring by outsourcing employment, payroll, and compliance to a locally registered expert entity.

• Faster Hiring: An EOR allows you to put talent on payroll in weeks rather than waiting months to register a local company, open bank accounts, and clear inspections. This is ideal when you need to staff a project, validate the market, or add a small satellite team without long-term structural commitments.
• Predictable Costs: Total employment cost is bundled into a clear monthly invoice that includes salary, statutory contributions, and payroll administration. You avoid one‑off legal, registration, and ongoing compliance costs that normally come with running your own entity, while still offering locally competitive packages.
• Compliance Management: The EOR takes responsibility for drafting compliant contracts, registering employees for EOBI and social security, applying minimum wage and working‑time rules, and managing terminations in line with Pakistani labor law. This reduces the risk of penalties, back‑pay claims, or reinstatement orders from labor courts if something goes wrong.
• Operational Focus: Your managers treat the person as part of your internal team, setting goals, managing performance, and running day‑to‑day workflows. The EOR stays in the background handling payroll, tax filings, payslips, and record‑keeping so your HR and finance teams are not pulled into country‑specific admin.
  Easy Scaling Up or Down: You can start with a single hire and scale up headcount as your pipeline grows, without re‑engineering your structure each time you enter a new city or province. If priorities change, the EOR manages notice, final settlements, and documentation, making adjustments smoother and less risky for your business.

Potential Risks of Using EOR Services in Pakistan

EOR services have limitations worth considering before committing. Here’s what to watch for.

• Less Direct Control: Because the EOR is the formal employer, contracts, statutory registrations, and termination notices are issued under the provider’s name, not your company’s. This can reduce how directly you shape employment terms, policies, and benefits compared with hiring through your own local entity registered with SECP.
• Cost Considerations: For a small team, EOR pricing is often cheaper and faster than setting up a company, but ongoing service fees can feel high once the workforce becomes larger and more permanent. At that stage, some employers find it more economical to move to their own entity and run payroll and compliance in‑house, especially if EOR contracts include high transition or exit fees.
• No Local Entity Presence: Operating only through an EOR means you do not have your own registered company in Pakistan, which can limit access to certain tenders, enterprise contracts, or local banking facilities. It can also slow down how quickly your brand is recognized in the local market compared with having a visible subsidiary.
• Limited Flexibility: EOR setups are built for straightforward hiring and day‑to‑day employment and may not be ideal when you want large graduate intakes, local leadership tracks, or close integration with regional hubs. In those cases, having your own entity can give more room to design people programs and internal policies that match long‑term plans.
• Data Privacy Concerns: EORs hold employee personal data, payroll records, and compliance documents, which can create access challenges or security concerns when you need real-time reporting for FBR/EOBI audits or integration with your global HR systems.

How to Select the Right EOR Provider in Pakistan

Choosing the right Employer of Record (EOR) in Pakistan comes down to compliance reliability, service quality, and total cost over time. The goal is to find a partner that can protect you legally while supporting your hiring and growth plans.

• Check Local Compliance and Registrations: Start by confirming the provider is properly registered in Pakistan for tax, EOBI, and provincial social security. Ask for details on how they keep contracts, payroll, and benefits aligned with current labor and tax rules. Request sample employment contracts and payslips to see how they handle mandatory clauses, leave, and contributions.
• Evaluate Payroll Accuracy and Processes: Review how the provider calculates income tax, EOBI, social security, and gratuity, and how they handle bonuses, commissions, and overtime. Clarify payroll cut-off dates, payment dates, and how salary errors or disputes are resolved. Ensure they can pay employees in PKR to local bank accounts on a predictable schedule with clear payslips.
• Assess Employee Support: Compare what is included in their fee: employment contracts, onboarding, payroll, benefits administration, terminations, and handling of government notices or audits. Ask how employees get support for questions on payslips, leave, and benefits, and whether you will have a dedicated account manager or shared support channel.
• Compare Pricing and Long-Term Cost: Understand their pricing model: fixed per-employee fee, percentage of payroll, or tiered pricing by headcount. Check what is extra (e.g., setup fees, offboarding fees, special contract changes) so you can calculate a realistic “all-in” monthly cost per employee. Consider how the fee structure scales if you grow from a small pilot team to dozens of hires.
• Review Experience & References: Prioritize providers with proven experience in Pakistan and, ideally, your industry. Ask for client references or case studies involving teams of similar size and use case (market testing, support center, engineering team). Evaluate their platform for onboarding, document storage, and reporting, clean dashboards and exportable reports make it easier for HR and finance to track headcount and costs.
• Align on Control, Data, and Exit Options: Clarify how much visibility and control you retain over hiring decisions, performance management, and day-to-day work. Confirm how you can transition employees to your own entity later, whether the provider supports smooth conversion, and what notice periods or fees apply. Make sure data ownership, confidentiality, and security standards meet your internal policies, especially for employee records and payroll information.

Why Choose HRBS Global for Hiring in Pakistan?

HRBS Global serves as a dedicated Employer of Record in Pakistan, providing structured, compliant employment solutions for organizations building or scaling local teams. Our services are designed for companies that require precision in compliance, payroll, and process rather than generic, one-size-fits-all support.

• Strategic Partner for Hiring: For organizations adding employees in Pakistan as part of a regional or global expansion, HRBS Global operates as a long-term partner focused on headcount growth and risk reduction. With local expertise and structured communication channels, we help employers run reliable, compliant employment operations in Pakistan while maintaining alignment with global HR and finance standards.
• Payroll, Currency, and Cost Control: We run payroll in PKR with transparent calculations, while supporting multi-currency funding and reporting for finance teams handling cross-border budgets. Employers receive payroll data, cost breakdowns, and reconciliations that integrate smoothly with existing HRIS and accounting systems.
• Enterprise-Ready Employment Operations: As an independent, specialized provider, we design employment structures that match each client’s organization, job levels, and global policies. We support different team setups in Pakistan, including permanent staff, local leaders, and remote professionals, with clear SLAs for onboarding, changes, and terminations.
• Compliance and Legal Support: We keep employment contracts, policies, and HR processes in line with Pakistani labor laws, tax rules, and social security requirements at both federal and provincial levels. We manage all statutory requirements end to end, including income tax, EOBI, social security, and mandatory benefits, with records and documentation suitable for internal audits and compliance checks.
• Data Security and Protection: We implement strict data protection protocols for all employee and payroll information, with role-based access controls and secure document management systems. Our platform ensures confidentiality of sensitive employment records and maintains audit trails for compliance verification and risk management.

Ready to hire in Pakistan without setting up a local entity? Contact us today to discuss your requirements and get a customized proposal for your team.