Hire and Pay Employees in Pakistan

Did you know that over 60% of Pakistan’s population is under 30? This makes it one of the youngest and fastest-growing workforces in the world, creating an excellent opportunity for businesses to hire skilled professionals. However, navigating Pakistan’s labor laws, payroll regulations, and hiring practices can be challenging—especially for foreign companies or startups expanding into the country. In this comprehensive guide, we’ll break down Pakistan’s key labor laws for 2025, including minimum wage, payroll taxes, overtime policies, and employment contracts. Whether you’re an international company expanding into Pakistan or a local business building a compliant workforce, you’ll get actionable insights to legally and efficiently hire employees in Pakistan.

Pakistan at a Glance: Unveiling the Potential

Pakistan’s economy is expanding, with a skilled workforce and diverse investment opportunities in sectors like technology, manufacturing, and agriculture. Businesses benefit from a strategic location, improved infrastructure, and government policies that support growth. With a rising middle class and increasing digital adoption, Pakistan is becoming a key market for investors.

Strategic Location: Pakistan’s location connects South Asia, Central Asia, and the Middle East, making it a key trade hub. The China-Pakistan Economic Corridor (CPEC) is transforming connectivity by improving infrastructure and reducing logistics costs. With access to major shipping routes and neighboring markets, Pakistan is a strategic choice for companies looking to expand regionally. According to the World Bank, improved trade policies and transport networks are enhancing economic integration.
Growing Economy: Pakistan is one of South Asia’s emerging markets, with expanding IT, textile, agriculture, and manufacturing sectors. The tech industry is booming, with startups and IT exports reaching new heights. Government policies are attracting foreign direct investment (FDI) in energy, real estate, and industrial zones, making Pakistan a prime location for business growth. Special Economic Zones (SEZs) provide tax exemptions and incentives, making it easier for companies to set up operations.
Skilled Workforce: Pakistan has a young, skilled, and cost-effective workforce. Each year, thousands of IT professionals, engineers, and finance experts enter the job market, specializing in software development, artificial intelligence, fintech, and cybersecurity. Pakistan is also a top destination for freelancers, ranking among the largest freelancing economies globally. Universities and training programs are continuously improving, ensuring businesses can access high-quality talent.
Business-Friendly Policies: Pakistan offers tax incentives, simplified regulations, and investor-friendly reforms to support businesses. The IT sector enjoys tax breaks, while industries in Special Economic Zones (SEZs) benefit from duty-free imports of essential equipment. Digital banking and fintech solutions are making payments easier, helping both startups and international businesses operate smoothly. With low labor costs, improved infrastructure, and pro-business policies, Pakistan is an ideal market for hiring, investment, and expansion in 2025.
Constitutional Framework: Pakistan’s Constitution guarantees strong labor rights and protections, ensuring fairness in the workplace. It upholds equality before the law, prohibits forced and child labor, and secures freedom of association. Workers have the right to choose their occupation without discrimination, while children are entitled to free education under Article 25-A. Social security benefits further strengthen employee welfare. These constitutional rights shape Pakistan’s labor laws, making compliance essential for businesses operating in the country.

Key Labor Laws and Ordinances

Pakistan’s labor laws play a crucial role in shaping the job market, protecting workers’ rights, and ensuring fair employment practices. These laws, enforced at both the federal and provincial levels, govern various aspects of employment, including contracts, wages, working conditions, and employee benefits. HR teams and employers must understand these legislations to maintain compliance, foster a fair work environment, and avoid legal complications. Several key laws and ordinances form the foundation of labor regulations in Pakistan:

The Industrial and Commercial Employment Ordinance, 1968: This ordinance defines employment categories, conditions of service, termination policies, and the rights of workers in commercial businesses. It sets out the terms and conditions of employment for industrial and commercial establishments, including rules regarding employment contracts, working hours, leave, and termination.
The Minimum Wages Ordinance, 1961: This ordinance establishes minimum wage rates for various categories of workers, aiming to protect them from exploitation. The daily minimum wage for an 8 hour work day is Rs. 500 (and Rs.13,000 for 26 working days).
The Factories Act, 1934: This act focuses on workplace safety, hygiene standards, overtime policies, and employee welfare in manufacturing and industrial sectors. It applies to any premises where ten or more workers are employed and addresses crucial aspects of worker welfare, including health and safety regulations, working hours, and leave entitlements.
Employees’ Old Age Benefits Act, 1976: This act ensures workers receive a share in company profits, encouraging employee motivation and financial security. It provides pension, retirement benefits, and financial security to employees after retirement. It applies to every industry and establishment employing five or more individuals.
Employment of Children Act, 1991: This act prohibits child labor in hazardous industries and ensures children’s right to education. It governs the employment of minors across all sectors and is designed to safeguard children from exploitation and the dangers associated with labor at a young age, especially in hazardous conditions.

Understanding Employment Contracts

Employment contracts are essential for establishing a clear and legally sound relationship between employers and employees in Pakistan. These agreements outline the terms and conditions of employment, providing clarity and protection for both parties. Understanding the different types of employment contracts and their implications is crucial for ensuring compliance and fostering a productive work environment. In Pakistan, employment contracts can be categorized based on duration and purpose. The most common types include:

Permanent Employment Contracts: These contracts offer long-term, indefinite employment with the assurance of full benefits and job security. While Pakistani law does not mandate a written contract for permanent employees, it is highly recommended to document the terms and conditions of employment clearly, including job responsibilities, compensation, benefits, and termination procedures.
Fixed-Term Contracts: Used for specific projects or engagements with a predefined end date, typically less than nine months. These contracts are suitable for short-term assignments or project-based work where the employment relationship is intended to last for a specific duration. Key provisions to include are start and end dates of employment.
Badli (Alternate) Employment Contracts: These are temporary arrangements where a “Badli” worker fills in for a regularly employed worker who is temporarily absent due to illness, leave, or other reasons. The term of employment ends when the original employee returns to work. These should follow the same procedures as “Probationary contracts”.
Apprenticeship Agreements: These are specialized contracts designed for individuals undergoing structured on-the-job training and skill development programs. Apprenticeship agreements typically involve a combination of classroom instruction and practical training under the guidance of experienced professionals, with the goal of equipping apprentices with the necessary skills to enter a skilled trade or profession.
Contract Worker Agreements: These agreements involve hiring individuals for a specific period or to complete a defined task or project. Contract workers are typically engaged on a short-term basis and are not entitled to the same benefits as permanent employees. However, you have complete control over the work being done, while not being responsible for paying benefits.

Crafting Compliant Employment Contracts in Pakistan

A well-drafted employment contract is critical for ensuring legal compliance and preventing disputes in Pakistan. To create enforceable and employee-friendly agreements, consider these best practices:

Include Essential Clauses: Ensure the contract covers key elements such as a precise job description outlining roles and responsibilities, clear working hours , compensation details, eligibility for benefits, and specific termination procedures, aligning with Pakistan’s labor laws.
Specify Confidentiality Terms: Include confidentiality clauses to protect sensitive company information and trade secrets. Outline the scope of confidential information and the employee’s obligations regarding its use and disclosure.
Comply with Provincial Variations: Be aware of provincial labor laws. For instance, the definition of a contract worker can differ between Sindh and other provinces. Consulting with a legal professional is advisable to ensure compliance with the specific labor laws applicable to your location and industry
Avoid Ambiguity: Use clear, concise language and define all terms to prevent misunderstandings. Ambiguous clauses can lead to legal challenges, so go for clarity in every provision.

Protecting Intellectual Property (IP)

In Pakistan, protecting your innovative ideas and brand assets is crucial for staying competitive. Understanding intellectual property (IP) – which includes patents, trademarks, copyrights, geographical indications (GI), and industrial designs – is key to securing your business’s future. This is how you implement the right steps and focus on the necessary areas.

The Copyright Ordinance 1962 (CO): Protects original creative works, such as books, music, and films, preventing unauthorized use and promoting artistic expression. This not only protects your creations but also establishes your rights to adapt, distribute, and publicly display your work, which are crucial for monetization and reach.
The Patent Ordinance 2000: Protects new inventions, providing inventors exclusive rights for a limited time (typically 20 years from the date of filing).This protection incentivizes further innovation, contributing to technological advancement and economic growth. Remember to file for your patent as soon as possible, and always before disclosing your invention publicly.
The Trade Marks Ordinance 2001 (TO): Protects brands by safeguarding names, logos, and other identifying symbols used for goods and services, helping consumers easily recognize and trust your products.
The Geographical Indications Act 2020: Protects regional products, geographical indications create value for local communities by recognizing their unique regional products. They act as a source of community development and also prevents misuse of names

Classifying Workers Correctly: Employee vs. Independent

Before hiring in Pakistan, it’s crucial to determine the correct working relationship. Should you engage independent contractors or hire full-time employees? Each choice has different legal and tax implications, so understanding the distinctions is vital. While Pakistan’s employment laws don’t clearly define independent contractors and employees, you can be penalized for misclassification. If you don’t understand, you may need to follow up with legal personnel to understand your decision.

Control Over Work: If you dictate how, when, and where someone works, they are likely an employee. Contractors, on the other hand, use their own methods and tools to complete tasks.
Financial Responsibilities: Employees typically receive company-provided equipment, benefits, and insurance, while contractors cover their own expenses and work with multiple clients.
Tax Obligations: Employers deduct income tax and social security contributions for employees, whereas contractors manage their own taxes. In Pakistan, personal income tax rates range from 0% to 35%, depending on income levels.

Misclassification Risks and How to Avoid Them

Hiring someone as a contractor doesn’t always mean they legally qualify as one. If authorities determine they should be classified as an employee, businesses may face serious consequences. This includes back payments for unpaid taxes and benefits, penalties for non-compliance with labor laws, and legal disputes over wrongful classification. To avoid misclassification, carefully assess the worker’s role. If you control their tasks, work schedule, or equipment, they may legally be an employee. Independent contractors typically work with multiple clients, set their own hours, and get paid per project. Conducting a proper classification review can help you stay compliant and prevent costly legal issues.

Compensation and Payroll in Pakistan: A Practical Guide

Understanding Minimum Wage: Minimum wage laws in Pakistan can be a bit complex. Each province and the Islamabad Capital Territory (ICT) sets its own wage rules, often based on recommendations from a local Minimum Wage Board. This means minimum wages can differ not just by location but also by industry and skill level. For example, the Punjab region has different minimum wage standards for each industry and labor type. The national minimum wage in Pakistan is PKR 32,000 per month. As of July 1, 2024, the new minimum wage is PKR 37,000 per month.
Payroll Frequency and Payment Methods: How often you pay your employees is flexible in Pakistan. You can pay them daily, weekly, every two weeks, or monthly. However, you must pay them at least once a month. It’s best to clearly state your pay schedule in their employment contract, so everyone knows when to expect their paycheck. While the exact payment methods are not specified, payroll usually includes calculating pay, making payments, and keeping track of hours worked.
13th Month Pay and Bonuses: Many countries worldwide offer a 13th-month salary, which is an extra payment equal to one month’s salary. In Pakistan, this isn’t legally required. However, if your business is profitable and has 20 or more employees, you’re obligated to pay them a bonus. This bonus typically ranges from 15% to 30% of the annual profit, depending on the profit amount and employee wages.

Calculating Payroll in Pakistan

Tax at Source: Employers must calculate and deduct income tax from salaries, following Pakistan’s income tax scale. Employees earning less than PKR 600,000 annually are exempt from income tax, while others may owe between 5% to 35%.
Social Security Contributions: Payroll calculations must include contributions to social security, including pension rights. Employees aged 60 or above with a minimum of 15 years of employment are eligible for full pension benefits. Employees between 55 and 59 years (male) or 50 and 54 years (female) with at least 15 years of employment can receive partial pension benefits. The old-age pension rate is calculated as 2% of the insured employee’s average monthly pay (in the past 12 months) multiplied by the years of contributions.
Dependents’/Survivors’ Benefits: Social security laws in Pakistan also provide survivor benefits to dependents like widows, widowers, and children1.
Invalidity Benefit: Employees who suffer a loss of 67% in their earning capacity due to a non-occupational injury, accident, or disease are eligible for an invalidity benefit. They are paid 2% of the average monthly earnings in the past 12 months, multiplied by the employment years.
Cost to Company (CTC): CTC is the annual amount a company spends on hiring an employee, covering gross and net remuneration, additional benefits, and payroll deductions.
Gross Salary: Gross salary includes all components of the employee’s salary package before any deductions.
Net Salary: Net salary is the amount left after deducting all applicable deductions from the gross salary.
Basic Salary: Basic salary is what employees get after additions and deductions from the annual package and depends on the job role and sector activities.
Allowances: These cover job-related expenses to ensure employees have a better work-life balance.

Navigating Pakistan’s Tax Landscape: Employer and Employee Obligations

Understanding Pakistan’s tax system is essential for both employers and employees to ensure compliance and avoid penalties. This guide outlines the key tax obligations, including employer contributions, employee income tax rates, penalties for non-compliance, and available resources. Staying informed and proactive is crucial, especially with the Federal Board of Revenue’s (FBR) increasing focus on stricter enforcement and penalties.

Employer Taxes and Contributions

Pakistani employers have mandatory payroll tax obligations, including contributions to the Employees’ Old-Age Benefits (EOBI) and the Provincial Employee Social Security Institution (PESSI).

Employees’ Old-Age Benefits (EOBI): Employers contribute 5% of the employee’s minimum wage to the EOBI. EOBI provides pensions to employees after retirement, ensuring financial security.
Provincial Employee Social Security Institution (PESSI): The contribution rate for PESSI is 6%. These funds, self-governed under the Provincial Employees Social Security Ordinance (PESS or PSSS), 1965, offer benefit coverage for employees in cases like injury, maternity, sickness, employment, or death.
Gratuity or Provident Fund: Employers must also offer gratuity (severance pay) or Provident Fund contributions. If the employer does not offer gratuity, the contribution to the Provident Fund must be equivalent to the annual gratuity amount.

Employee Taxes

Pakistan follows a progressive income tax system, where income tax rates increase with higher earnings. Employers must withhold the correct amount of taxes from employees’ paychecks and submit them on time.

Income Tax Rates for Salaried Individuals (FY 2024-25, effective July 1, 2024 – June 30, 2025

Annual Income (PKR)	Applicable Tax Rate
Up to 600,000	0%
600,001 – 1,200,000	5% of the amount exceeding PKR 600,000
1,200,001 – 2,200,000	PKR 30,000 + 15% of the amount exceeding PKR 1,200,000
2,200,001 – 3,200,000	PKR 180,000 + 25% of the amount exceeding PKR 2,200,000
3,200,001 – 4,100,000	PKR 430,000 + 30% of the amount exceeding PKR 3,200,000
Above 4,100,000	PKR 700,000 + 35% of the amount exceeding PKR 4,100,000

Penalties for Non-Compliance

The FBR has adopted a stricter approach to tax penalties. Non-compliance can result in significant financial and legal repercussions.

Late Tax Withholding: Employers who fail to withhold taxes on time may face a penalty of PKR 40,000 or 10% of the outstanding income taxes, whichever is higher.
Late Filing of Tax Returns: Failing to declare tax returns on time may result in a 0.1% penalty on the tax amount for each day or PKR 1,000 per day, whichever is higher. The minimum penalty is PKR 10,000, and the maximum is 200% of the outstanding taxes. Filing returns within three months after the due date may reduce the penalty.
Stopping Business without Filing: If a taxpayer stops doing business and does not file their returns after being asked, they will be fined the higher of 0.1% of their tax due for the year or Rs1,000 per day of default, with a minimum of Rs10,000 or Rs50,000 for individuals or other persons.
Higher Withholding Tax Rates: Non-filers face higher withholding tax rates on various financial transactions, such as property purchases, car purchases, and banking transactions. The WHT rate for non-filers can be up to double that of filers.
Restrictions on Purchases: Non-filers cannot purchase immovable property worth more than Rs. 5 million or vehicles with an engine capacity exceeding 1,000 cc.
SIM Card Blocking: The FBR can block mobile SIM cards for non-filers.
Higher Taxes on Banking Transactions: Non-filers are subject to higher taxes on banking transactions, such as cash withdrawals.
Legal Action and Confiscation of Property: The government may pursue legal action against non-filers, potentially leading to the confiscation of undeclared assets or property. Non-filers can also face heavy fines, ranging from Rs. 5,000 to Rs. 200,000, depending on the violation and the amount of tax evaded.

The tax filing deadline in Pakistan is September 30 for individuals and Associations of Persons (AOPs). For companies, the deadline is December 31, or September 30 for companies with a special tax year. Employers must withhold income tax from their employees’ salaries monthly and file an annual tax return electronically by September 30.

Resources for Tax Compliance

By staying informed, utilizing available resources, and adhering to deadlines, both employers and employees in Pakistan can navigate the tax landscape effectively and ensure compliance.

Federal Board of Revenue (FBR): The FBR website offers online filing services, rules, regulations, and support material.
Tax Compliance Guide: Pak Tax Calculator offers a comprehensive tax compliance guide with the latest tax changes, income tax rates, filing deadlines, and tax-saving options.
Tax Policy Office (TPO): The Ministry of Finance is establishing a Tax Policy Office (TPO) to enhance tax policy analysis and separate it from revenue administration.
Waystax: Waystax offers expert guidance through the tax filing process.

By staying informed, utilizing available resources, and adhering to deadlines, both employers and employees in Pakistan can navigate the tax landscape effectively and ensure compliance.

Working Hours, Overtime, and Leave Entitlements

Pakistan’s labor laws regarding working hours, overtime, and leave are crucial for employers and employees. Following these regulations ensures fair practices, reduces legal risks, and supports a positive work environment. The Constitution of Pakistan, federal and provincial employment laws, and court decisions all form the basis for these guidelines.

Standard Working Hours and Rest Periods

Understanding the regulations surrounding standard working hours is crucial for businesses operating in Pakistan. Typically, work hours are capped at 48 per week, with a maximum of nine hours daily, including breaks. The Factories Act of 1934 outlines key requirements to protect employee well-being and ensure fair labor practices.

Breaks During Workday: Employees are entitled to a one-hour break after six hours of work.
Shorter Rest Options: Alternatively, employers can provide a 30-minute rest after five hours of work, or two 30-minute breaks after eight and a half hours.
Mandatory Intervals: Workers must not work more than five consecutive hours without intervals for prayer, rest, or meals.

Overtime Laws and Compensation

Overtime, defined as work exceeding 48 hours weekly, requires fair compensation under Pakistani law. It’s essential for employers to understand eligibility, compensation rates, and limitations to avoid legal issues and maintain positive employee relations.

Overtime Eligibility: Most employees are eligible for overtime pay, with the exception of those in managerial or supervisory roles.
Overtime Compensation: Overtime pay is usually double the regular wage rate. This may increase to triple the rate on festival holidays.
Overtime Limits: Including overtime, daily work hours may extend to 12, but weekly hours must not exceed 56. Employees must also ensure their overtime hours do not exceed 50 hours within a quarter.
Employee Consent: Overtime requires employee consent; it cannot be mandatory.
Bonuses and Overtime: Regular, non-discretionary bonuses are typically included when calculating overtime pay.

Employers must maintain overtime records for at least three years and pay wages within one month without deductions. The maximum weekly overtime hours are 12 hours.

Leave Entitlements

Understanding Pakistan’s leave policies is vital for employers and employees alike. These policies, governed by labor laws, aim to provide employees with adequate time off for a healthy work-life balance.

Annual Leave: Employees are entitled to 14 calendar days of fully paid annual leave after 12 months of continuous service. This leave must be taken all at once and cannot be divided into smaller periods. Employees can get payment for leaves proportional to their monthly wage within 24 months.
Sick Leave: The Shops and Establishments Ordinance offers 10 days of sick leave with full pay, whereas the Factories Act offers 16 days of sick leave with half pay per year. Employers in Pakistan must offer 10 days of casual leave with full pay and 16 days of sick leave with half pay. Sick leaves may be carried forward, but the total accumulation of such leaves cannot exceed 16 days at any one time.
Casual Leave: Employees are entitled to 10 days of fully paid casual leave annually. Certain areas provide 15 days of casual leave on full pay.
Maternity Leave: Female employees are entitled to maternity leave with full pay for up to three children: 180 days for the first childbirth, 120 days for the second, and 90 days for the third. The Maternity and Paternity Leave Act, 2023, applies to public and private establishments under the administrative control of the Federal Government. Female employees of public and private departments under the administrative control of the federal government will be entitled to avail maternity leave with full pay three times during service.
Paternity Leave: Male employees may be granted up to 30 days of fully paid paternity leave, which is optional for employers. Paternity leave may not be granted for more than three times in the entire service of the male employee.
Bereavement Leave: A female employee may be entitled to Special (Iddat) Leave for up to 130 days fully paid following her husband’s death.
Public Holidays: Pakistan observes approximately 10 public holidays each year, including Eid al-Fitr, Ashura, and Independence Day. If an employee must work on a public holiday, the employer must pay them three times their normal rate of pay. Some employees may also be entitled to a substitute holiday and a compensatory holiday.
Pilgrimage Leave: Muslim employees have a right to leave for religious pilgrimages, such as Hajj and Umrah. Leave for pilgrimage may last up to 60 days, and employers allow their staff to observe them.

Streamlining Employee Onboarding in Pakistan

Effective employee onboarding is crucial for setting new hires up for success and integrating them into the company culture. A well-structured onboarding process not only ensures compliance but also enhances employee engagement and reduces turnover. Here’s a guide to streamlining your employee onboarding process in Pakistan:

Onboarding Checklist: A Simple, Action-Oriented Guide

Use a complete onboarding checklist to give every new hire a consistent start. Include these key actions:

Before Day One: Get the workspace ready, create accounts, and email a welcome message with first-day details.
First Day: Welcome the new hire, show them around, introduce the team, explain company rules, and complete HR paperwork.
First Week: Arrange meetings with key people, train them on software, and set goals for the first few months.
First Month: Check on paperwork, introduce other teams, provide software training, and meet weekly to discuss progress and answer questions. Review the first month’s goals.
After 3 Months: Check skills, create training plans, assign projects, and ask for feedback on onboarding.

Pre-Employment Checks

Before extending an offer, conduct thorough pre-employment checks to verify the candidate’s credentials and suitability for the role. This includes:

Identity Verification: Use the candidate’s Computerized National Identity Card (CNIC) or passport to confirm their identity through the National Database and Registration Authority (NADRA).
Employment History Verification: Contact previous employers to verify job titles, employment dates, responsibilities, and performance. Requesting salary information from previous employers is illegal.
Educational Qualification Verification: Validate educational credentials with the respective educational institutions to ensure the candidate possesses the claimed qualifications.
Criminal Record Check: Conduct a criminal record check through the local police station or NADRA. This is essential for roles requiring trust and security, especially in finance, government, and healthcare sectors. You can check your criminal record by visiting the local police station or through the relevant authorities in your area. The process typically involves submitting a formal request or application, providing identification, and paying any required fees.
Reference Checks: Contact references provided by the candidate to gain insights into their work ethic, skills, and professional conduct.

Background Checks: Legal and Ethical Considerations

Background checks are legal in Pakistan, but employers must adhere to certain legal and ethical guidelines.

Written Consent: Obtain written consent from the candidate before conducting any background checks, as required by the Prevention of Electronic Crimes Act (PECA). The consent form should include the candidate’s full name, address, date of birth, and other necessary details.
Data Privacy: Comply with data protection laws and ensure that all collected information is used solely for the purpose for which it was obtained. Avoid disclosing information to unauthorized parties.
Relevance: Ensure that the information requested is relevant to the job requirements. Avoid asking for irrelevant or discriminatory information.
Fairness: Treat all candidates equally and avoid discrimination based on race, religion, gender, or other protected characteristics.
Transparency: Inform candidates about the background check process and their right to refuse. However, explain that refusal may impact their eligibility for certain positions.
Credit History Checks: Pre-employment credit checks are not commonly used due to the lack of a reliable credit reporting system. As with background and educational history checks, any pre-employment credit check must adhere to all applicable legal requirements and treat all candidates equally regardless of their backgrounds.

NDAs and Confidentiality Agreements

To protect company information, utilize Non-Disclosure Agreements (NDAs) and confidentiality agreements.

Specificity and Clarity: Clearly define what constitutes confidential information or trade secrets.
Reasonableness: Ensure that the restrictions are reasonable in terms of duration and scope. Overly broad restrictions may be challenged in court.
Legitimate Business Interests: Articulate the legitimate business interests that the NDA is designed to protect, such as trade secrets, customer lists, or specialized knowledge.
Consideration and Compensation: Provide adequate consideration or compensation for the employee agreeing to the restrictions.
Review and Legal Counsel: Have the agreement reviewed by legal counsel specializing in employment law.

Probationary Periods

Probationary periods allow employers to assess a new hire’s suitability for the role.

Duration: The probationary period is fixed by law to a maximum of three months.
Evaluation: Use this time to evaluate the employee’s performance, skills, and fit within the company culture.
Confirmation: Before the end of the probationary period, inform the employee whether their employment is confirmed or terminated.
Extension: There is no extension of Probation Period as per law. If a company Fails to give a Confirmation letter before or Expiry of Probation Period, the Employee will be deemed as Confirmed / Permanent Employee.
Entitlements During Probation: During probation, employees are entitled to sick leaves and casual leaves, weekly off, festival leaves with full pay.

By implementing these strategies, employers in Pakistan can streamline their employee onboarding process, ensuring compliance with legal requirements, protecting company interests, and fostering a positive experience for new hires.

Terminating Employment in Pakistan

In Pakistan, employment termination is governed by laws and regulations designed to protect both employers and employees. Key statutes include the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, and its provincial versions.

Understanding At-Will Employment: At-will employment does not exist in Pakistan. Employers must have a justifiable reason for termination, such as misconduct, incapacity, or redundancy. Serious misconduct can be a reason for dismissal, but the employee must have a chance to respond to the charges. Other valid reasons include serious illness or inability to perform the job to the required standards.
Notice Period: Either party may end an employment contract by giving one month’s notice. If one month’s notice isn’t served, the party must pay one month’s wages instead.
Severance Pay (Gratuity): Employees whose employment is terminated for reasons other than misconduct are entitled to severance pay, also known as gratuity. This is usually equivalent to 30 days’ wages for every completed year of service, or any part of it exceeding six months. Employers can choose to replace gratuity with a provident fund. However, gratuity isn’t applicable if services are terminated due to misconduct.
Wage Calculation: The wage calculation is based on ‘wages admissible to a fixed-rate worker in the last month of service’ or ‘the highest drawn pay by a piece-rate worker during the preceding 12 months.

Checklist for Compliant Termination

Written termination order with a specific reason.
Legal grounds for termination (misconduct, incapacity, or redundancy).
Opportunity for the employee to respond to charges, if applicable.
Compliance with notice period or payment in lieu.
Payment of severance/gratuity if applicable.
Final settlement of all dues.
Issuance of experience letter.

Visa and Work Permit Requirements for Foreign Nationals

Any foreign national who intends to work in Pakistan needs a work permit, commonly known as a work visa. This is applicable to all non-Pakistani citizens, regardless of the nature or duration of employment. Employers must ensure their international hires secure the right authorization before they start working.

Types of Work Visas

Pakistan offers several types of work visas tailored to different employment needs:

General Work Visa: For foreign nationals employed by Pakistani companies across various sectors.
CPEC Work Visa: Specifically for Chinese citizens working on China-Pakistan Economic Corridor projects.
Journalist Visa: For foreign journalists assigned to major Pakistani cities.
Domestic Aide Visa: For foreign nationals employed as domestic aides in Pakistan.
Transit/Transport Visa: For drivers and transporters from ECO countries entering Pakistan for transport-related purposes.

Applying for a Work Visa

To get a work permit in Pakistan, both the employer and the foreign employee must meet certain criteria. The employer must be a registered entity with the Securities and Exchange Commission of Pakistan (SECP) and provide a formal job offer. The employee must have the necessary qualifications and experience for the job. Here’s a step-by-step guide to the work visa application process:

Employer Sponsorship: The employer acts as the sponsor for the foreign employee’s work visa. This includes submitting a formal job offer and required documents to the relevant authorities, like the Board of Investment (BOI) and Ministry of Interior (MOI), to help with the visa issuance. The employer must follow all legal requirements and provide accurate information to support the employee’s application.
Online Application: The companies employing expatriates are required to submit their work visa application on the E-Visa portal. You can apply for two types of visas online: entry and extension. You can apply for a new visa if you do not possess a valid Pakistan visa or apply for a visa extension if you possess a valid Pakistan visa and you are residing in Pakistan.
Required Documents: You need a passport, a photograph, and an employment letter from an SECP-registered company showing salary and job duration or a sponsorship/guarantee letter from the company. You also need the employer’s tax certification, the CNIC or passport of the employer, and a recommendation from BOI.
Processing Time: The processing time for work permits or visas in Pakistan can vary depending on the visa type and individual circumstances and generally ranges from 24 hours to several weeks.
Fees: The fees for work permits and visas in Pakistan vary depending on the visa type and the applicant’s nationality.

It is important to note that the issuance of a Visa is the prerogative of the Government of Pakistan.

Hire in Pakistan with Ease – EOR and Payroll Solutions

Instead of getting lost in paperwork and complex labor laws, focus on finding the best people for your team. HR Business Solutions handles the hiring process in Pakistan, managing everything from legal contracts to accurate payroll and tax filings. Avoid the delays and expenses of setting up a local entity – our Employer of Record (EOR) service lets you hire quickly and compliantly. We also ensure compliance with social security, employee benefits, and termination policies, minimizing legal risks. Plus, our expert payroll service ensures timely salary disbursements and tax deductions, giving you a hassle-free way to manage your workforce in Pakistan.

FAQ’s

What are the legal requirements for hiring employees in Pakistan?

When hiring in Pakistan, employers must comply with local labor laws. This includes issuing a detailed written employment contract that outlines job roles, salary, working hours, and benefits. Employers are also required to register with the Federal Board of Revenue (FBR) and ensure proper social security contributions through schemes like the Employees’ Old-Age Benefits Institution (EOBI). Staying current with Pakistan labor regulations and legal updates is essential for maintaining compliance and reducing legal risks.

What benefits are required for employees in Pakistan?

Employees in Pakistan are entitled to statutory benefits such as paid annual leave, sick leave, and public holidays. Employers must also contribute to social security schemes like the Employees’ Old-Age Benefits Institution (EOBI) and provide maternity/paternity leave. Many companies add extra perks like health insurance, transportation allowances, and performance bonuses to attract and retain top talent.

How does maternity/paternity leave work in Pakistan?

In Pakistan, maternity leave is typically available for female employees who have worked at least four months before delivery. Depending on company policy and local regulations, maternity leave usually lasts between 90 and 180 days with full pay. Paternity leave is less common but generally offers up to 30 days of paid leave for new fathers. These policies support family well-being and comply with local labor laws.

How can I pay employees in Pakistan from the US/Canada/Europe?

You can pay employees in Pakistan from the US, Canada, or Europe using global payroll solutions and Employer of Record (EOR) services. These systems let you process payroll in local currency, manage tax deductions, and comply with local regulations, all through a single, streamlined platform. This approach minimizes administrative burdens and ensures timely, compliant salary payments.

How does Social Security payment work?

In Pakistan, both employers and employees contribute to social security programs. Employers typically pay a fixed percentage of the employee’s salary, while employees contribute a smaller amount. These funds support schemes like the Employees’ Old-Age Benefits Institution (EOBI), which provides pensions and other benefits. Regular, timely contributions are required to comply with local laws and ensure employees receive their entitled benefits.

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