Hire employees in Pakistan

With a population that is currently estimated at around 227 million and a workforce of roughly 72.3 million, Pakistan is one of the world’s largest countries in terms of labor force. The country is of particular interest for foreign employers as Pakistani workers can be hired at very cheap rates.

Not only are wages in Pakistan very low, but the social security contributions for employees and employers are only a fraction of what needs to be paid in Europe. The same goes for the legally imposed employee benefits which are below European standards.

Companies employing more than 20 employees must provide their hires with a written employment contract. There are no legal requirements regarding its form, but the contract should outline the basic employment terms and conditions:

• Identification of both parties

• Date of commencement (and employment duration for temporary contracts)

• Workplace

• Job description, duties and responsibilities

• Salary

• Working hours

• Leave entitlement

• Notice periods

The contract is usually drafted in the local language. Contracts may either be permanent or fixed-term.

Probation Period

Probation periods in the private sector usually last for 3 to 6 months. In the public sector, they can extend to up to 2 years. During this time, there is no obligation for the employer to respect a notice period or to even indicate a reason when terminating the employment relationship.

Working Hours and Breaks

An employee’s standard working hours shouldn’t exceed 48 hours per week. Daily working hours are limited to 9 hours – not counting overtime. Employees should also have a 1-hour break during work for lunch and prayer. Sunday is generally considered as a rest day. Working hours during Ramadan are reduced to 6 hours per day and 36 hours per week.

Overtime

Overtime work is allowed as long as the daily 12-hour limit is respected. Overtime needs to be paid at a rate of 200% of usual wages.

Employees in Pakistan should be paid at least once per month.

Minimum Wage

The national minimum wage currently (February 2023) stands at PKR 17,500 per month. However, several provinces have introduced their own minimum wages. For instance, employees in Sindh must be paid at least PKR 25,000 per month.

Sick Pay

Pakistani employees are eligible for paid sick leave upon presentation of a medical certificate. Employers have to provide sick pay during 26 days per year, of which 10 days are fully paid and 16 days are partially paid.

Bonuses

There is no legal obligation to provide an annual bonus but there are rules and regulations regarding the sharing of business profits (only applies to businesses with more than 20 employees).

Employees and employers in Pakistan are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

up to 35%

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• Corporate tax rate: up to 35% (depending on industry), plus additional super tax of up to 10%

• VAT (standard rate): 17%

Employees

up to 35%

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Tax rates on employment income range from 0% to 35% *

Social security

Employers

5%

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5% of the employee’s salary goes to the Employees Old Age Benefits Institution (EOBI).

Depending on the province, employers may have to contribute to regional social security funds.

Employees

1%

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1% of the employee’s salary goes to the Employees Old Age Benefits Institution (EOBI).

Annual Leave

After 1 year of work for the employer, the employee is entitled to 14 (calendar) days of paid annual leave. There are 11 public holidays – their number may vary as they are determined by the government every year – on which employees receive a paid day off.

Maternity Leave and Paternity Leave

Female employees who have successfully completed their first year of service can go on fully-paid maternity leave. Following the 2020 Maternity and Paternity Leave Act, the leave duration is up to 180 days for the first child, up to 120 for the second child and up to 90 days for the third child.

Fathers are allowed to take up to 30 days of paid paternity leave.

Parental Leave

There is no further parental leave.

Additional Leave and Benefits

Employees can request another 10 days of paid leave when a close family member dies or when they get married. Once in a lifetime, an employee may also make use of his right to go on a religious pilgrimage for which they receive 60 days of paid leave.

There is no mention of what is considered a legally valid reason for employee dismissal in Pakistan’s Labor Code. However, the most common grounds for dismissal include:

• Economic situation

• Long-term illness

• Underperformance

• Employee misconduct (theft, fraud, breach of law and more)

With the exception of dismissal due to misconduct, employers have to respect a one-month notice period – or provide pay in lieu of notice – and provide severance pay equal to one month’s salary for each year of service.