Using an Employer of Record in Pakistan

Hiring and managing employees in Pakistan requires careful attention to local labor regulations, payroll rules, and employment practices that can change over time. Employers must navigate compliance requirements related to contracts, wages, taxes, benefits, and termination, which can be challenging without local expertise.

Working with an Employer of Record in Pakistan helps simplify this process by allowing companies to engage talent compliantly without establishing a local legal entity. Providers like Payoneer Workforce Management handle employment administration while you focus on growing your business.

Learn more about how Payoneer Workforce Management can support your expansion, or keep reading to explore how using an EOR in Pakistan works and when it may be the right solution.

How to hire employees in Pakistan

Companies looking to build a team in Pakistan can choose between three main approaches, each with different legal, operational, and cost considerations.

1. Set up a local entity: This allows a business to hire employees directly under its own registered company. While this provides full control, it requires time, legal support, and ongoing compliance with local corporate, tax, and labor laws.
2. Hire independent contractors or freelancers: This approach can offer flexibility for short-term or project-based work, but it carries classification risks. Misclassifying employees as contractors can result in penalties, back payments, and compliance issues.
3. Engage employees through an EOR: The third option is onboarding employees through an EOR. An Employer of Record in Pakistan legally employs workers on your behalf and manages payroll, taxes, benefits, and compliance. This allows companies to enter the market quickly without setting up an entity.

Payoneer Workforce Management provides EOR in Pakistan services to help businesses engage talent efficiently with support to stay compliant with local employment laws. We assist you in mitigating misclassification risks while helping you set up localized benefits based on local requirements.

How to onboard employees in Pakistan

Onboarding employees in Pakistan involves administrative and legal steps for compliant employment.

Employers typically need to,

• Issue a written employment contract
• Collect personal and tax-related documentation
• Register the employee with the relevant authorities
• Set up payroll and benefits
• Provide equipment and devices
• Arrange team introduction
• Conduct a company orientation program

When engaging through an EOR, you get assistance with drafting compliant contracts, enrolling employees in payroll, benefits, and more.

Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform.

Pay employees in Pakistan

Understanding how to pay employees correctly is a critical part of compliance and workforce management. Employers must follow local wage rules, tax obligations, and statutory benefit requirements when running Pakistan payroll.

Pakistan payroll basics

Salaries in Pakistan are paid in Pakistan rupees (PKR), with wages typically paid on the last day of the month. The minimum wage in Pakistan is PKR 37,000 per month.

End of service gratuity

Employees who have completed 5 years of continuous service with the same employer may be entitled to an end-of-service benefit known as gratuity. 

Gratuity is calculated based on the employee’s last drawn salary and total years of service. The standard rate is 30 days of wages for each completed year of service, and any employment period exceeding 6 months is treated as a full year. 

Gratuity rules can differ by province, so local guidance is essential.

Taxes and contributions

Employers are also responsible for several taxes and statutory contributions when they pay employees in Pakistan.

• Income tax: Applied at progressive rates ranging from 0% to 35%, depending on income level.
• Social security: Funded by both employees and employers, administered by the Employees’ Old Age Benefits Institution (EOBI), and covers retirement, invalidity, survivor, and old age pensions for eligible private sector employees and their dependents. The system operates under federal jurisdiction and manages pension funds.
• Other employer costs: Can vary depending on salary levels, location, and other local factors, so should be assessed on a case-by-case basis

Employee benefits

Employees in Pakistan may be entitled to additional benefits, such as:

• Life insurance: Life insurance is a mandatory benefit in Pakistan.

Using an EOR offers a streamlined way to manage payroll and maintain compliance when you pay employees in Pakistan. Our unified, all-in-one platform gives you a single dashboard to manage a global workforce. 

Employment laws in Pakistan

Employment laws in Pakistan define minimum standards for working hours, overtime, probation, and notice periods. Employers must comply with these rules to avoid disputes and penalties. 

Working hours and overtime

Working hours are capped at 48 hours per week and typically spread across 6 days. Employees may work up to 3 hours of overtime per day, and total working hours may not exceed 12 hours per day or 60 hours per week. 

Overtime on regular workdays must be paid at 2 times the ordinary rate. Total annual overtime is capped at 624 hours.

Probation and notice periods

There is no mandatory probation period in Pakistan, so there is no minimum duration. The maximum is 6 months. 

Notice during probation is not legally required, although a notice period of 7 to 15 days is commonly recommended.

After probation, employees are entitled to a notice period of at least 30 days, with a maximum notice period of 60 days, depending on contract terms and circumstances.

You can get support to stay compliant with local labor laws by using Payoneer Workforce Management’s infrastructure.

Minimum wage in Pakistan

The minimum wage in Pakistan is currently set at PKR 37,000 monthly. 

Minimum wage levels may differ slightly by province and can be revised by local authorities. Employers should regularly review government announcements to stay compliant with updated wage requirements.

Employment contracts in Pakistan

Employment contracts in Pakistan generally outline the key terms and conditions of the working relationship. These can include job title, responsibilities, compensation, working hours, benefits, leave entitlements, notice periods, and termination conditions.

The specific structure and content of a contract vary depending on factors such as industry, role, seniority, and location. Employers should always confirm that contract terms align with labor laws and regulations.

Onboard talent quickly and securely with localized contracts and payroll through Payoneer Workforce Management.

Leave policy in Pakistan

Here are key details about the leave policy in Pakistan.

Public holiday and vacation time

Pakistan recognizes 10 public holidays each year. 

Vacation or earned leave generally accrues after 1 year of service, with employees entitled to 14 days of paid leave upon completion of that period.

Vacation leave can usually be carried forward for up to 30 days. 

Maternity leave and parental leave

Maternity leave entitlements decrease with each childbirth. Employees are entitled to 180 days of leave for their first birth, 120 days for the second birth, and 90 days for the third. 

Non-birthing parents are entitled to 30 days of parental leave.

Sick leave

Employees are entitled to at least 8 days of sick leave per year.

Sick leave may also be accumulated, with a typical maximum of 16 days.

Other leave

Casual leave is commonly provided for short-term personal needs, with employees typically entitled to 10 days per year.

Work permit in Pakistan

Work permit requirements in Pakistan vary depending on the employee’s country of origin. Employers should consult official government sources to confirm current visa and permit rules, available on Pakistan’s government website.

Background check in Pakistan

Background checks can be carried out before engaging an employee. These checks can include criminal records, employment history, education verification, and other lawful screening methods. Employers are generally required to inform candidates about the scope of checks and obtain appropriate consent before proceeding.

Always check local regulations before carrying out background checks.

Employment termination in Pakistan

Employers may terminate employees based on valid grounds. Termination without valid justification may be considered unfair dismissal and can expose employers to legal consequences. Termination must be assessed on a case-by-case basis. 

Common termination scenarios include: 

• Employee resignation
• Mutual agreement between both parties
• Termination during probation
• Dismissal due to misconduct, performance issues, or absence without leave

Notice periods can range from 1 to 60 days. 

Employees may be entitled to severance pay depending on length of service, reason for termination, and applicable laws.

Company registration in Pakistan

Some businesses choose to register a local entity in Pakistan to establish a long-term presence, enter regulated industries, sign local contracts, or employ staff directly under their own name. Details on company formation and registration procedures can be found on official government websites.

For many companies, using an EOR in Pakistan is a simpler and quicker way to engage talent without the administrative burden of entity setup.

Expand in 160+ countries without setting up a local entity. Payoneer Workforce Management enables compliant onboarding and engagement of talent in 160+ countries without having to set up a legal entity.

PEO in Pakistan

A Professional Employer Organization (PEO) in Pakistan can support HR and payroll functions, but requires you to have a legal entity in-country. 

On the other hand, an Employer of Record in Pakistan does not require a legal entity and instead serves as the legal employer for your local team. This often makes it the better choice for companies new to the Pakistan market.

Payoneer Workforce Management’s Employer of Record services in Pakistan

Payoneer Workforce Management helps growing companies onboard, pay, and manage employees in Pakistan without setting up a local entity. 

As your EOR in Pakistan, we offer assistance with employment contracts, benefits administration, taxes, and payroll, while you retain control over daily operations.

Book a demo to learn more about Payoneer Workforce Management.

FAQs

1) What is an Employer of Record in Pakistan?

An Employer of Record in Pakistan provider is a third-party organization that legally employs workers on your behalf and manages payroll, taxes, benefits, and employment contracts. This allows companies to engage talent in Pakistan without establishing a local entity.

2) How much does it cost to hire Pakistan?

Hiring costs vary by role and compensation level. Estimated employer costs are approximately 2.32% of an annual salary of USD 60,000, but actual costs may vary. Try our employee cost calculator for a more accurate estimate.

3) Why should you hire talent with an EOR in Pakistan?

An EOR in Pakistan can help streamline the employment process. Payoneer Workforce Management allows you to onboard and pay independent contractors and employees across the globe in 70+ currencies and offers a transparent pricing structure. Get in touch for detailed information.