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How to hire and pay employees in Pakistan
Slasify
Jun 21, 2025
| Key Takeaways |
|---|
| 1. Payroll is monthly, with a minimum wage of PKR 40,000 per month for unskilled workers (varies slightly by province). |
| 2. Personal income tax is progressive up to 35% for residents, with no local taxes on employment income. |
| 3. Standard working hours are 9 per day and 48 per week, with overtime capped at 624 hours/year and paid at 200% of normal rate. |
| 4. Annual leave is 14 days, with a maximum carryover of 30 days. Employees also receive 17 paid public holidays in 2025. |
| 5. Maternity leave ranges from 180 to 90 days depending on the number of births; paternity leave is 30 days. Sick leave: 8 days/year, casual leave: 10 days/year. |
| 6. Termination and severance depend on reason: one month's notice is required for normal termination; gratuity is 30 days' wages per year of service unless a Provident Fund is established. |
| 7. Statutory bonuses depend on company profit, typically 15–30% of monthly wages for eligible employees after 90 days of employment. |
| 8. Probation periods are 3 months, after which employees are considered permanent if performance is satisfactory. |
Personal Income Tax
The following tax rates apply to those whose income from salary exceeds 75% of their taxable income:
| Taxable Income (PKR) | Progressive Tax Rate (%) |
|---|---|
| Up to 600,000 | - |
| 600,001–1,200,000 | 5 |
| 1,200,001–2,200,000 | 15 |
| 2,200,001–3,200,000 | 25 |
| 3,200,001–4,100,000 | 30 |
| Over 4,100,000 | 35 |
Local Tax
There are no local taxes on employment income in Pakistan.
Statutory Contributions
The establishment of a Provident Fund is not obligatory, but the employer who establishes it and equally matches the contributions of their employees shall no longer be obligated to pay their employees gratuity upon termination.
On the other hand, contributions made to the Employees' Old-Age Benefit Institution (EOBI) shall be calculated based on the prevailing minimum wage, and those made to the Provincial Employees Social Security (PESS) shall be calculated based on the employees' monthly wages up to a ceiling that varies across the provinces.
More information on PESS rates in each province can be accessed through the following links: Punjab | Sindh | ICT | Balochistan | Khyber Pakhtunkhwa | Others
Employer Contributions
| Contribution Rate | |
|---|---|
| EOBI | 5% |
| PESS | 6%–7% |
Employee Contributions
| Contribution Rate | |
|---|---|
| EOBI | 1% |
Payment of Wages
The minimum wage in Pakistan is set at PKR 37,000 per month for unskilled workers in all provinces.
Minimum Wage
The minimum wage in Pakistan is generally set at PKR 40,000 per month for unskilled workers, with it being PKR 37,000 per month in the provinces of Balochistan and Islamabad Capital Territory.
Statutory Bonus
Employees who have been employed for at least 90 days are generally entitled to a bonus calculated based on the profit of the establishment, provided that they meet the qualifying conditions.
These conditions may include having been employed in an establishment with at least 20 employees in the preceding 12 months for 90 consecutive days in the year and the establishment having declared a profit in the year for which the bonus is to be awarded.
| Proportion of profit to be used as bonus | |
|---|---|
| Profit is at least the aggregate of a month's wages of all employees | 30% |
| Profit is less than the aggregate of a month's wages of all employees | 15% |
In the distribution of such bonus, the bonus to monthly wages ratio shall be equal to total bonus payable to the aggregate of all employee's wage for a month ration.
Termination
Either the employer or employee can terminate their employment relationship by notifying the other party in writing of their reasons. An employee who is dismissed due to misconduct, while not entitled to any notice period, shall still be informed in writing of the alleged misconduct and be given the opportunity to defend themselves.
Serious misconduct, provided that the employee is given an opportunity to respond to the charges leveled against them, is sufficient enough reason for dismissal. However, not every conduct deserves the dismissal punishment.
Section 15 of WP Ordinance VI of 1968 provides a range of punishments available to an employer depending on the severity of the misconduct.
Notice Period
When terminating an employment relationship for any reason other than misconduct, the terminating party is obligated to observe a month's notice period or pay the other party in lieu of notice.
Severance Pay
Employers are generally obligated to pay gratuity equivalent to 30 days' wages for every completed year of service or any part thereof in excess of 6 months to their employees. However, gratuity is not payable if the employer has established a Provident Fund where they contribute to it at least as much as the employee.
Probationary Period
An employee shall be considered to be a permanent employee once they have satisfactorily completed a probationary period of 3 months.
Work Time Rules
Standard Working Hours
An employee's standard working hours are subject to a maximum of 9 hours per day, inclusive of break time, and 48 hours per week.
The period of work shall be arranged so that it does not spread-over more than 12 hours per day and that the total period of time worked does not exceed 60 hours per week.
Break Period
Employees who work continuously for more than 6 hours must be granted a break time of at least an hour.
Overtime
Employees may be required to work overtime under certain circumstances, provided that their total overtime hours does not exceed 624 hours in a year and that they are paid double their ordinary rate of pay for the overtime hours worked.
Employees can be required to work overtime in any day or in any week where there occurs stock-taking, making up of accounts, settlement or such other business operation, and during such other periods as may be prescribed.
Note: Employers must always make sure that they observe the legal spread over limits when requiring their employees to work overtime.
Weekly Rest Days
Employees are entitled to a day of rest per week with no deductions to their wages. For those who are not employed on a monthly salary, the following shall apply:
| Weekly rest entitlement | |
|---|---|
| Those employed on daily wages | Must be paid their daily wages for the rest day |
| Those paid on piece-rate | Must be paid their average wages received during the week |
Holiday and Leave Entitlements
Public Holidays
Employees are entitled to 10 days of paid days off during public holidays per year, the dates of which shall be notified to the employees by the employer in the beginning of each calendar year. There are 17 days of public holidays in Pakistan for 2025.
| Holiday | Date |
|---|---|
| Kashmir Day | February 5 |
| Pakistan Day | March 23 |
| Eid al-Fitr | March 30–April 1 |
| Labor Day | May 1 |
| Youm-e-Takbeer | May 28 |
| Eid al-Adha | June 7–9 |
| Ashura | July 5–6 |
| Independence Day | August 14 |
| Milad un-Nabi | September 5 |
| Iqbal Day | November 9 |
| Christmas Day | December 25 |
| Boxing Day | December 26 |
Annual Leave
Employees who have completed a continuous year of service in an establishment shall be entitled to 14 days of paid annual leave.
Any leave not taken by the employee shall be carried over to the following year, provided that no employee can accumulate more than a total of 30 days of annual leave at any one time. Employees may request to be paid in lieu of any annual leave not taken at their full wage.
In any case, employees who take their leave for any period not less than 4 days shall be paid their wages for the leave period before the leave begins.
Sick Leave
Employees shall be entitled to 8 days of paid sick leave per year, which can be carried over to subsequent years if not used, provided that the total accumulation does not exceed 16 days at any one time.
Maternity Leave
Female employees are entitled paid maternity leaves that subsequently decrease with each additional child, as follows:
| Number of births | Maternity leave entitlement |
|---|---|
| 1 | 180 days |
| 2 | 120 days |
| 3 | 90 days |
Maternity leave shall not be granted more than 3 times throughout the employee's entire service. However, subject to the employer's agreement, they can use their annual leave or be granted leave without pay for the period.
Paternity Leave
Male employees expecting their wives to give birth shall be entitled to 30 days of paid paternity leave.
Paternity leave shall not be granted more than 3 times throughout the employee's entire service. However, subject to the employer's agreement, they can use their annual leave or be granted leave without pay for the period.
Parental Leave
There are no statutory parental leave entitlements in Pakistan, though employees may use part of their annual or casual leave for paid time off in connection with their children, or come to other agreements with their employer.
Other Leave
Employees are entitled to take 10 days of paid casual leave per year, and they can be taken at up to 3 days at a time. This leave cannot be accumulated and shall expire at the end of every year it is not taken.
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