Pakistan is a country in south Asia bordered by India, Afghanistan, Iran, and China. It is the world’s 5th most-populous country with the 2nd-largest Muslim population on the globe. Pakistan is the site of many ancient cultures, and has a diverse climate and geography.

While it is considered to be a developing country, it has a high potential to become one of the world's largest economies in the 21st century.

Types of Contracts

In Pakistan, the following contract types are available:

• Permanent: does not have a specified end date and continues until terminated by either the employer or the employee according to the terms specified in the contract or as allowed by law.
• Fixed Term: Has a defined start and end date and is often used for temporary or project-based work. The contract automatically terminates at the end of the agreed-upon term unless renewed.
• Part-Time contract: has reduced working hours compared to full-time employment. Part-time employees are entitled to proportional benefits based on hours worked.

Working Hours

A standard working week in Pakistan is 45 hours long (Monday to Saturday).

Overtime

Hours worked over and above 45 hours are counted as overtime. There is no mandated limit to overtime for non  factory workers. Overtime pay is twice the regular rate.

Minimum Wage

The minimum wage is announced annually. For 2024 it is:

• Unskilled worker: PKR 32,000
• Skilled worker: PKR 44,000

Probation Period

The maximum probation period in Pakistan is 90 days. The period can be extended for a further 90 days.

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Taxes & Local Employment Costs

Employee Taxes & Contributions

Taxable income for employees includes salaries, wages, bonuses, allowances, and other employment-related income. Pakistan uses a progressive income tax rate system, where tax rates increase with income levels ranging from 0% to 35%.

Social Security contribution: Employees contribute 1% towards Employee Old Age Benefits Institution (EOBI) for pension.

Employer Taxes & Contributions

Employers pay 6% of their employees' salaries up to PKR 37000 for social security contributions.

Annual Leave

An employee is entitled to a minimum of 14 calendar days of annual leave. At the end of the year, accrued leave is carried over to the next year for up to 12 months. At the termination of the contract, unused leave is compensated.

Sick Leave

An employee is entitled to 8 calendar days of sick leave per year with full pay from the employer, contingent upon presenting a medical certificate. Once this limit is exceeded, any further leave will be unpaid.

Casual Leave

An employee is entitled to 10 days of paid casual leave for unforeseen circumstances. Any unused casual leave is forfeited at the end of the year. The leave is paid by the employer.

Maternity Leave

Female employees who have been employed for at least 4 months before the delivery date are entitled to maternity leave that varies between 90 and 180 days as follows:

• 180 days for the first child;
• 120 days for the second;
• 90 days for the third.

Maternity leave is paid by the employer.

Paternity Leave

Male employees are entitled to up to 30 days of fully paid paternity leave after the birth of the first, second, and third child. The leave is paid by the employer.

Public Holidays

There are 10 national public holidays in Pakistan each year, as well as some bank and optional holidays across the country.

Benefits

Statutory Benefits

Employees in Pakistan have the following statutory benefits:

Social Security: Under the Employees' Old-Age Benefits Institution (EOBI) Act, employees are entitled to old age benefits, survivor's pension, and invalidity pension.

Employees' Provident Fund (EPF): The EPF Act mandates employers to contribute to a provident fund for their employees. This fund serves as a retirement savings scheme.

Group Life Insurance: cover offering death benefit.

Gratuity: The gratuity amount is based on the employee's last drawn salary and the years of service.

Profit Bonus: Employers with 20 or more employees pay a profit bonus to employees who have worked for 90 continuous days.

Non Statutory Benefits

Employers in Pakistan typically offer the following non-statutory benefits:

• Health insurance
• Flexible working hours;
• Festival Bonus/13th Salary;
• Remote work allowance;
• Home office equipment;
• Wellness Programs such as gym memberships;
• Employee Assistance Programs (EAPs) such as legal assistance;
• Transportation benefits;
• Education assistance;
• Stock options;
• Meal benefits.

Notice Period

During probation, the minimum notice period is 7 days. After probation, the minimum notice period is 30 days. An employee can be paid cash in lieu of the notice period.

Severance Pay

The following statutory payments apply following the termination of the employment contract:

• Cash in lieu of unused leave;
• 30 days notice pay where applicable;
• 30-day severance pay for a worker terminated for any reason other than misconduct.

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