Employer of Record in Pakistan

How an Employer of Record works in Pakistan

Expanding into Pakistan offers commercial potential but navigating the local landscape can present a number of challenges due to fragmented legislation. An Employer of Record (EOR) like Rivermate acts as the legal employer for foreign companies’ staff in Pakistan. While foreign clients recruit and manage their team members, Rivermate handles all legal, payroll, tax, and HR administrative duties.

When hiring via an EOR, candidates are legally employed under an existing local entity structure, using compliant employment contracts and enrolled in statutory benefits. Local HR experts manage the full process and make sure that both federal and provincial legal frameworks are adhered to so that foreign employers can hire with confidence.

Pakistan labor market: At a glance

The hiring market
Greatest hiring activity:	High demand is concentrated in the major business hubs of Karachi, Lahore, and the capital of Islamabad.
Hiring timelines:	Locals: around 1 week Foreign nationals: about 1 month for work permit.
In-demand sectors:	Information technology, software engineering, BPO, digital services.
Sectors with skills shortages:	Specialized software development, senior management roles.

The salary market
Employer tax contributions:	EOBI pension fund: 5% of statutory minimum wage Provincial social security contribution: variable, typically around 6% of minimum wage WWF: 2% of annual income, if applicable WPF: 5% of pre-tax profit, if applicable
Monthly minimum wage:	Regional variations, range from PKR 37,000 - 43,000 / month
Average monthly wage:	PKR 39,042 (2024-2025)
Personal income tax rates:	Progressive brackets up to 35%; amount up to PKR 600,000/year is tax exempt. The following tax rates are applied marginally: PKR 0-600,000/year: 0% PKR 600,000 - 1,200,000: 1% PKR 1,200,000-2,200,000: 11% PKR 2,200,000-3,200,000: 20% PKR 3,200,000-4,100,000: 25% PKR 4,100,000-5,600,000: 29% PKR 5,600,000-7,000,000: 32% PKR 7,000,000+: 35%

Important note on labor legislation in Pakistan: local labor legislation is mostly provincial rather than applied on a national level. Each of the four provinces (Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan) can legislate separately, so the main starting point in determining which rules apply is the work location of the employee. Differences across provinces are observed in almost all aspects of the legislation, including minimum wages, contribution rates and leave entitlements. The income tax (collected by the FBR) and old-age pension contribution (collected by the EOBI) are regulated and paid on the federal level.

What will it cost to hire in Pakistan?

Base salary

Minimum wages are defined by province in Pakistan and range from PKR 37,000 (Balochistan) through PKR 40,000 (Khyber Pakhtunkhwa and Punjab) to PKR 43,000 (Sindh). The stated figures relate to entry-level unskilled workers. Some provinces (such as Sindh) also issue separate minimums for semi-skilled, skilled or highly skilled workers.

According to the Pakistan Bureau of Statistics 2024-2025 report, the average monthly wage was PKR 39,042, up from PKR 24,028 four years prior to that (2020-2021) showing significant growth.

Pakistani salaries are paid at least once monthly in rupees. There is no statutory 13th-month salary requirement in Pakistan at the national level; collective agreements or individual contracts may define one.

Employer taxes and contributions

Pakistan applies a somewhat unusual method in calculating employer costs. Instead of the calculations being based on the actual salary of an employee, they are based on applicable minimum wage levels. This results in contributions being capped relatively low, therefore significantly reducing employment costs.

Specifically, employers contribute to:

• Old-Age Benefits Institution (EOBI): Employers contribute 5% of the statutory minimum wage (regardless of actual salary level). Employees contribute 1% of the minimum wage. EOBI benefits include old-age pension, survivor’s pension and disability pension.
• Provincial Social Security (PESSI/SESSI/KPESSI or BESSI): approximately 6% on the wage ceiling (set per province). This contribution provides access to medical treatment, hospitalization, maternity care and disability support to employees.
• Workers’ Welfare Fund (WWF): A statutory workers’ welfare contribution applicable to companies exceeding annual income thresholds (PKR 500,000), subject to federal or provincial legislation. Employers in scope contribute 2% of the assessable income.
• Workers’ Participation Fund (WPF): Statutory profit-sharing scheme applicable to qualifying companies who must make a contribution of 5% of pre-tax profit, which is then distributed as profit share to eligible employees.

Remittance deadlines vary by obligation. Employers should follow the applicable FBR, EOBI and/or provincial social security deadlines rather than applying a single monthly payment date.

Statutory benefits and premiums

Beyond the above monthly employer costs that need to be budgeted for, employers should be aware of the following as well:

• Paid annual leave: 14-21 consecutive days of leave after twelve months of service, variable by province. Depending on provincial regulations, it may be carried over and accumulated if unused. In the first year, it is accrued proportionally to the months of service.
• Public holidays: Around 15 public holidays (2026, may change from year to year) are fully paid, with the majority of them movable from one year to the next. Some provinces have extra local public holidays.
• Casual leave: typically 10 days / year, fully paid, intended for urgent personal matters or short absences.
• Sick leave: depending on province, 8-16 days / year, payment depends on legislation, typically set at 50%.
• Paid maternity leave: variable by province but commonly 12 weeks paid by the employer.
• Paternity leave: up to 30 days fully-paid by employer in establishments under Federal control (including Islamabad); in other provinces, paternity leave is subject to local legislation or company policy.
• Gratuity: a benefit associated with an employee’s service, payable when an employment ends. Typically it is calculated as 30 days’ wages for each completed year of service (or a part of the year if it exceeds six months). The Gratuity is only payable during offboarding, except in cases of misconduct.

The Pakistani work week is set at eight hours a day and 48 hours a week but is reduced during Ramadan based on provincial regulations. Overtime is paid at double the regular rate (100% premium).

Additional benefits

Though not mandatory, supplementary health insurance is common for both employees and their dependents, particularly in multinational companies.

Certain allowances (such as medical and conveyance) have income tax exemption thresholds so they are often used for compensation package structuring.

Calculate employment costs

What hiring in Pakistan really looks like

Market condition	Current reality	Details
Hiring momentum	🟡 Moderate	Stable growth in tech and BPO.
Talent availability	🟢 Strong	Strong talent pool in Karachi, Lahore and Islamabad
Salary and benefits pressure	🟡 Moderate	Premium pay required for top talent. High demand for private health insurance
Employment legislation	🟡 Complex	Both federal and provincial layers of regulation apply.
Workplace culture	🟢 Stable	Work-focused, generally practical, reluctant to raise unnecessary operational escalations.

Hiring professionals in regulated sectors

Some regulated sectors (such as healthcare, law, banking, architects, aviation staff etc) are bound by regulatory bodies requiring employment through an already properly-licensed entity (e.g. medical institution, law firm, bank etc) rather than an Employer of Record. Similarly, hiring individuals for purposes of employment in the government, defense, civil service or similar sectors may not be feasible through an EOR due to various requirements such as security clearances or public administration laws. Foreign companies are advised to check with Rivermate whether the role they are hiring for can be legally supported through an EOR ahead of onboarding.

The reality of hiring expats in Pakistan

When hiring foreign nationals into Pakistan, employers must account for distinct administrative realities. While formal immigration laws apply universally, foreign nationals from specific jurisdictions undergo more intense background verifications that can extend visa timelines.

Foreign nationals require a work visa to be employed in Pakistan. Employers submit the application through Pakistan’s E-Visa system, with the Board of Investment and other government authorities involved in the review process. An employment letter is required, issued by an employer who is an SECP-registered entity, and showing the salary level and the duration of the assignment.

Employment in Pakistan while visiting on a business visa is not allowed.

Compliance risks to consider in Pakistan

Probationary periods

Provincial legislation defines legal probationary periods, so no country-wide rule is applicable even though a three-month probationary period is the market standard. Terminating a contract during a probationary period carries less procedural burden, assuming the probationary period is clearly defined in the contract. The required notice period for termination during probation is usually governed by the individual contract or company policy; payment in lieu of notice is possible.

Terminations

Termination requirements in Pakistan depend on the employee’s province as well as on the employment classification and the contracted terms. Typically, a one-month notice period applies, or a payment in lieu, with the exception of cases of proven misconduct after a disciplinary process, which may require no notice. Pakistani law permits termination for reasons including misconduct, performance and retrenchment (economic reasons), subject to applicable provincial legislation and procedures. Each case should be analyzed individually.

Fixed-term contracts should be reviewed carefully before early termination as ending a contract before its expiry date may result in additional payment or other obligations.

Why choose hiring through an EOR in Pakistan?

While government promotional materials often suggest that local company incorporation takes only 10 to 16 days, in practice the process typically takes much longer. Expecting a two-week setup window for corporate registrations, tax office procedures, EOBI enrollment and banking setup often leads to missed hiring deadlines and potential compliance gaps.

Using an EOR like Rivermate solves any administrative complications so that foreign employers can hire talent immediately without spending months on setup.

Ready to hire in Pakistan?

Hiring in Pakistan involves more than finding the right candidate. From managing onboarding, processing payroll, to ensuring full compliance with Pakistani labor laws, Rivermate handles the complexities so you can confidently expand your business. If you have found your next candidate in Pakistan, talk to a Pakistan Hiring Expert now.

Sources:
PwC Tax Summary Pakistan
Income Tax Ordinance 2001
PakIncomeTax
EOBI FAQ
SESSI payment of contribution
WWF
PBS 2024-2025 Labor Force Statistics Report
Factories Act, 1934
Industrial and Commercial Employment (Standing Orders) Ordinance, 1968
Employees Old-Age Benefits Act, 1976
Ministry of Interior: Work General Visa
Invest.gov.pk Work Visa