Pakistan Payroll & Employer Of Record (EOR) services.
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PAKISTAN
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Pakistan Payroll and EOR: Employment Contracts
To live and work lawfully in Pakistan, all foreign employees will require work permits. To apply for the visa, they must have a work offer and satisfy specific standards. All work visas are valid for one year and can be used several times in Pakistan. Employees can also extend their permission yearly after it has been approved.
PAID TIME OFF
Annual Vacation
Every employee who has completed a term of 12 months of continuous employment is entitled to 14 days of paid annual leave in the following 12 months. If all 14 days are not used, those days will be added to the employee’s annual leave for the next 12 months.
Sick
In addition to the 14 days of paid annual leave, each employee is entitled to 10 days of unpaid casual leave and an additional 16 days of sick or medical leave at half pay. Casual leave is allowed under particular circumstances, such as an unexpected sickness. A medical certificate is required for sick leave.
Maternity
- Every working woman is entitled to a maximum of 12 weeks of fully compensated maternity leave under the Maternity Benefits Ordinance. This leave is available six weeks before the predicted birth date and six weeks following the delivery and entitles the employee to full compensation. The individual must have worked for at least four months prior to the date of delivery.
- Furthermore, under the Provincial Employees Social Security Ordinance, female employees are qualified for prenatal confinement and postnatal medical care if they have paid contributions for at least 90 days in the previous six months.
Paternity
There is no formal policy in Pakistan regarding paternity leave.
Family
N/A
National Holidays
-
13 Paid National Holidays
Other Paid Time Off
N/A
STATUTORY EMPLOYEE BENEFITS
Unemployment
No unemployment benefits available yet in Pakistan.
Workers Compensation
The Workmen Compensation Act of 1923 (the “Act”) requires employers to compensate employees who are injured or killed while doing their responsibilities. According to the Workers Compensation Act of 1923, an employer is required to reimburse his employees for injuries caused by an accident. If a worker dies or is permanently and totally disabled as a result of the injury, the company must pay PKR 200.000 to the employee’s dependents (limit raised to PKR 300,000 in KPK, PKR 400,000 in Punjab and PKR 500,000 in Sindh).
Social Security
- Employees of companies with five or more employees.
- Voluntary coverage for employees of businesses with up to five employees.
- Exclusions include self-employment and family labour.
- Special systems are available for public-sector employees, military and police officers, and railway workers. Person who is insured: 1% of the monthly minimum pay (none for residents of Sindh province).
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
- Employer: 5% of the monthly minimum pay
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
Retirement
Laws governing social security provide for both full and partial/early pensions. A worker must be at least 60 years old (55 years for women) and have made at least 15 years of payments to be eligible for a full pension. Workers with at least 15 years of contributions and ages 55 to 59 (men) or 50 to 54 (women) receive a reduced pension. The old-age pension is equal to 2% of the covered worker’s average monthly wages over the previous 12 months multiplied by the number of years of contributions.
In terms of early/partial pensions, the full pension is lowered by 0.5 percent for each month the pension is received before retirement age (thus a worker accepting a pension after the age of 55 receives only 70% of the entire pension). If a worker does not match the qualifications for a full or partial pension, an old-age allowance is available. The EOBI minimum monthly pension has been increased from Rs. 3,600 to Rs. 5,250 per month.
Health
N/A
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
Private workers compensation is available in Pakistan.
Retirement
There are private retirement schemes available in Pakistan.
Health
Private healthcare is available in Pakistan.
Insurance
Private life insurance is available in Pakistan.
PERSONAL INCOME TAX
Tax Year
Pakistan Payroll: Personal Income Tax
The tax year in Pakistanis a calendar year from 1st July to 30th June.
Tax Tables
Taxable Income | Rates of Taxes |
0 – 600 000 | 0% |
600 000 – 1 200 000 | 5% |
1 200 000 – 1 800 000 | 10% |
1 800 000 – 2 500 000 | 15% |
2 500 000 – 3 500 000 | 17.5% |
3 500 000 – 5 000 000 | 20% |
5 000 000 – 8 000 000 | 22.5% |
8 000 000 – 12 000 000 | 25% |
12 000 000 – 30 000 000 | 27.5% |
30 000 000 – 50 000 000 | 30% |
50 000 000 – 75 000 000 | 32.5% |
75 000 000 + | 35% |
Taxation Method
Pakistan imposes a tax on its people’ worldwide income. A non-resident individual is only taxed on income derived from Pakistan, which includes money received or deemed to be received in Pakistan, as well as income deemed to accrue or arise in Pakistan.
Double Taxation
Pakistan has multiple double tax agreements (DTA) with other countries.
Residence Requirements
For income tax purposes, a person is considered to be a resident of Pakistan if:
- If the individual is present in Pakistan for a period or periods totalling 183 days or more in a tax year (1 July through 30 June), regardless of nationality;
- If the individual is an employee of the federal government of Pakistan or a provincial government posted outside Pakistan during the tax year.
Payroll Calendars
There are no predetermined dates on which employees must be paid.
Weekly, Bi-weekly, fortnightly and monthly payrolls are acceptable.
Rebates & Tax Credits
In Pakistan, there are no additional substantial tax breaks or incentives for individuals.
Health Insurance
Efforts have been made to improve Pakistan’s healthcare system, with intentions to develop a universal healthcare program by 2025.
Unemployment
No unemployment benefits available yet in Pakistan.
Social Security
- Employees of companies with five or more employees.
- Voluntary coverage for employees of businesses with up to five employees.
- Exclusions include self-employment and family labour.
- Special systems are available for public-sector employees, military and police officers, and railway workers. Person who is insured: 1% of the monthly minimum pay (none for residents of Sindh province).
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
- Employer: 5% of the monthly minimum pay
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
PAYROLL ELEMENTS
Income
Pakistan Payroll Elements
Salary, earnings, bonuses, overtime pay, taxable benefits, allowances, and certain lump sum perks are examples of remuneration (revenue from employment). Profits or losses made by a company or trade. Income or profits derived from an individual’s status as a trust beneficiary.
Bonuses
According to Section 1(4) of the Standing Orders Ordinance, 1968, every industrial and commercial establishment in Pakistan with 20 or more employees is required to pay a profit bonus to their employees if they have been in employment for at least 90 days in that year and the company has declared profit in that year.
The bonus is given to workers in acknowledgment of the excellent services they have provided to the business. It must be paid within three months of the fiscal year’s end and cannot be postponed for any reason, including a lack of sufficient cash or incomplete financial statements.
The following is how the bonus is calculated:
- If the profit is less than the sum of all employees’ one-month salary, 15 percent of the profit is paid to the qualified employees.
- If the profit equals the sum of all employees’ one-month salary, 30 percent of the profit is allocated to the qualified employees.
- If the profit exceeds the amount of all employees’ one-month salary, no more than 30% of the profit is paid to the qualified employees.
Allowances
The following are significant exclusions available under salary income:
- Medical allowances/expenditures: Reimbursement of expenses incurred by an employee for medical treatment, hospitalization, or both is tax-free.
- If the employee does not have access to medical expenditure reimbursement, a medical allowance of up to 10% of basic pay is excluded.
Benefits in Kind
Benefits in kind are simple payments in kind and company subsidies offered for workers’ personal or social needs. Also, depending on its purpose, money provided to employees may be considered a kind benefit and may be excluded from tax and premium contributions.
Investment Income
- Capital gains derived from the sale, exchange, or transfer of moveable capital assets are taxed.
- Dividend income received from a firm (including mutual funds and real estate investment trusts, among others) is typically subject to final taxation at a rate of 15%; however, a different rate might apply in the following circumstances:
- Pay-out provided by independent power producers if such dividend is a pass-through item under relevant energy agreements and is obliged to be repaid at 7.5 percent by the appropriate agency (applicable rate of tax deduction also at 7.5 percent ). Dividend from a corporation when no tax is payable owing to income exemption, carry forward of business losses, or claim of tax credits at a rate of 25% (applicable rate of tax deduction also at 25 percent ).
- A company’s interest income is taxed in the same way as its other revenue. WHT is levied at a rate of 10% on interest generated by a non-resident business without a PE in Pakistan, unless a lower rate is specified in the associated DTT, which is also the ultimate tax on such income.
Retirement Funding
Laws governing social security provide for both full and partial/early pensions. A worker must be at least 60 years old (55 years for women) and have made at least 15 years of payments to be eligible for a full pension. Workers with at least 15 years of contributions and ages 55 to 59 (men) or 50 to 54 (women) receive a reduced pension. The old-age pension is equal to 2% of the covered worker’s average monthly wages over the previous 12 months multiplied by the number of years of contributions.
In terms of early/partial pensions, the full pension is lowered by 0.5 percent for each month the pension is received before retirement age (thus a worker accepting a pension after the age of 55 receives only 70% of the entire pension). If a worker does not match the qualifications for a full or partial pension, an old-age allowance is available. The EOBI minimum monthly pension has been increased from Rs. 3,600 to Rs. 5,250 per month.
Health Insurance
Efforts have been made to improve Pakistan’s healthcare system, with intentions to develop a universal healthcare program by 2025.
Risk Insurance
N/A
Taxable Income
Pakistan imposes a tax on its people’ worldwide income. A non-resident individual is only taxed on income derived from Pakistan, which includes money received or deemed to be received in Pakistan, as well as income deemed to accrue or arise in Pakistan.
Allowable Deductions
Zakat paid under the Zakat and Usher Ordinance is eligible for a special direct deduction.
On gifts given to any qualified non-profit organization, a tax rebate at the average rate is permitted on the lesser of the donation amount and 30% of the individual’s taxable income. If an individual makes a contribution to an associate, the amount of the donation that qualifies for tax credit is limited to 15% of the individual’s taxable income.
There are special deductions/tax credits available for interest paid on home loans, investments in specific stocks, payment of insurance premiums, and so on.
Donations to some designated institutes, which were formerly eligible for a direct deduction from income, are now subject to a tax credit scheme.
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
Pakistan Payroll Taxes and Employment Contracts
Employers are not required to pay any extra taxes in relation to their employees or their compensation, other than social security contributions.
Unemployment
No unemployment benefits available yet in Pakistan.
Social Security
- Employees of companies with five or more employees.
- Voluntary coverage for employees of businesses with up to five employees.
- Exclusions include self-employment and family labour.
- Special systems are available for public-sector employees, military and police officers, and railway workers. Person who is insured: 1% of the monthly minimum pay (none for residents of Sindh province).
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
- Employer: 5% of the monthly minimum pay
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
Workers Compensation
The Workmen Compensation Act of 1923 (the “Act”) requires employers to compensate employees who are injured or killed while doing their responsibilities. According to the Workers Compensation Act of 1923, an employer is required to reimburse his employees for injuries caused by an accident. If a worker dies or is permanently and totally disabled as a result of the injury, the company must pay PKR 200.000 to the employee’s dependents (limit raised to PKR 300,000 in KPK, PKR 400,000 in Punjab and PKR 500,000 in Sindh).
ADMINISTRATION
Income
Pakistan imposes a tax on its people’ worldwide income. A non-resident individual is only taxed on income derived from Pakistan, which includes money received or deemed to be received in Pakistan, as well as income deemed to accrue or arise in Pakistan.
Payroll Taxes
Employers are not required to pay any extra taxes in relation to their employees or their compensation, other than social security contributions.
Unemployment
No unemployment benefits available yet in Pakistan.
Social Security
- Employees of companies with five or more employees.
- Voluntary coverage for employees of businesses with up to five employees.
- Exclusions include self-employment and family labour.
- Special systems are available for public-sector employees, military and police officers, and railway workers. Person who is insured: 1% of the monthly minimum pay (none for residents of Sindh province).
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
- Employer: 5% of the monthly minimum pay
- The monthly minimum wage in Punjab, Islamabad, the Capital Territory, Khyber Pakhtunkhwa, and Balochistan is 15,000 rupees; in Sindh, it is 16,200 rupees (July 2018).
Workers Compensation
The Workmen Compensation Act of 1923 (the “Act”) requires employers to compensate employees who are injured or killed while doing their responsibilities. According to the Workers Compensation Act of 1923, an employer is required to reimburse his employees for injuries caused by an accident. If a worker dies or is permanently and totally disabled as a result of the injury, the company must pay PKR 200.000 to the employee’s dependents (limit raised to PKR 300,000 in KPK, PKR 400,000 in Punjab and PKR 500,000 in Sindh).
Statutory Benefits
Statutory benefits in Bangladesh include time off for the 15 national holidays, as well as one day off for every 18 days worked.
Employee Benefits
All employees are entitled to time off, including 13 paid public holiday days.
LEGISLATION
- The Workers Compensation Act
- Payment of Wages Act
- Employees Cost of Living Relief Act
STATUTORY BODIES
The Federal Ombudsman Office, the Federal Public Service Commission, the Pakistan Securities and Exchange Commission, and the courts (e.g. Islamabad High Court, Federal Shariat Court, Supreme Court)
