Pakistan Payroll & Employer Of Record (EOR) services.
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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.
In Pakistan the probationary period usually lasts three months.
The minimum salary in Pakistan is 15,000 Pakistani rupees ($150) per month.
In Pakistan, the usual workday is nine hours long, with a total of 48 hours per week spread out over six days. Employees are given a one-hour break every day and are not permitted to work for more than six hours without a break.
The weekly overtime limit is 12 hours. Keeping that weekly limit in mind, employees may work an additional 2-3 hours each week while keeping the aforementioned spread over restrictions in mind. Overtime labor hours should not exceed 624 hours per year. If a worker works longer than the required working hours, i.e., 9 hours per day and 48 hours per week, they are entitled to overtime compensation at double the rate of their regular salary (200 percent of the normal wage rate).
Non-compete clauses are commonly included in agreements between companies and enterprises in Pakistan. The language of such a provision can range from prohibiting another company from engaging in competitive work while employed by the restricting party to prohibiting an individual from working for a competitor firm after resigning.
There is a provision in the legislation for severance/redundancy compensation, however it is not paid when a worker is fired for misbehaviour. For each completed year of employment, a worker is entitled to a severance payment of 30 days’ earnings.
In the private sector, an employee’s probationary term is normally between 3-6 months. The probationary period in the public sector is usually between one and two years.
A permanent worker’s employment cannot be terminated for any reason other than misbehaviour unless the employer or the employee provides one month’s notice or pay. One month’s earnings are computed using the average pay received during the previous three months of work. If the employee has been with the firm for less than one month, he or she is entitled to one month’s pay in lieu of notice.
Employers may cancel an employment contract, but they must give a documented termination letter outlining the grounds for the termination. It should be emphasized that local legislation does not specify the reasons for terminating an employment connection; nonetheless, case law includes significant sickness, inability to execute the work, and the company’s financial demands. Misconduct is sufficient grounds for dismissal if the employee is given an opportunity to reply to the accusations. Wilful disobedience, damage to the employer’s property, theft, fraud, frequent violation of the law, absence without authorization, and unlawful strikes are examples of significant misbehaviour.
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Judiciary of Pakistan
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.
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.
There is no formal policy in Pakistan regarding paternity leave.
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13 Paid National Holidays
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No unemployment benefits available yet in Pakistan.
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).
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.
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Private workers compensation is available in Pakistan.
There are private retirement schemes available in Pakistan.
Private healthcare is available in Pakistan.
Private life insurance is available in Pakistan.
The tax year in Pakistanis a calendar year from 1st July to 30th June.
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% |
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.
Pakistan has multiple double tax agreements (DTA) with other countries.
For income tax purposes, a person is considered to be a resident of Pakistan if:
There are no predetermined dates on which employees must be paid.
Weekly, Bi-weekly, fortnightly and monthly payrolls are acceptable.
In Pakistan, there are no additional substantial tax breaks or incentives for individuals.
Efforts have been made to improve Pakistan’s healthcare system, with intentions to develop a universal healthcare program by 2025.
No unemployment benefits available yet in Pakistan.
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.
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:
The following are significant exclusions available under salary income:
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.
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.
Efforts have been made to improve Pakistan’s healthcare system, with intentions to develop a universal healthcare program by 2025.
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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.
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.
Employers are not required to pay any extra taxes in relation to their employees or their compensation, other than social security contributions.
No unemployment benefits available yet in Pakistan.
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).
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.
Employers are not required to pay any extra taxes in relation to their employees or their compensation, other than social security contributions.
No unemployment benefits available yet in Pakistan.
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 in Bangladesh include time off for the 15 national holidays, as well as one day off for every 18 days worked.
All employees are entitled to time off, including 13 paid public holiday days.
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)
This information is provided solely for informational purposes and should not be used as a substitute for professional advice in any jurisdiction. You should hire your own legal, tax, and accounting professionals as part of your worldwide payroll needs.
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