Currency
Pakistani Rupees (PKR)
Capital
Islamabad
Population
231.4 Million
Economy
GDP: $376.493 billion (2022)
Language
Urdu
Hire employees in Pakistan
Pakistan’s employment laws are comprehensive and include various ordinances, acts, rules and regulations with statutes relating to industrial, commercial, and labor establishments. The federal labor laws in Pakistan include the Workmen Compensation Act, the Payment of Wages Act, the Employer’s Liability Act, and more. Some other statutes apply to Sindh, Punjab, and Khyber Pakhtunkhwa provinces in Pakistan.
Pakistan’s labor laws apply to both citizens as well as foreign nationals. Foreign employees can easily work in Pakistan with a work visa unless there is a Visa Abolition Agreement between Pakistan and the employee’s home country. An application for this must be submitted to the Board of Investment, Pakistan.
Therefore, to stay compliant with the laws, Vurke provides an effective global network solution to expand your business and handles complete payroll without you having to set up another entity.
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Vurke provides an effective global network solution to expand your business and handles complete payroll without you having to set up another entity
The types of visas in Pakistan are as follows:
Visa Category |
Explanation |
Visitor Visa |
A visitor visa is required if you are visiting Pakistan to meet relatives or friends or for any other legitimate purpose at their invitation for a duration of 3 months. |
Business Visa |
Business visa is granted to individuals with a minimum annual income of PKR 5,00,000/-, or if their company’s annual turnover or sale is greater than PKR 30,00,000/- (Duration: 1 year business visa for visiting 5 places, four times a year)
AND If you are a businessman with an income of at least PKR 50,00,000/- or your company’s annual turnover or sale is more than PKR 3,00,00,000/- (Duration: 1 year multiple entry business visas for up to ten places with exemption from Police Reporting). |
Conference Visa |
This visa is required if you intend to participate in any conference/seminar/exhibition on a specific invitation. |
Pilgrim Visa |
A pilgrim visa is given to a group of pilgrims (more than 10) visiting religious places. |
Medical/ Medical Attendant Visa |
This visa is issued if you need to visit Pakistan for specialized medical treatment or to accompany such a patient. |
Journalist Visa |
This visa is issued to accredited journalists to cover an event or attend a seminar, conference, or exhibition. |
Student Visa |
A student visa is issued for applicants who intend to study in a recognized and approved academic institution in Pakistan. |
Official Visa |
An official visa is given to a diplomatic/official passport holder. |
Assignment Visa |
Assignment visas are issued only to diplomatic/official passport holders who are posted in Pakistan. |
When planning to set up a subsidiary and hire remote teams to carry on business operations in Pakistan, one needs to be aware of the laws on work permits and visas in Pakistan. Some of the important documents required while applying for a work visa are as follows:
- Employee’s photograph
- Employee’s passport
- Company registration letter from Securities and Exchange Commission of Pakistan (SECP)
- Recommendation letter by the Board of Investors (BOI)/Ministry of Interior (MOI) for an extension
- Contact details
- Undertaking on company letterhead
- The employer cover letter on company letterhead
- Company’s profile
- Employment agreement
- Company’s FBR NTN certificate
These applications must be filled in English, and 4 identical sets of the application must be submitted to the embassy with a visa fee. Time taken to obtain a visa is three to four months. Applicants may need to go for an interview. After that, the BOI will process it, and then it approves the work visa and sends a recommendation to the Ministry of Interior. After this approval, you will finally be authorized for the issuance of a visa.
Vurke EOR can help provide you with a work permit in Pakistan. As a reliable EOR partner in Pakistan, Vurke’s EOR platform helps client organizations efficiently hire and manage their employees’ activities in Pakistan.
Pakistan’s employment laws are comprehensive and include various ordinances, acts, rules and regulations with statutes relating to industrial, commercial, and labor establishments. The federal labor laws in Pakistan include the Workmen Compensation Act, the Payment of Wages Act, the Employer’s Liability Act, and more. Some other statutes apply to Sindh, Punjab, and Khyber Pakhtunkhwa provinces in Pakistan.
Pakistan’s labor laws apply to both citizens as well as foreign nationals. Foreign employees can easily work in Pakistan with a work visa unless there is a Visa Abolition Agreement between Pakistan and the employee’s home country. An application for this must be submitted to the Board of Investment, Pakistan.
Therefore, to stay compliant with the laws, Vurke provides an effective global network solution to expand your business and handles complete payroll without you having to set up another entity. Here are some important aspects of employment in Pakistan.
Entitlements |
Explanation |
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Statutory Working Hours |
48 hours per week | ||||||||||||
Weekly Rest Period |
Between 7 workdays, workers are given a rest period of one day before returning to work. | ||||||||||||
Maternity Leave |
12 weeks of maternity leave for female employees with full pay and 6 weeks post-natal leave is compulsory under the Maternity Benefit Act. The Revision of Leave Rules 1981 in the Punjab province allows employees to avail paternity leave. Paternity leave of fifteen days (extendable up to three months) is admissible with full pay on or immediately before the child’s birth. |
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Annual Leave Accrual Entitlement |
14 consecutive days’ leave in the period of 12 months is permitted in Pakistan.
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Overtime Compensation |
If a worker works beyond the stipulated working hours, he or she is entitled to overtime pay which is double the rate of the ordinary pay. | ||||||||||||
Employment Security |
Written employment particulars, fixed-term contracts, and probation period details are mentioned under the Standing Orders Ordinance. |
When the company scales up and expands internationally, there are generally two options for hiring; contractors or full-time employees. Before hiring, companies must be familiar with the prevailing laws in Pakistan for hiring contractors and full-time employees. The relevant laws in Pakistan to define employment are:
- Industrial and Commercial Employment (Standing Orders) Ordinance 1968 (applicable in Baluchistan, ICT, and Punjab)
- Khyber Pakhtunkhwa Industrial and Commercial Employment (Standing Orders) Act, 2013
- Sindh Terms of Employment (Standing Orders) Act, 2015
For the workmen to whom the above ordinances apply, a formal employment letter is issued to define the terms and conditions of service. Workers in Pakistan are divided into six categories.
| 1 |
Permanent |
When a worker has been working for 9 months and has satisfactorily completed 3 months of the probation period |
| 2 |
Probationers |
Probationers for the period of the first 3 months |
| 3 |
Badlis (Alternate) |
When a worker is appointed to the post of a permanent or probationary employee who is temporarily absent |
| 4 |
Temporary |
A person hired for a project ending within 9 months |
| 5 |
Apprentices |
A person undergoing training through an apprenticeship system |
| 6 |
Contract worker |
When a worker is employed to work on a piece-rate basis for a specified period. Overtime pay for working over-hours is not specified |
The maximum duration for a fixed-term contract worker doing tasks of permanent nature is nine months. Sindh legislation defines a contract worker as a worker who works on a contract basis for a specific period mentioned in the contract in any establishment but does not include third-party employment. Hence, it is helpful to choose a global payroll provider such as Vurke, who can easily maintain your compliances and leave you free to focus on core business operations.
Probation Period |
According to the Standing Order Ordinance, 1968, the probation period lasts for 3 months. |
Notice for Termination of Employment |
According to the Standing Order Ordinance, 1968, one-month prior notice before terminating an employment contract is mandatory. (This applies to permanent employees only) |
Severance Pay |
If employment is terminated for any reason other than misconduct, the worker is entitled to severance pay or gratuity. This is equivalent to 30 days’ wages for every completed year of service or any part thereof in excess of 6 months. |
Get all the details of the probation period and termination period in Pakistan from Vurke experts today!
To set up payroll and manage taxation in Pakistan, you need to be aware of the payroll and taxation rules which vary across different categories. With Vurke’s EOR Pakistan solution, you can rest assured as we manage a locally compliant payroll in Pakistan. The decision to be made is whether you want to manage payroll remotely or you prefer outsourcing to Vurke to manage your payroll along with compliance with local rules and regulations. Moreover, while choosing to set up a Pakistan payroll, it is necessary to establish a subsidiary in the country through which you can legally operate.
Tax |
Explanation |
Tax year |
The tax year is the financial year. |
Penalties |
0.1 % of the amount of the tax payable for each day of default. |
Withholding Tax (For non-residents) |
Dividends: 15% Interest: 10% Royalties: 15% Fees for technical services: 15% |
Payroll Tax |
No specific payroll taxes. |
Social Security Contributions |
The employer contributes up to 6% of wages to the social security institution on behalf of the employee. No contribution is due on wages in excess of PKR 600 per day or PKR 15,000 per month. |
Health Insurance |
No healthcare benefits as it is administered through expensive private sector insurance companies. |
Additional Benefit |
An employee who takes pilgrimage is granted a special leave of up to 60 days. Some companies offer medical insurance, life insurance, and tuition fee reimbursement. |
Filing & Payment |
It must be filed by 31st August after the tax year ending on 30th June. Resident individuals also need to file a statement of wealth and a wealth reconciliation statement as of 30th June. |
Public Pension |
Pensions in Pakistan are governed under the Pakistan Pension Fund. |
Social Security Contributions |
Nil |
Sales Tax |
17% for goods and 13% to 16% for services |
Talk to us and know more about payroll and taxes in Pakistan!
Business entities in Pakistan
The most common way of doing business in Pakistan is through the registration of a limited liability company (locally known as a private company (Pvt. Ltd.)). While a representative office can be used when there are no plans to conduct any productive or commercial operations from within the country, branch registration is usually not optimal. See the page below for further details.
A company that is planning to grow its business in Pakistan needs to decide, first and foremost, which state it wishes to set up the subsidiary in. Each region has different subsidiary laws that can impact the working of the company.
The types of business that can be set up in Pakistan are Limited Liability Company (LLC), Free Zone company (EPZ company), Limited Liability Partnership (LLP), Public Limited company and representative office. The most common among these are Limited Liability companies.
The Pakistan Limited Liability Company (LLC)
An LLC can be registered with two directors and two shareholders with a minimum capital of USD 1,000. Directors and shareholders can be non-resident and need to register individually for an NTN number with the local tax authority. The Pakistan government also requires the LLC to have a legal advisor ordinarily residing in Pakistan if the entity has a share capital over US$5,000.
The steps to incorporate an LLC include:
- Name approval by the Securities and Exchange Commission
- Payment of application fees by any designated Muslim commercial bank
- Opening a bank account in Pakistan
- Completing the memorandum with signatures and then submitting a list of directors
- Obtaining a digital signature from the National Institutional Facilitation Technologies
- Registering with the regional tax office
- Registering with the social security institution depending on the location
- Registration with the labor department
- A waiting period of 6 weeks to get incorporated as an LLC
Setting up a subsidiary in Pakistan raises many questions and queries. With Vurke’s EOR solution, you can put your concerns to rest, as we will help you operate legally and hire employees, manage payroll, and maintain business relationships on your behalf.
We recommend taking your time to work with your finance team and finding the right budget for the location where you want to set up a business. Connect with Vurke to streamline the process.
The Pakistan Free Zone Company (EPZ company)
Foreigners planning to manufacture products in Pakistan and re-export them to foreign markets can register their business in an export processing zone. Requirements for the same will vary according to the preferred EPZ and the nature of business of our Client, but usually include i) higher paid up capital requirements and ii) manufacturing permits and licenses.
Requirements applicable for the registration of a standard limited liability company also applies to the SEZ company, including the need to secure tax numbers for all directors and shareholders.
The Pakistan Public Limited Company (joint stock company or JSC)
JSCs are available, requiring a minimum of 3 and a maximum of 50 shareholders. A joint stock company can have a public subscription for shares and shareholders may freely dispose of their shares.