What does a $60,000 hire cost in Pakistan?
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Total annual employer cost
Full cost breakdown
Statutory contributions and typical benefits for an employee in Pakistan at $60,000 base salary.
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Key Takeaways for Hiring in Pakistan
- Payroll Frequency: Monthly, with wages typically paid at month-end.
- Minimum Wage: PKR 37,000/month (federal rate for FY 2025–26).
- Contract Types: Fixed-term and open-ended; no requirement for bilingual contracts.
- Notice Period: 1 month for both resignation and termination.
- Working Hours: 48 hours/week (6 days, 8 hours/day).
- Mandatory Benefits: Social security (EOBI), provincial medical coverage, gratuity/severance after 1 year.
- Income Tax: Withheld at source under a progressive system.
- Leave Entitlements:
- 14 days annual leave
- 16 days sick leave
- 10 days casual leave
- Maternity leave up to 180 days
- Paternity leave up to 30 days
Continent
Asia
Capital
Islamabad
Currency
Pakistani Rupee (PKR)
Language
Urdu, English
Payroll Cycle
Monthly
Pay Date
End of the month
VAT
18%
Pakistan Employment Contract Overview
What Do You Need To Include in a Pakistani Employment Contract?
Every employment contract in Pakistan must include the following key details to remain compliant with local labor laws:
Employee Information
- Full name
- ID number
- Role / Job title
- Start date
- End date (if applicable)
- Contract duration
- Annual leave
- Address
- Probation and notice conditions
- Termination provisions
- Compensation details
Hiring contractors? Learn how to avoid misclassification risks in Pakistan.
Payroll
Average employer cost
5%
| Category | Details |
|---|---|
| 13th Salary | Not mandatory; subject to employer discretion |
| Avg employer tax | 5% |
Tax Breakdown
Personal Income Tax (PIT)
| Category | Rate / Details |
|---|---|
| Salaried Individuals | Progressive tax rates up to 35% |
| Non-Salaried Individuals | Progressive tax rates up to 45% |
Corporate Income Tax (CIT)
| Category | Rate / Details |
|---|---|
| Standard Rate | 29% |
Small and Medium Enterprises (SMEs)
| Category | Rate / Details |
|---|---|
| Category 1 | 7.5% for turnover up to PKR 100 million |
| Category 2 | 15% for turnover between PKR 100 million and PKR 250 million |
VAT
| Category | Rate / Details |
|---|---|
| VAT | 18% |
Mandatory Employee Benefits in Pakistan
| Benefits | Mandatory? | Notes |
|---|---|---|
| Health Insurance | No | No mandatory government-provided health insurance for private-sector employees. Provincial Social Security Institutions (e.g., PESSI in Punjab, SESSI in Sindh) provide healthcare benefits to registered employees in covered industries, funded by employer contributions (6%). Coverage includes medical treatment, maternity care, disability benefits for insured employees earning up to provincial wage caps. |
| Pension / Social Security | Yes | Employees’ Old-Age Benefits Institution (EOBI) is the statutory pension scheme providing old-age, invalidity, and survivors’ pensions. Eligibility requires a minimum contribution period (usually 15 years). Applies to all employees in establishments with ≥5 workers. Provincial Social Security Schemes (PESSI, SESSI, etc.) are employer-funded (6% contribution) and cover medical, maternity, and disability benefits. |
| Other Statutory Benefits | No | Workers’ Compensation & Death Benefits Establishments with 20+ employees must pay annual profit bonus to eligible workmen who have worked at least 90 days. |
Leave And Holiday Entitlement in Pakistan
Annual Leave
Employees who complete 12 months of continuous service earn 14 consecutive days of paid annual leave. Unused leave must be carried forward (up to 14–30 days, depending on provincial rules) and paid out on termination.
Public Holidays
Pakistan observes 13–17 public holidays annually, including national events such asPakistan Day (March 23) and Independence Day (August 14) along with major religious holidays like Eid and Ashura.
Sick Leave
Casual Leave: Employees receive up to 10 days of paid casual leave per year, usually for urgent personal reasons.. Prior notice is required, except in emergencies.
Sick leave provides up to 16 days per year at half pay, with a medical certificate required for absences longer than two days.
For employees covered under Provincial Employees’ Social Security Ordinances, sick leave benefits can extend up to 121 days for ordinary illness (typically at 75% of wages, or 50% in KP and Balochistan) and up to 365 days at full pay for serious illnesses such as tuberculosis or cancer.
Maternity Leave
Female employees are entitled to:
- 180 days of paid leave for the first birth
- 120 days for the second birth
- 90 days for the third birth
- Some provinces provide up to 112 days of paid maternity leave.
Paternity Leave
Male employees are entitled to take up to 30 days of fully paid paternity leave for the first three separate births. Additional leave for later births may be granted as unpaid, depending on company policy.
Other Types of Leave
- Pilgrimage Leave (Hajj/Umrah, Ziarat): Not legally required but often granted for up to 60 days, paid or unpaid, depending on company policy or collective agreements.
- Bereavement (Compassionate) Leave: The Factories Act grants one day of paid leave for the death of an immediate family member, subject to proof.
- Marriage Leave: Not required by law, though many employers grant two days of paid leave for the employee’s own marriage as a matter of policy or custom.
Termination And Offboarding in Pakistan
In Pakistan, every employment ending, whether by resignation or dismissal, must follow the law’s structure for notice, settlement, and records. The outline below shows what this means in practice.
| Type | Possible? |
|---|---|
| Termination for Cause (poor performance, misconduct, etc.) | Yes |
| Termination without Cause | Yes |
| Mutual Termination Agreement (MTA) | Yes |
| Redundancy | Not possible under the EOR setup |
Pakistani Employee Resignation
Form
Written notice.
Notice period
Employees intending to resign are required to provide their employer with a 30-day notice period.
End-of-Service Benefits
Severance/Gratuity
- Employees who complete at least one year of service qualify for end-of-service gratuity equal to 30 days of wages for each completed year. Any period over six months counts as a full year.
- This benefit applies even when an employee resigns, unless the contract explicitly states otherwise.
Other Benefits
Upon resignation, employers must settle all dues, including:
- Unpaid salary, pro-rated if necessary;
- Leave encashments (e.g., earned annual leave);
- Bonuses, overtime, arrears, etc., as applicable.
Final Payment Timing and Compliance
Final Payment Deadline: Employers must pay all final dues within a few days of the employee’s last working day.
Employer Termination With Cause in Pakistan
Acceptable grounds
The law allows employers to dismiss an employee for serious misconduct such as fraud, theft, or insubordination. A fair process must be followed, including a show-cause notice, an inquiry, and a written explanation of the decision.
Notice
Under the Industrial and Commercial Employment Ordinance, employers can terminate an employee’s contract without notice in proven cases of misconduct.
End-of-Service Benefits
Severance
Employers can forfeit gratuity if the termination for cause is lawful, and all disciplinary procedures under the Standing Orders have been followed.
Other Benefits
Employers are obligated to provide permanent employees with a written termination notice detailing the reasons for dismissal, regardless of the cause.
Employer Termination Without Cause in Pakistan
Acceptance Grounds
The law allows employers to terminate an employee without cause, as long as they issue a termination letter with a valid, documented reason such as poor performance or business restructuring.
Notice
- Notice period: When terminating permanent employees for reasons other than misconduct, employers must provide one month’s notice.
- Payment in lieu of notice or notice waiver: Alternatively, they can offer payment in lieu of notice equal to one month’s wages, based on the average earnings of the previous three months.
End-of-Service Benefits
Severance/Gratuity
- Permanent employees who are dismissed after completing at least 12 months of service are entitled to severance pay equivalent to 30 days’ wages for each year worked. Any service period longer than six months is counted as a full year.
- Employers contributing to a provident fund on behalf of their employees are exempt from paying severance.
Other Benefits
Employers must provide permanent employees with a written termination notice detailing the reasons for dismissal, regardless of the cause.
Mutual Termination Agreements (MTAs) in Pakistan
- MTA is a voluntary agreement signed by both parties (employer and employee) to terminate an employment contract by mutual consent.
- Pakistani labor law neither mandates or prohibits agreements like this, but they’re lawful as long as they’re fair, voluntary, and properly documented. They’re typically used to avoid disputes or litigation by clearly spelling out termination terms: final payments, notice waivers, confidentiality, non-compete clauses, and release of claims.
These agreements are valid under Pakistani contract law (Contract Act, 1872), provided they involve free consent and lawful terms.
Offboarding Process for the End of Fixed-term Contracts in Pakistan
If the Fixed-Term Contract Ends Normally
Under Pakistan’s Industrial Relations Ordinance (IRO) and related regulations, when a fixed‑term contract concludes on its agreed date, no additional compensation or severance is required-unless the employment contract itself says otherwise.
If the Fixed-Term Contract Ends Normally
When an employer ends a fixed‑term contract prior to its scheduled end, the following legal principles apply:
Notice or Pay in Lieu
- MThe employer must provide 30 days’ notice, or payment in lieu of notice
- This applies even to fixed-term contracts that are ended early, unless otherwise specified.
Severance Pay (Gratuity)
Employees who complete at least one year of service are entitled to severance/gratuity pay: typically one month’s salary per year of service, or as per contract terms.
Supporting Guides
Frequently Asked Questions
Can I hire foreign workers in Pakistan without setting up a legal entity?
Yes, using an Employer of Record (EOR) like RemotePass allows you to legally hire and pay workers in Pakistan without establishing a local entity.
What’s the minimum wage in Pakistan for 2025?
The federal minimum wage is PKR 37,000/month as of FY 2025–26. Provincial rates may vary but must not fall below this threshold.
Do I have to provide health insurance to employees in Pakistan?
No, it’s not mandatory. However, provincial social security schemes like PESSI and SESSI provide health coverage funded by the employer.
How are end-of-service benefits (gratuity) calculated in Pakistan?
Employees with at least one year of service are entitled to 30 days’ wages per year worked. Partial years over 6 months count as full years.
What taxes should I withhold from employee salaries?
You must withhold monthly income taxes per Pakistan’s progressive PAYE system. Social contributions like EOBI (1%) are also deducted from employees.
What’s the probation period and notice requirement?
Probation is up to 3 months. The standard notice period is 30 days, both for resignation and termination (unless for cause).
How is sick leave handled in Pakistan?
Employees get 10 days of casual leave and up to 16 days of sick leave per year. Sick leave can extend up to 121–365 days under social security.
Is there a bonus requirement in Pakistan?
There’s no statutory requirement for bonuses, but companies with over 20 employees must pay an annual profit bonus to eligible workers.
What is the VAT or sales tax rate in Pakistan?
General Sales Tax (GST) is 17%. Some provinces impose a Service Sales Tax (SST) between 13–16% on services.
How can RemotePass help me hire in Pakistan?
RemotePass handles compliant onboarding, payroll, taxation, benefits, and offboarding without the need to set up a local entity.
