Hiring in Pakistan: A Complete Guide

Pakistan gives employers access to a large, young, English-speaking workforce at some of the lowest wage costs in Asia, with strength in IT, software, customer support, and textiles. Talent is concentrated in Karachi, Lahore, and Islamabad, and salaries for skilled and technical roles run well above the statutory minimum wage.

What sets Pakistan apart from most hiring destinations is that employment law is set at the provincial level rather than nationally. As a result, the rules that apply to your team, from minimum wage to leave entitlements, can depend on whether your employee is based in Lahore, Karachi, or Islamabad, rather than on a single country-wide standard.

This guide covers contracts, pay, leave, termination, and what to expect if you hire through an Employer of Record.

Overview

Labor became a provincial matter after a 2010 constitutional amendment, so there is no single national labor code. Punjab, Sindh, Khyber Pakhtunkhwa (KP), Balochistan, and the Islamabad Capital Territory (ICT) each set their own rules, and requirements can differ meaningfully between them.

Most employers work from the same handful of laws day to day. The Factories Act covers working hours and leave in manufacturing. The Standing Orders Ordinance, and its provincial versions, covers contracts, discipline, and termination. Provincial Shops and Establishments laws cover hours for offices, retail, and other commercial establishments.

Which law applies, and at what size of employer, depends on your establishment. As a rough guide, the Standing Orders Ordinance applies once you have 20 or more workers, while the Shops and Establishments laws apply regardless of headcount. Confirm the right threshold before setting up contracts and payroll.

Employment Contracts

A written contract is not spelled out as a requirement for every employer, but the law requires a written appointment letter for most formal-sector employees, so it is the default in practice.

A solid appointment letter typically includes the following.

• Nature of employment. Whether the role is permanent, probationary, temporary, or contract-based.
• Job description. Designation, duties, and reporting line.
• Compensation. Basic wage, allowances, and payment schedule.
• Place of work and hours. Location and standard working hours.
• Termination terms. Notice period and grounds for dismissal.

Types of employment status

Probation

Probation is capped at 3 months for most worker categories. Some employers extend it to 6 months for managerial roles that fall outside this definition, but stretching probation for clerical or blue-collar staff beyond 3 months carries legal risk, since courts generally apply the shorter cap regardless of what the contract says.

Workers become permanent automatically after 9 months in a permanent-nature role, or after 12 months across contracts renewed close together. Permanent status brings full protections, including notice rights and gratuity eligibility, covered later in this guide.

Working Hours and Overtime

Standard hours are 9 a day and 48 a week for adult workers, with one full rest day each week. A meal break of at least 30 minutes is required once a worker has been on duty for 6 hours.

Anything worked beyond that counts as overtime and must be paid at double the normal rate. Total hours, including overtime, cannot exceed 60 in a week, which caps overtime at roughly 12 hours.

Workers under 18 cannot be asked to work overtime at all, and pregnant employees are excluded from overtime around the period of maternity leave.

For overtime purposes, the ordinary rate of pay includes cash allowances but excludes the value of housing, utilities, or medical facilities provided in kind. Most employers simply use basic salary for the calculation.

Minimum Wage

There is no single national minimum wage. Each province sets and updates its own rate, typically once a year, and a federal budget announcement is only a recommendation until a province formally adopts it.

‍

‍

In practice, most white-collar and technical roles pay well above the statutory floor. The minimum wage mainly matters as a compliance baseline, and it is also the figure used to calculate EOBI contributions, covered next.

Payroll and Taxes

Pakistan's tax year runs from July 1st to June 30th. The Federal Board of Revenue (FBR) administers income tax, and employers withhold tax monthly from salary based on an estimate of the employee's total annual income.

Salaried individual tax slabs, tax year 2025-26

These rates apply to salaried individuals, meaning salary makes up more than 75% of their taxable income, and took effect July 1, 2025.

An additional 9% surcharge applies where total annual income exceeds PKR 10,000,000.

Employees who are not on the FBR's Active Taxpayers List face higher withholding on unrelated transactions, so it is worth encouraging staff to file their annual return by 30 September even where no tax is due.

Beyond income tax, budget for EOBI and provincial social security contributions, covered next, and check whether a small provincial professional tax applies to registered employers in your area.

Social Security Contributions

Pakistan runs statutory social insurance through two separate systems, a federal pension scheme and a provincial health and sickness scheme, and employers typically register with both.

EOBI contributions are calculated on the minimum wage rather than actual salary, so the monthly cost per employee is fixed no matter how much a senior employee earns. That keeps the cost predictable, though it also means the resulting pension is modest and not earnings-linked.

Leave Entitlements

Leave comes from a mix of national and provincial rules, and like wages, exact entitlements can vary by where your employee is based.

Maternity leave

Dismissing an employee during maternity leave, or because of pregnancy, is unlawful in every province.

Paternity leave

Paternity leave is far less standardized than maternity leave. Fathers employed by federally-administered establishments are entitled to 30 days of paid paternity leave for each of their first three children.

Outside that federal scope, most private-sector employers have no general statutory paternity leave obligation, though some provincial factory rules grant a shorter paid entitlement to covered factory workers. Many private employers offer it voluntarily as policy. It is worth confirming the specific provincial position before drafting one.

Employee Benefits

Beyond the mandatory EOBI pension and provincial health cover described above, a few things are worth building into your compensation planning.

• Workers' Profit Participation Fund. Qualifying companies, generally those with 50 or more workers and above a set capital threshold, must contribute 5% of profits to a fund distributed among workers. It is a distinct legal obligation that is easy for foreign employers to overlook.
• Provident fund. Not legally required, but a common voluntary benefit among mid-size and large employers, typically with matching employer and employee contributions of around 8% to 10% of basic salary.
• Private health insurance. Many employers add private group health insurance on top of statutory cover, since public facility quality varies a lot by region.
• Gratuity. A statutory end-of-service benefit for permanent workers, covered below, since it is triggered by separation rather than paid during employment.
• Festival or performance bonus. Common practice, particularly around Eid, but not a general legal requirement outside the Workers' Profit Participation Fund obligation above.

Termination Requirements

Termination is primarily governed by the Standing Orders Ordinance and its provincial equivalents, which apply to industrial and commercial establishments with 20 or more workers. Smaller establishments fall under provincial Shops and Establishments laws, which are generally less prescriptive on dismissal procedure.

Notice

A permanent worker is entitled to at least 1 month's notice, or 1 month's wages in lieu, calculated on average wages over the last 3 months. This applies in both directions, whether the employer or the employee is ending things, and covers termination for reasons other than misconduct.

Probationers, temporary workers, and badli workers generally are not entitled to statutory notice or pay in lieu. Some employers still build in a short notice period, commonly 7 to 15 days, as good practice for probationers, even though it is not required. Whatever you decide, state it clearly in the appointment letter, since the contract terms will govern in the absence of a statutory entitlement.

Dismissal for misconduct

Where dismissal is for misconduct, no notice or pay in lieu is required, but due process is. The employer must issue a written charge setting out the allegations and give the worker a genuine chance to respond before deciding.

Recognized misconduct includes habitual unauthorized absence, willful insubordination, theft or fraud, damage to employer property, and participation in an illegal strike. Skipping the inquiry step is one of the most common reasons employers lose unfair dismissal claims, even where the underlying conduct was genuine.

Gratuity

A permanent worker terminated for any reason other than misconduct, including retrenchment, non-renewal, retirement, or death in service, is generally entitled to gratuity of 30 days' wages for every completed year of service, with any period beyond 6 months counting as a full year. This requires at least 12 months of qualifying service.

An employer that instead operates an approved pension fund with contributions meeting or exceeding the statutory threshold may be exempt from paying gratuity on top of that fund. On separation, a permanent worker is also entitled to a written certificate of service confirming their role, dates of employment, and reason for leaving.

Employees who believe they were dismissed unfairly, or without proper notice or procedure, can raise a complaint with the relevant provincial Labour Department, which will attempt to broker a settlement before a case proceeds to the labour courts. Clear, contemporaneous documentation of any performance or conduct issue is the best protection against a successful unfair dismissal claim.

Hiring Through an Employer of Record (EOR)

Pakistan's employment rules are unusually fragmented for a single country. Minimum wage, social security, and even maternity leave duration can differ depending on whether your employee sits in Punjab, Sindh, KP, Balochistan, or Islamabad.

For a company without a local entity, or without in-house familiarity with the provincial rules, that patchwork adds real compliance risk. An Employer of Record hires the employee on your behalf under Pakistani law, while you continue directing their day-to-day work. It typically handles the appointment letter, payroll and tax withholding, EOBI and provincial registration, leave administration, and termination procedure in line with whichever province's rules apply.

This tends to make the most sense if you are hiring a small number of people in Pakistan, testing the market before committing to a local entity, or building a team spread across more than one province.

If you would like to talk through what hiring in Pakistan could look like for your team, see how Knit can help.

Curious about hiring elsewhere? Take a look at our other country guides.

Frequently Asked Questions

Is a written employment contract legally required in Pakistan?

Effectively, yes, for most formal-sector employers. The law requires a written appointment letter at hire, and it is standard practice across the formal sector regardless of establishment size.

What is the minimum wage in Pakistan?

There is no single national figure. As of this guide's publication, the notified rate for unskilled adult workers is PKR 40,000 a month in Punjab, Sindh, and KP, and PKR 37,000 a month in Balochistan and Islamabad. Several provinces were actively revising their rates, so confirm the current notification before setting pay.

How much notice do I need to give to terminate an employee?

For permanent workers, at least 1 month's notice or 1 month's pay in lieu, unless the termination is for misconduct, in which case no notice is required but a written charge and a chance to respond are.

Do I need to register employees with EOBI?

Yes, if you operate a formal commercial or industrial establishment. You contribute 5% and the employee contributes 1%, both calculated on the applicable minimum wage rather than actual salary.

How long is maternity leave in Pakistan?

It depends on the province and sector. Private-sector employees are generally entitled to 12 weeks in Punjab, KP, Balochistan, and ICT, or 16 weeks in Sindh. Employees of federally-administered establishments are entitled to up to 180 days for a first child.

Can I hire in Pakistan without setting up a local entity?

Yes, through an Employer of Record, which employs the worker on your behalf and manages local compliance, while you keep day-to-day management of their work.

What is gratuity, and when do I owe it?

Gratuity is a statutory end-of-service payment of 30 days' wages per completed year of service, generally owed to permanent workers with 12 or more months of service who leave for any reason other than misconduct.