Global HR Compliance in Pakistan

Pakistan’s employment framework blends federal labour laws with provincial regulations and strong industry-specific practices. For international employers, these layers can create complexity when hiring, managing, or offboarding staff. Missteps in contract structure, payroll compliance, or immigration processes can expose a business to fines, disputes, or reputational damage.

This guide outlines the key legal and operational requirements you must meet to employ staff in Pakistan, helping you build compliant, sustainable employment arrangements from the outset.

Why Hire and Launch Teams in Pakistan

Pakistan offers a large, young, and increasingly skilled workforce, particularly in sectors such as IT, engineering, manufacturing, and customer support. Labour costs are competitive compared to many regional markets, and English proficiency is strong among graduates in urban centres.

The country’s time zone aligns well with both European and Gulf markets, making it a strategic base for service delivery, remote operations, and regional sales teams. While infrastructure and regulatory complexity can be a challenge, a compliant employment setup allows companies to tap into a deep talent pool without exposure to legal or tax risk.

For businesses expanding into South Asia or servicing clients in the region, Pakistan can provide a cost-effective, scalable workforce, provided hiring, payroll, and benefits administration are structured to meet both federal and provincial requirements.

Employment Contracts in Pakistan

Employment in Pakistan is regulated by the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, alongside provincial legislation in Sindh and Khyber Pakhtunkhwa. Written contracts are mandatory and must outline the type of employment, job description, terms and conditions of service, and any sector-specific labour laws that apply.

Contract types

• Permanent contracts – Indefinite duration. Termination rules under the Standing Orders apply.
• Fixed-term contracts – Permitted only for genuinely temporary work. The total period, including renewals, cannot exceed nine months.
• Casual contracts – For irregular or occasional work with separate termination and benefit rules.
• Probationary arrangements – Common in the private sector but should not exceed six months.

Clearly defining the correct contract type is critical to avoiding disputes and ensuring the employee’s rights and benefits are applied under the correct category.

Termination and Severance in Pakistan

Pakistani labour law requires employers to provide written notice stating the reason for termination. While legislation does not set an exhaustive list of valid dismissal grounds, case law recognises reasons such as prolonged illness, inefficiency, redundancy, and serious misconduct.

Notice periods
Permanent employees must receive at least one month’s written notice or wages in lieu. Temporary, probationary, and casual workers are not entitled to notice unless specified in their contract.

Severance pay
When employment is ended for reasons other than misconduct, employees are entitled to a severance payment equal to 30 days’ wages for each completed year of service, counting any part of a year beyond six months as a full year. A registered provident fund may be used in place of a gratuity if provided for in the employment terms.

Protected employees
Workers on maternity, sickness, or injury leave cannot be dismissed during these periods. Dismissal protections also apply to certain categories under provincial social security laws.

Proper documentation and adherence to notice and payment obligations are essential to prevent claims and maintain compliance.

Working Time and Overtime in Pakistan

The Factories Act and related provincial regulations set the standard working limits for adult employees.

Standard limits

• Maximum of 9 hours per day
• Maximum of 48 hours per week

Seasonal operations
In registered seasonal factories, the weekly limit can increase to 56 hours.

Overtime pay
Any hours worked beyond the standard limits must be paid at twice the employee’s ordinary wage rate (200 percent). Employers must maintain accurate attendance and wage records to demonstrate compliance in the event of inspection.

Exceeding working hour limits without the required overtime pay exposes employers to statutory penalties and potential disputes.

Leave Entitlements in Pakistan

Leave provisions are governed by the Factories Act, Shops and Establishments Ordinances, and specific provincial rules.

Annual leave
Employees who complete 12 months of continuous service are entitled to 14 consecutive calendar days of paid annual leave. A maximum of 14 unused days can be carried forward to the following year. Factory workers must receive at least half of their leave pay before the leave begins.

Casual leave
Up to 10 days per year on full pay, typically granted for urgent or unforeseen needs. Prior approval is standard unless the urgency makes advance notice impossible.

Sick leave
Up to 16 days per year on half pay, supported by a medical certificate. Employers are generally expected to grant the leave if properly certified.

Public holidays
Employees are entitled to paid time off for national and religious holidays as declared by the government.

Maternity leave
Female employees are entitled to 12 weeks of paid maternity leave, six weeks before and six weeks after childbirth, at their last drawn wage rate. Termination during maternity leave is prohibited.

Clear tracking of leave balances and proper payroll integration are essential for HR compliance and to avoid disputes over entitlements.

Social Security and Benefits in Pakistan

Statutory benefits are delivered through two main systems:

Employees’ Social Security Institutions (ESSI) – Administered at the provincial level. Employers contribute a fixed percentage of wages for eligible staff (the current rate is generally 6% of wages, subject to provincial caps). Registered employees and their dependants receive:

• Medical treatment through ESSI-approved hospitals and clinics
• Sickness benefit at 75% of wages (up to 121 days)
• Maternity benefit at full wages for 12 weeks
• Injury and disability compensation based on medical assessment

Employees’ Old-Age Benefits Institution (EOBI) – A federal scheme funded by employer contributions equal to 5% of the minimum wage (employees contribute 1%). It provides:

• Old-age pension (after at least 15 years’ insured service)
• Invalidity pension
• Survivor’s pension for dependants

Coverage is mandatory for employees earning up to the prescribed wage threshold, though employers may voluntarily register higher-paid staff to extend benefits. Contribution rates, thresholds, and qualifying conditions can differ slightly between provinces.

Immigration and Work Authorisation in Pakistan

Foreign nationals require both a valid work visa and, in most cases, a letter of recommendation from the Board of Investment (BOI) to work in Pakistan.

Work visa process

• Application authority – Directorate General of Immigration & Passports, processed via the Pakistan Online Visa System.
• Sponsorship – A Pakistani entity must sponsor the application, providing a contract of employment and business justification.
• Initial validity – Generally issued for one year, renewable annually.
• Entry type – Multiple-entry visas are common for senior or project-based roles.

Short-term assignments
Some technical roles may qualify for a temporary work visa or business visa with restricted activities, though these still require BOI involvement for formal work permissions.

Labour market testing
Not formally mandated, but authorities may require justification where local skills are available.

Registration
Foreign employees must register with the local police or the relevant regional registration authority upon arrival if required by visa conditions.

Using a Global Employer of Record in Pakistan

Hiring in Pakistan often intersects with practical barriers — from setting up a compliant payroll system to navigating provincial labour laws and immigration requirements. A Global Employer of Record (EOR) provides a direct route through these barriers by becoming the local legal employer while you retain operational control of the employee’s role and deliverables.

When an EOR in Pakistan is a strategic fit

• You need to hire before a local entity is established and cannot wait for registration and licensing.
• Your current vendor lacks coverage in Pakistan or cannot manage both federal and provincial compliance.
• You are transitioning contractors to employee status to mitigate misclassification and Permanent Establishment risk.
• Market entry is being tested without long-term commitment, but employees require full statutory benefits and protections.
• An acquisition or restructuring requires rapid transfer of staff onto a compliant local payroll.
• You need work permit and visa sponsorship for expatriate hires alongside local employment administration.

What the EOR delivers in Pakistan

• Execution of locally compliant employment contracts tailored to role type and industry
• Payroll in Pakistani rupees with correct tax and social security deductions
• Registration and contributions to EOBI and the relevant provincial ESSI
• Administration of statutory leave, benefits, and severance obligations
• Immigration sponsorship where applicable
• Continuous monitoring of legislative changes at both federal and provincial level

By aligning with an EOR, you gain immediate employment capability in Pakistan without the delays, cost, and liability of setting up a local legal presence, while ensuring each hire meets the country’s regulatory and cultural requirements from day one.

Using the Global Payroll Calculator for Pakistan

Acumen International’s Global Payroll Calculator provides instant, jurisdiction-specific cost of hire data for Pakistan, enabling accurate budgeting before you commit to a hire.

What it delivers for Pakistan

• Full breakdown of employer costs, including gross salary, social security contributions.
• Employee-side deductions for income tax and social security, giving a complete view of net take-home pay.
• Real-time tax rates and thresholds.
• Comparative modelling of employment costs in Pakistan against other jurisdictions to guide location strategy.
• Explanatory notes detailing the legislative basis for each cost component, supporting internal compliance reviews.

With the GPC, you can scope the financial impact of a hire in Pakistan with the same accuracy as a payroll run, reducing the risk of budget overruns and ensuring offers are competitive yet compliant.

Acumen International Services in Pakistan

Acumen International operates as your single in-country employment partner in Pakistan, managing the full lifecycle of compliant employment without requiring you to establish a local entity. Our focus is on bridging the gap between legal compliance and practical workforce deployment.

We integrate legal, payroll, and immigration requirements into one coordinated process, ensuring that contracts, onboarding, and benefits are aligned with both federal and provincial legislation from day one. For employers running multi-country operations, we apply consistent service standards across all jurisdictions, removing the fragmentation of working with multiple vendors.

Where projects involve sensitive timelines, such as mergers and acquisitions, restructuring, or urgent project launches — our team mobilises staff in Pakistan within days, not months, while maintaining full statutory compliance.

This approach means you can build and retain teams in Pakistan with the same speed and governance you expect in established markets, while navigating local requirements with precision.