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Pakistan has a large and growing labor force, with a significant proportion of youth and a rising middle class. The country’s economy is diverse, with major sectors including agriculture, textiles, manufacturing, IT, and services. Despite challenges like unemployment and underemployment, Pakistan offers access to a wide talent pool, especially in urban centers like Karachi, Lahore, and Islamabad.
Hiring in Pakistan is regulated by the Pakistan Labor Code and related provincial labor laws, which provide guidelines on contracts, wages, employee benefits, and termination procedures. The hiring process can be straightforward, but employers must ensure compliance with local labor laws and regulations. Leveraging recruitment agencies, job boards, and platforms like Iris can help companies quickly access qualified talent and streamline the hiring process.
Facts & Stats
Labor Laws in Pakistan
Under Pakistan’s labor laws, the probation period for employees is typically up to 3 months, but it can be extended. During probation, either the employer or the employee can terminate the contract without notice. After the probation period, the employee is entitled to the benefits specified in the permanent contract.
In Pakistan, employees are entitled to 14 days of paid annual leave after completing one year of continuous service. For employees working in certain industries, the entitlement may be higher, as per collective agreements or company policies. Employees must request annual leave in advance, and unused leave can typically be carried over to the next year, although it can be subject to employer approval. For workers in industries with hazardous conditions, the number of leave days may be greater.
The standard working hours in Pakistan are 48 hours per week, usually spread over six days. The normal workday is 8 hours, with one day off, typically Sunday. Some private sector companies may adopt a 5-day work week, with extended working hours to compensate for the shorter week. Overtime regulations apply if employees work beyond the normal working hours, and additional compensation is mandated.
In Pakistan, overtime is defined as work performed beyond the standard 48-hour work week. Employees are entitled to be compensated for overtime at a rate of 1.5 times the regular hourly wage (or 150% of their standard hourly rate). Overtime is typically limited to a maximum of 2 hours per day as per labor law. Any overtime worked on public holidays or rest days is usually compensated at 200% of the regular wage. Employers are required to maintain proper records of overtime hours worked.
The minimum wage in Pakistan is set at 25,000 PKR per month as of 2024. However, this is for unskilled workers in the public sector. For skilled professionals, wages vary based on industry and experience, with higher salaries offered in sectors like IT, engineering, and finance.
Understanding Employer and Employee Tax Obligations
1% (for EOBI contribution)
Employees contribute 1% of their salary to the EOBI, which supports social welfare programs, including pensions and healthcare benefits. Additionally, employees are subject to income tax based on a progressive system. The rates range from 0% for incomes up to 600,000 PKR to 20% for higher income brackets, with rates increasing for higher earnings.
5% (for EOBI contribution) 2% (for WWF contribution)
In Pakistan, employers must contribute to the EOBI, providing employees with retirement, disability, and death benefits. Employers also contribute to the WWF, a fund that supports workers' welfare and provides financial assistance to employees in distress. These contributions are mandatory and are deducted from the employer’s overall expenses.
Pakistan's individual tax system is progressive, meaning the tax rate increases as income rises. Individuals are taxed on their total annual income, with exemptions and rebates available for certain categories, such as pensioners or individuals with specific family circumstances. Employers withhold tax from employees’ salaries and remit it to the Federal Board of Revenue (FBR).
Pakistan’s pension system is not as extensive as in some other countries, but the EOBI provides a basic pension scheme for employees in the formal sector. Employees contribute to the pension fund during their employment, and upon retirement, they are entitled to monthly pension payments.
Termination Process
Termination in Pakistan must follow the guidelines specified in the labor laws. Employees can be dismissed for reasons such as misconduct, poor performance, or redundancy. However, termination must comply with due process, and employers are required to provide proper documentation and justifiable cause.
Employees are entitled to the following notice periods based on their length of service:
Employees who are terminated without cause are entitled to severance pay, which is calculated based on the length of service. The severance amount is usually one month’s salary for each year of employment.
Annual Leave
Employees are entitled to 14 days of paid annual leave after one year of continuous service. This can be higher if specified by the employment contract or company policies.
Sick Leave
Employees are entitled to 10 to 15 days of paid sick leave per year, depending on the company’s policy. Sick leave must be supported by a medical certificate.
Maternity and Paternity Leave
Female employees are entitled to 12 weeks of paid maternity leave under Pakistan’s labor law. There is no statutory paternity leave, though some companies may offer it voluntarily.
Bereavement Leave
Employees are generally entitled to 3 days of paid bereavement leave in the event of the death of a first-degree relative. This is based on company policy or industry norms.
Public Holidays in Pakistan
Pakistan observes several national holidays, including:
Frequently asked questions
What makes Iris helpful for hiring in Pakistan?
Iris provides AI-powered recruitment tools that help employers in Pakistan quickly find and hire qualified candidates. The platform automates candidate screening and job posting, improving efficiency and ensuring compliance with local labor laws.
Is it mandatory to hire Pakistani nationals?
While there is no formal nationalization program in Pakistan, employers are encouraged to hire local talent. Hiring expatriates requires approval from the Ministry of Interior and Ministry of Labor, and the employer must demonstrate that the required skills are not available locally.
How is severance pay calculated in Pakistan?
Employees are entitled to severance pay if terminated without a valid reason. Severance pay is generally calculated as one month’s salary for each year of service.
Do employees in Pakistan receive a pension?
Employees in Pakistan contribute to the EOBI pension fund, which provides basic retirement benefits. The amount is based on salary history and contributions, and employees can receive monthly payments upon retirement.
What’s the official work week in Pakistan?
The legal work week in Pakistan is 48 hours, typically spread across six days. Some businesses follow a 5-day work week, with longer hours.
