Global PEO Services (GPS) helps companies hire employees in Pakistan without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Pakistan, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Pakistan labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Pakistan. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Pakistan - Country Overview
Pakistan, a developing country, has a GDP of $315.00 billion, which is projected to grow at around 5% and be $360.00 bilion by 2020. The country’s export commodities include leather goods, pharmaceuticals, textiles, surgical instruments, sports goods, medical instruments, chemicals, and carpets/rugs.
The government has undertaken a process of economic liberalization including privatization of state-owned enterprises to attract foreign investment and reduce the budget deficit.
Parliamentary Republic, Federal Republic, Islamic Republic
Karachi, Lahore, Rawalpindi, Peshawar, Multan, Quetta
Employment Contracts in Pakistan
Employees are provided a written document at the time of appointment, promotion, or transfer that contains the terms and conditions of employment. Employers are forbidden to hire employees under fixed-term contracts if employees would be required to perform tasks of a permanent nature.
Probationary periods of a maximum 3 months are allowed and employees become permanent after 9 months of employment including the probationary period. Under the Workmen’s Compensation Act, employers cannot conclude employment contracts in which employees renounce their rights to compensation for work-related injuries.
Working Hours in Pakistan
Work hours vary by industry; factory workers work for 48 hours in a week and this limit increases to 50 hours in a week if the factory is seasonal and 56 hours if the factory operates 24 hours in a day. The general work hour limit is 9 hours while in the case of a seasonal factory it is 10 hours.
The 48-hour work limit also applies to commercial establishments, shops, and mines. During Ramadan, reduced working hours must be observed in the commercial, manufacturing, and service sectors.
There is no national minimum wage in Pakistan. The provinces of Khyber Pakhtunkhwa, Balochistan, Punjab and Sindh, and the capital Islamabad each have a monthly minimum wage of 15,000 rupees.
Employees who work overtime are given twice their regular pay. Contract employees are not entitled to increased pay for working overtime.
Wage periods cannot be more than 1 month and employees must be paid before the 7th day after the wage period’s last day. The wages must be paid on a working day.
Employees who make a profit in any year are required to give a bonus to their employees within 3 months of the year-end. If the profit is equal to or exceeds 1 month’s payroll, employers are required to give all employees a bonus equal to 1 month’s pay subject to a maximum of 30% of the profit. If the profit does not exceed 1 month’s payroll, the bonus may not be less than 15% of total profit. Employees who complete a continuous employment period of 90 days qualify for bonus pay.
Employee Leave in Pakistan
The following national holidays are observed in Pakistan:
- Feb. 5: Kashmir Solidarity Day
- March 23: Pakistan Day
- May 1: Labor Day
- Eid Al Fitr (3 days)
- Aug. 14: Independence Day
- Eid al Azha (2 days)
- Ashura Holiday (2 days)
- The Prophet’s Birthday
- Dec. 25: Quaid-e-Azam’s Birthday / Christmas Day
Employees who work on a national holiday receive full pay and a compensatory holiday.
Employees covered by the Factories Act and the West Pakistan Shops and Establishment Ordinance receive 14 days’ annual leave after completing 12 months of continuous employment. The annual leave of 14 days can be carried over to the next year.
Employees covered by the Mines Act receive a 1 day leave for every 17 days of work performed below ground and a 1 day leave for every 20 days of work above ground during the previous year. Employees who resign or are dismissed must be compensated for their unused annual leave.
The Provincial Employees’ Social Security Ordinance and the Factories Act are used to determine leave benefits. Under the Provincial Employees’ Social Security Ordinance, employees are entitled to sick leave of up to 121 days for ordinary ailments and 365 days for tuberculosis or cancer. To qualify, employees should have made at least 90 days’ contributions to the social security system in the last 6 months. Employees receive 75% of their wages (50% in Khyber Pakhtunkhwa and Balochistan) for ordinary ailments and 100% for cancer and tuberculosis (50% in Khyber Pakhtunkhwa and Balochistan). The benefit is paid after a waiting period of 2 days. Under the Factories Act, employees are entitled to 16 days’ sick leave with half pay and eight days with full pay in a year.
The illness must be certified by a doctor or medical professional. Employers are forbidden to dismiss workers on sick leave.
Pregnant employees are entitled to 12 weeks of maternity leave after completing at least 4 months of continuous employment. Out of these 12 weeks, 6 weeks must be taken post-delivery. Employees are required to give notice to employers before taking leave. After giving notice, employees are forbidden to work until the end of leave entitlement. The maternity benefits are paid by the employer. The employee on maternity leave enjoys special protection rights against dismissal. An employer is not allowed to discontinue providing maternity leave benefits if the employee dies on the day of delivery or during the period of pregnancy; the benefits due must be paid to the person designated by the employee.
There is no provision for paternity leave in Pakistan’s labor laws.
Employees receive 10 days’ casual leave to attend to unforeseen circumstances or events. Casual leave cannot be taken for more than 3 days in a go and cannot be accumulated.
Employee Benefits in Pakistan
Male employees get eligible for a full pension at age 60, female employees get eligible at age 55, and miners get eligible at age 50 after making at least 15 years’ contributions. Male employees can retire early at age 55 while female employees can retire early at age 50 after making 15 years’ contributions. The pension benefit equal to 2% of the average monthly wages in the last 12 months multiplied by the number of years of insured employment is paid. The minimum old-age pension is 3,000 rupees each month.
The pension is reduced by 0.5% for every month that the pension is taken before the regular retirement age.
The old-age grant is provided to male employees aged 60, female employees aged 55, and miners aged 50. A lump sum equal to 1 month’s earnings for every year of covered employment is provided.
Employers are required to contribute up to 7% of wages to Social Security and up to 5% to Employee Old Age Benefit. No contributions are required if wages exceed PKR 400/day or PKR 10,000/month. Social Security provides four types of benefits:
- Survivor’s Pension
- Old-age Pension
- Old-age Grant
- Invalidity Pension
Employers must submit both employee and employer contributions to a bank assigned by the Employees’ Old-age Benefits Institution before the 15th of each month.
Survivor pension equal to 100% of the deceased’s minimum pension is given to the surviving spouse or divided equally among spouses. In case there is no surviving spouse, the pension is divided equally among eligible orphans. In case there are no eligible orphans and the surviving spouse passes away within first 5 years of receiving the survivor pension, the survivor pension is provided to the deceased’s surviving parents for up to 5 years after the death of the insured’s spouse. If there are no surviving parents, the remaining balance of the initial 5 years of survivor pension can be paid to a dependent.
In Pakistan, 78% of the population pay health care expenses out of pocket. Three-quarters of healthcare expenses in the country are borne by the private-sector insurance companies.
Disability pension equal to 2% of average monthly wages in the last 12 months multiplied by the number of years of insured employment is paid.
Under the Workmen’s Act, employees are required to compensate employees for any work-related injuries during the course of employment. In case the injury results in total disability or death, the employer is required to pay the worker up to PKR 500,000 based on the provisions in each province.
Employees who suffer a temporary injury receive half their monthly wages for up to 1 year or 1/3rd of their monthly wages for up to 5 years in case of chronic lung disease. Employers are not required to pay employees for injuries that result in partial disability lasting less than 4 days. Employers are also not required to pay for injuries if the employee was drunk at the time of injury, willfully disregarded regarded safety rules, or willfully disobeyed orders or other measures in place for the safety of workers. Under the Standing Orders Ordinance, commercial and industrial establishments with 50 or more employees are required to provide workers’ compensation insurance to permanent workers.