Pakistan

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.  

Currency: Pakistani Rupee

Principal Languages: Urdu, English

Government: Parliamentary Republic, Federal Republic, Islamic Republic

Capital City: Islamabad

Major Cities: Karachi, Lahore, Rawalpindi, Peshawar, Multan, Quetta

Employment Contracts

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.

Work/Time Regulations

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.

Minimum Wage
There is no national minimum wage in Pakistan. The provinces of Khyber Pakhtunkhwa, Balochistan, Punjab and Sindh, and the capital Islamabad have a monthly minimum wage of 14,000 rupees.

Overtime
Employees who work overtime are given twice their regular pay. Contract employees are not entitled to increased pay for working overtime.

Wage Payment
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.

Mandatory Bonuses
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.

Leave

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.

Annual Leave
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.

Sick 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.

The illness must be certified by a doctor or medical professional. Employers are forbidden to dismiss workers on sick leave.

Maternity 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.

Paternity Leave 
There is no provision for paternity leave in Pakistan’s labor laws.

Other Leave
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.

Benefits

Pension Plan
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.

Early pension: The pension is reduced by 0.5% for every month that the pension is taken before the regular retirement age.

Old-age Grant
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.

Social Security
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
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.

Health Insurance
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
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.

Workers' Compensation
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 more 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.

How GPS can Help

With our Global PEO/Employer of Record services, companies can expand into Pakistan and hire their employees without having to establish a branch office or subsidiary in Pakistan.

  • Your candidate is hired via our Pakistan PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
  • Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Pakistan laws.
  • Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
  • With no contractor risks, pass on the compliance burden to Global PEO Services.

Spin Off/M&A Support

  • Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.

24/7 Support in 100+ Countries

  • Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
  • We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.

Easy Visibility into Your Employee Time & Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management and benefits enrollment and management. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcount.

Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Learn more about our end-to-end international expansion services.