Payroll and Benefits Guide Pakistan
Last updated: Aug 29, 2023
Employer Payroll Contributions
|5.00%||Total Employment Cost|
Employee Payroll Contributions
|1.00% plus 40-rupee per month||Total Employee Cost|
|40-rupee flat rate each month||Healtcare|
Employee Income Tax
15,000 PKR (+12.50% on excess)
165,000 PKR (+22.50% on excess)
435,000 PKR (+27.50% on excess)
1,095,000 PKR (+35.00% on excess)
Super tax is imposed on high-earning persons having income of more than PKR 150 million. Income of a person for that matter comprises of their taxable income under all heads of income including profit on debt, dividend, capital gain, brokerage/commission, and imputable income.
An enhanced super tax rate of 10% is applicable for certain specified sectors for the tax year 2022 or 2023 only:
The rate of super tax is as under:
2022 & onwards
Income exceeds PKR 150 million but does not exceed PKR 200 million
Income exceeds PKR 200 million but does not exceed PKR 250 million
Income exceeds PKR 250 million but does not exceed PKR 300 million
Where income exceeds PKR 300 million
The national minimum wage in Pakistan is 25,000 PKR per month. The province of Punjab revised the minimum wage from PKR 25,000 to PKR 32,000. The wages of semi-skilled, skilled, and highly skilled workers will also be raised, reaching PKR 35,000.
MINIMUM WAGE (PER MONTH)
In Pakistan, the payroll frequency can be daily, weekly, bi-monthly, or monthly. The employee must pay salaries at least once a month.
13th-month payments are not legally required
The standard work week in Pakistan consists of 45 hours a week, 9 hours a day.
All work more than the standard working hours a week is to be paid as overtime and is regulated by employment contract/collective agreements. When an employee is requested to work overtime or work on holidays, there are maximums in relation to the number of hours allowed.
Anytime worked over 9 hours per day is considered overtime and needs to be paid at a rate of 200% salary. Employees receive compensation equivalent to 300% of their typical pay for overtime hours worked on public holidays.
Paid Time Off
In Pakistan, employees are entitled to 14 calendar days of fully paid annual leave following 12 months of consecutive service. This leave cannot be taken in part and must be taken in its entirety. Leave of up to 14 days can be carried over into the following vacation year.
The local government decides each year if holidays falling on the weekend are lost or moved to a working day in lieu.
Religious holidays are determined by the lunar cycle and will show as tentative until they are confirmed nearer the date of the holiday.
Employees are entitled to 10 days of casual sick leave upon contingent situations such as sudden illness or other urgent purposes.
Every employee is entitled to 10 days of casual leave (in addition to the annual leave) with full pay. This leave is granted upon certain situations such as sudden illness.
A further 16 days of leave is entitled for sick or medical leave and paid at a rate of 50% of pay. Sick leave requires a medical certificate.
Female employees are entitled to three months of paid maternity leave following four months of working for a single employer before giving birth. The employee must take a six-week post-natal leave period.
Employees are protected during their maternity leave and cannot be terminated during this time.
To receive benefits, the employee must have at least 180 days of contributions in the year before the child’s expected birth.
PAID MATERNITY LEAVE (DAYS)
Fathers are eligible for one month of leave following the birth of their first three children.
There are no provisions in the law regarding parental leave.
Employees in Pakistan are entitled to Iddat leave. Iddat leave is applicable if a secured person dies while in receipt of a sickness or injury benefit. In this case, their survivors are entitled to a death grant equal to the daily rate of sickness benefit multiplied by 30, but it should not be less than 1500 PKR.
Iddat leave is also applicable if a female employee loses her husband.
The termination process varies according to how the employment agreement and collective agreement are in place and is based on the type of contract and reason for termination. Both employees and employers should provide terminations in writing, and the reasoning for dismissal must be sufficient.
Both employees and employers require a notice period of one month to terminate an employment contract. Advanced notice is not necessary for temporary workers.
If advanced notice is not provided, then an employer must pay a monthly salary in its lieu.
Except in the circumstance of misconduct, employees receive severance pay amounting to 30 days’ wages for each year of completed service following their discharge from work.
In Pakistan, probation periods are outlined in the employees’ employment contracts. The probation period is typically three months long.
Work visas are usually granted for one year once approved by the board of investment; these must be renewed and re-approved annually. Pakistan has several specific visa applications for particular countries – each with differing requirements and levels of responsibility.
Foreign workers looking to work in Pakistan must obtain their working visa at the Pakistani Consulate in their country of residence. An essential requirement for the visa is an official invitation/letter from the Chamber of Commerce and Industry on behalf of sponsoring company in Pakistan. The letter must indicate the length of stay, place of stay, etc.
Once a work visa is granted for three months, an applicant can seek an extension of up to 2 years with multiple entries.
Following the completion of 2 years, an employee can apply for permanent status.
The standard rate of VAT in Pakistan is 17.00%.
Stay up to date on payroll & employment law changes
Questions & Answers
Public Holidays Calendar
|Wednesday||Jun-28||Eid al Azda|
|Thursday||Jun-29||Eid al Azda|
|Friday||Jun-30||Eid al Azda|
|Saturday||Jul-1||Eid al Azda||For those doing a 6-day working week|
|Tuesday||Dec-26||Day After Christmas|