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Employer of Record (EOR) in Pakistan

Employer Of Record In Pakistan

Skuad’s Pakistan EOR (Employer of Record) solution helps you expand your business into Pakistan without having to set up a separate entity. Any organization’s development depends upon a good HR team who can easily handle the onboarding of remote teams, payroll management, attendance, compliance, etc., accurately and on time. Skuad supports your global HR needs through its international network with an automated and unified platform.

Skuad helps you create exceptional remote teams, hire contractors or full-time employees, and understand the details of compliance and taxation structure in Pakistan. Book a Demo to understand our process.

Employment In Pakistan

Pakistan’s employment laws are comprehensive and include various ordinances, acts, rules and regulations with statutes relating to industrial, commercial, and labor establishments. The federal labor laws in Pakistan include the Workmen Compensation Act, the Payment of Wages Act, the Employer’s Liability Act, and more. Some other statutes apply to Sindh, Punjab, and Khyber Pakhtunkhwa provinces in Pakistan.

Pakistan’s labor laws apply to both citizens as well as foreign nationals. Foreign employees can easily work in Pakistan with a work visa unless there is a Visa Abolition Agreement between Pakistan and the employee’s home country. An application for this must be submitted to the Board of Investment, Pakistan.

Therefore, to stay compliant with the laws, Skuad provides an effective global network solution to expand your business and handles complete payroll without you having to set up another entity. Here are some important aspects of employment in Pakistan.

Entitlements Explanations

Statutory Working Hours

48 hours per week

Weekly Rest Period

Between 7 workdays, workers are given a rest period of one day before returning to work.

Paid Public Holidays

  • Kashmir Day (February 05)

  • Pakistan Day (March 23)

  • Labour Day (May 01)

  • Eid ul Azha* (July 21-23)

  • Independence Day (August 14)

  • Eid Milad un Nabi (October 19)

  • Quiad-e-Azam Day/ Christmas (December 25)

Maternity Leave

12 weeks of maternity leave for female employees with full pay and 6 weeks post-natal leave is compulsory under the Maternity Benefit Act. The Revision of Leave Rules 1981 in the Punjab province allows employees to avail paternity leave. Maximum 7 days of paternity leave is admissible with full pay on or immediately before the child’s birth.

Annual Leave Accrual Entitlement

14 consecutive days’ leave in the period of 12 months is permitted in Pakistan.

Laws Earned Annual Leave
  • Factories Act, 1934 (applicable in Balochistan, ICT, and Punjab)

  • The Khyber Pakhtunkhwa Factories Act, 2013

  • Sindh Factories Act, 2015

14 consecutive days

  • Shop and Establishment Ordinance 1969 (applicable in Balochistan, ICT, and Punjab)

  • Khyber Pakhtunkhwa Shops and Establishments Act, 2015

  • Sindh Shops and Commercial Establishments Act, 2015

14 consecutive days

Mines Act, 1923 (Applicable in Pakistan)

  • 1 day of leave for every 17 days of work below ground

  • 1 day of leave for every 20 days of work above ground

Newspaper Employees Act, 1973 (Applicable in Pakistan)

At least 1/11th of time spent on duty

Road Transport Workers Ordinance 1961 (Applicable in Pakistan)

At least 14 days leave with full pay

Overtime Compensation

If a worker works beyond the stipulated working hours, he is entitled to overtime pay which is double the rate of his ordinary pay.

Employment Security

Written employment particulars, fixed-term contracts, and probation period details are mentioned under the Standing Orders Ordinance.

Contractors vs. Full-Time Employees

When the company scales up and expands internationally, there are generally two options for hiring; contractors or full-time employees. Before hiring, companies must be familiar with the prevailing laws in Pakistan for hiring contractors and full-time employees. The relevant laws in Pakistan to define employment are:

  1. Industrial and Commercial Employment (Standing Orders) Ordinance 1968 (applicable in Balochistan, ICT, and Punjab)
  2. Khyber Pakhtunkhwa Industrial and Commercial Employment (Standing Orders) Act, 2013
  3. Sindh Terms of Employment (Standing Orders) Act, 2015

For the workmen to whom the above ordinances apply, a formal employment letter is issued to define the terms and conditions of service. Workers in Pakistan are divided into six categories.

1

Permanent

When a worker has been working for 9 months and has satisfactorily completed 3 months of the probation period.

2

Probationers

Probationers for the period of the first 3 months.

3

Badlis (Alternate)

When a worker is appointed to the post of a permanent or probationary employee who is temporarily absent.

4

Temporary

A person hired for a project ending within 9 months.

5

Apprentices

A person undergoing training through an apprenticeship system.

5

Contract worker

When a worker is employed to work on a piece-rate basis for a specified period. Overtime pay for working over-hours is not specified.

The maximum duration for a fixed-term contract worker doing tasks of permanent nature is nine months. Sindh legislation defines a contract worker as a worker who works on a contract basis for a specific period mentioned in the contract in any establishment but does not include third-party employment. Hence, it is helpful to choose a global payroll provider such as Skuad, who can easily maintain your compliances and leave you free to focus on core business operations.

Hiring In Pakistan

Employees are valuable assets for a business’s growth, so it is essential to hire the right person for the right job. This has increased the importance of human resource management in all kinds of organizations. The system of recruitment and selection in Pakistan customarily relies on placing advertisements in the Sunday edition of the national newspapers, namely Daily Jang and Nawaiwaqt in Urdu and Dawn, The News, and The Nation in the English language.

Jobs in the government sector are advertised as a regulatory requirement through the National job portal, and jobs in the private sector are filled up through agencies, references, and popular websites such as Rozee, Brightspyre, Bayrozgar,Mustakbil, etc. Candidates who fulfill the criteria as per the job descriptions undergo a screening test followed by an interview.

The general etiquette during interviews suggests that the candidate wears a necktie during the interview and decent formal attire. Shaking hands with females is not permitted on religious grounds. After the interview process, a suitable candidate is given an opportunity for the job and is sent an employment offer containing the terms and conditions of the services.

There is a lack of equal employment opportunities among candidates. The literacy rate among females is lower than that of males, leading to the limited presence of females in the organization. Contractual jobs in Pakistan offer good packages and benefits in the short term without any job security.

Skuad helps to solve all such issues and provides a good compliance and payroll management system through which the right person from the right place can be selected as per the job requirement. Click here to learn more.

Probation & Termination

Probation Period

According to the Standing Order Ordinance, 1968, the probation period lasts for 3 months.

Notice for Termination of Employment

According to the Standing Order Ordinance, 1968, one month prior notice before terminating an employment contract is mandatory. (This applies to permanent employees only)

Severance Pay

If employment is terminated for any reason other than misconduct, the worker is entitled to severance pay or gratuity. This is equivalent to 30 days’ wages for every completed year of service or any part thereof in excess of 6 months.

EOR Solution In Pakistan

Companies looking to expand their business in Pakistan can rely on Skuad as we cater to virtually all sizes of enterprises, from startups, medium to well-established companies. Skuad handles contract drafting, screening, hiring, onboarding, taxation filing, and providing day-to-day employment solutions for companies looking to expand overseas.

Before expanding operations, it is important to decide whether you want to build an in-house team or take the services of an EOR to manage payroll and employee hire-to-fire lifecycle.

Choosing the Skuad route for all important business practices can enable quicker onboarding and business management processes through simplified business solutions. Learn more about our process here.

General Employer of Record Service Terms

Taxes that apply to invoices

Standard tax rate of 17%

Minimum duration of service

3 months

Currency Accepted

PKR, USD

Required Details and Documents

For Pakistani Citizens: Personal information, ID proof, residential proof, CV, bank details, job details. For Expatriates: Personal information, job details, educational qualifications, technical qualifications, CV, copy of passport, copy of ID, Bank details, photographs, Employment contract on stamp paper.


Types Of Visas In Pakistan

The types of visas in Pakistan are as follows:

Visa Category Explanation

Visitor Visa

A visitor visa is required if you are visiting Pakistan to meet relatives or friends or for any other legitimate purpose at their invitation for a duration of 3 months.

Business Visa

Business visa is granted to individuals with a minimum annual income of PKR 5,00,000/-, or if their company’s annual turnover or sale is greater than PKR 30,00,000/- (Duration: 1 year business visa for visiting 5 places, four times a year) AND If you are a businessman with an income of at least PKR 50,00,000/- or your company’s annual turnover or sale is more than PKR 3,00,00,000/- (Duration: 1 year multiple entry business visas for up to ten places with exemption from Police Reporting).

Conference Visa

This visa is required if you intend to participate in any conference/seminar/exhibition on a specific invitation.

Pilgrim Visa

A pilgrim visa is given to a group of pilgrims (more than 10) visiting religious places.

Medical/ Medical Attendant Visa

This visa is issued if you need to visit Pakistan for specialized medical treatment or to accompany such a patient.

Journalist Visa

This visa is issued to accredited journalists to cover an event or attend a seminar, conference, or exhibition.

Student Visa

A student visa is issued for applicants who intend to study in a recognized and approved academic institution in Pakistan.

Official Visa

An official visa is given to a diplomatic/official passport holder.

Assignment Visa

Assignment visas are issued only to Diplomatic/official passport holders who are posted in Pakistan.

Group Tourist Visa

It is issued to individual applicants who intend to travel in groups with not less than 10 members and not more than 50 members in each group, and such tours are organized by approved tour operators/travel agents.

Work Permit

When planning to set up a subsidiary and hire remote teams to carry on business operations in Pakistan, one needs to be aware of the laws on work permits and visas in Pakistan. Some of the important documents required while applying for a work visa are as follows:

  • Employee’s photograph
  • Employee’s passport
  • Company registration letter from Securities and Exchange Commission of Pakistan (SECP)
  • Recommendation letter by the Board of Investors (BOI)/Ministry of Interior (MOI) for an extension
  • Contact details
  • Undertaking on company letterhead
  • The employer cover letter on company letterhead
  • Company’s profile
  • Employment agreement
  • Company’s FBR NTN certificate

These applications must be filled in English, and 4 identical sets of the application must be submitted to the embassy with a visa fee. Time taken to obtain a visa is three to four months. Applicants may need to go for an interview. After that, the BOI will process it, and then it approves the work visa and sends a recommendation to the Ministry of Interior. After this approval, you will finally be authorized for the issuance of a visa.

Skuad EOR can help provide you with a work permit in Pakistan. As a reliable EOR partner in Pakistan, Skuad’s EOR platform helps client organizations efficiently hire and manage their employees' activities in Pakistan.

Payroll & Taxes In Pakistan

To set up payroll and manage taxation in Pakistan, you need to be aware of the payroll and taxation rules which vary across different categories. With Skuad’s EOR Pakistan solution, you can rest assured as we manage a locally compliant payroll in Pakistan. The decision to be made is whether you want to manage payroll remotely or you prefer outsourcing to Skuad to manage your payroll along with compliance with local rules and regulations. Moreover, while choosing to set up a Pakistan payroll, it is necessary to establish a subsidiary in the country through which you can legally operate.

Taxes in Pakistan

Tax Explanation

Income Tax Rates

Taxable Income Rate

Up to PKR 6,00,000

0%

Over PKR 6,00,000 and up to PKR 1.2 million

5% of the amount exceeding PKR 6,00,000

Over PKR 1.2 million and up to PKR 1.8 million

PKR 30,000 plus 10% of the amount exceeding PKR 1.2 million

Over PKR 1.8 million and up to PKR 2.5 million

PKR 90,000 plus 15% of the amount exceeding PKR 1.8 million

Over PKR 2.5 million and up to PKR 3.5 million

PKR 195,000 plus 17.5% of the amount exceeding PKR 2.5 million

Over PKR 3.5 million and up to PKR 5 million

PKR 370,000 plus 20% of the amount exceeding PKR 3.5 million

Over PKR 5 million and up to PKR 8 million

PKR 670,000 plus 22.5% of the amount exceeding PKR 5 million

Over PKR 8 million and up to PKR 12 million

PKR 1.345 million plus 25% of the amount exceeding PKR 8 million

Over PKR 12 million and up to PKR 30 million

PKR 370,000 plus 20% of the amount exceedPKR 2.345 million plus 27.5% of the amount exceeding PKR 12 million

Over PKR 30 million and up to PKR 50 million

PKR 7.295 plus 30% of the amount exceeding PKR 30 million

Over PKR 50 million and up to PKR 75 million

PKR 13.295 million plus 32.5% of the amount exceeding PKR 50 million

Over PKR 75 million

PKR 21.42 million plus 35% of the amount exceeding PKR 75 million

Tax Year

The tax year is the financial year.

Filing & Payment

It must be filed by 31st August after the tax year ending on 30th June. Resident individuals also need to file a statement of wealth and a wealth reconciliation statement as of 30th June.

Penalties

0.1 % of the amount of the tax payable for each day of default.

Withholding Tax (For non-residents )

Dividends: 15% Interest: 10% Royalties: 15% Fees for technical services: 15%

Sales Tax

17% for goods and 13% to 16% for services

Payroll Tax

No specific payroll taxes.

Social Security Contributions

The employer contributes up to 6% of wages to the social security institution on behalf of the employee. No contribution is due on wages in excess of PKR 600 per day or PKR 15,000 per month.

Health Insurance

No healthcare benefits as it is administered through expensive private sector insurance companies.

Additional Benefit

An employee who takes pilgrimage is granted a special leave of up to 60 days. Some companies offer medical insurance, life insurance and tuition fee reimbursement.

Public Pension

Pensions in Pakistan are governed under the Pakistan Pension Fund.

Incorporation: How To Set Up A Subsidiary In Pakistan

A company that is planning to grow its business in Pakistan needs to decide, first and foremost, which state it wishes to set up the subsidiary in. Each region has different subsidiary laws that can impact the working of the company.

The types of business that can be set up are Limited Liability Company (LLC), Free Zone company (EPZ company), Limited Liability Partnership (LLP), Public Limited company and representative office. The most common among these are Limited Liability companies.

The Pakistan Limited Liability Company (LLC)

An LLC can be registered with two directors and two shareholders with a minimum capital of USD 1,000. Directors and shareholders can be non-resident and need to register individually for an NTN number with the local tax authority. The Pakistan government also requires the LLC to have a legal advisor ordinarily residing in Pakistan if the entity has a share capital over US$5,000.

The steps to incorporate an LLC include:

  • Name approval by the Securities and Exchange Commission
  • Payment of application fees by any designated Muslim commercial bank
  • Opening a bank account in Pakistan
  • Completing the memorandum with signatures and then submitting a list of directors
  • Obtaining a digital signature from the National Institutional Facilitation Technologies
  • Registering with the regional tax office
  • Registering with the social security institution depending on the location
  • Registration with the labor department 
  • A waiting period of 6 weeks to get incorporated as an LLC

Setting up a subsidiary in Pakistan raises many questions and queries. With Skuad’s EOR solution, you can put your concerns to rest, as we will help you operate legally and hire employees, manage payroll, and maintain business relationships on your behalf.

We recommend taking your time to work with your finance team and finding the right budget for the location where you want to set up a business. Connect with Skuad to streamline the process.

Professional Employer Organization (PEO)

PEOs help companies hire employees in Pakistan without having to establish a legal setup. The PEO manages all HR benefits, payroll, and compliance needs for the employees. The key difference between PEO and EOR is as follows:

Professional Employer Organization (PEO) Employer Of Record (EOR)

PEO is a system of an outsourced department where an organization associates with the small and medium business sector to provide services such as tax filing, compliances, recruitment, training and others.

EOR directly becomes the legal employer and provides a complete HR solution from hire to retire services along with all business compliances. It eliminates the process of associating with the small and medium business sector.

It is up to the company to decide whether it wants to partner with a PEO or an EOR solution for growing its business.

In Skuad’s EOR solutions, you are not required to form an entity in the country of expansion. Skuad completely handles all the hassles of working through the various stages of incorporation, documentation and handling employment contracts.

Conclusion

Skuad's comprehensive solution allows you to have peace of mind and assists in every detail related to recruitment, tax and compliance, payroll management, a sound tracking system and updated details of changes in local employment laws in Pakistan. The main features of Skuad are:

  • Global Infrastructure
  • Unified Employment Platform
  • Single Invoice for Everything
  • Compliance with local taxation and employment laws
  • IP Protection and Safety

Skuad comes with experience and expertise in building a team anytime, anywhere and in any mode, covering over 150 countries around the globe. Contact us and learn more about our Pakistan EOR solution to shape your ideas for business expansion in Pakistan.

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