Employer of Record in Pakistan: A Complete Guide for 2026

Introduction

Pakistan offers foreign employers access to a large, cost-competitive workforce with strength in IT, engineering, and business process services, supported by English-speaking graduates and one of South Asia's most active freelance economies.

However, the regulatory landscape for companies looking to hire in Pakistan is split between federal and provincial levels.

The 18th Constitutional Amendment devolved labour law to the four provinces, so a hire in Karachi (Sindh), Lahore (Punjab), Peshawar (KPK), or Quetta (Balochistan) can carry different leave entitlements, maternity provisions, and termination procedures.

EOBI (Employees' Old-Age Benefits Institution), provincial Social Security Institutions, gratuity under Standing Order 12(6), and the Maternity and Paternity Leave Act 2023 add additional compliance requirements.

This EOR services in Pakistan guide walks through Pakistan's employment framework, payroll and taxes, contractor classification, work permits, entity setup, and how to hire Pakistani employees without setting up a local entity.

Pakistan at a glance

Population: 258.8 million

Currency: Pakistan Rupee (PKR)

Capital: Islamabad

Languages: Urdu, English

GDP: USD 371.5 billion

Employment in Pakistan

Pakistan's employment law is differentiated across federal and provincial levels. The 18th Constitutional Amendment in 2010 devolved labour law to the provinces, and each of the four provinces has since enacted its own labour statutes

• The Sindh Terms of Employment (Standing Orders) Act 2015
• The KPK Industrial and Commercial Employment (Standing Orders) Act 2013
• The Balochistan Industrial and Commercial Employment (Standing Orders) Act 2021
• Punjab continues to apply the federal Ordinance under the 2012 Amendment Act.

The Islamabad Capital Territory and federally regulated industries continue to apply federal laws. The Factories Act 1934, the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, and the West Pakistan Shops and Establishments Ordinance 1969 still form the federal backbone.

For foreign employers, this means the same hire in Karachi and Lahore can carry different leave entitlements, maternity provisions, and termination procedures.

Foreign nationals also need a valid work visa with a recommendation from the Board of Investment, except where a Visa Abolition Agreement is in place with their home country (a narrow list of mostly diplomatic and regional partners).

Pakistan's labour law fragmentation is one of the biggest compliance challenges for foreign employers. Maternity leave can swing between 12 weeks (Punjab, KPK) and 180 days (federal/ICT), depending on which province the employee is based in.

Provincial Standing Orders Acts have replaced the 1968 Ordinance in Sindh and KPK, with different notice periods, gratuity rules, and disciplinary procedures. Federal/ICT (Islamabad Capital Territory) employees get paid paternity leave under the 2023 Act, provincial private-sector employees generally don't.

Pakistan's employment compliance, from gratuity accrual under Standing Order 12(6) to EOBI registration to provincial maternity variations across Sindh, Punjab, KPK, and Balochistan, carries real penalty risk for foreign employers who get it wrong.

Skuad helps with the local employment laws and regulations as the legal employer in Pakistan, so your team can hire without setting up an entity or monitoring compliance changes across four provinces.

Book a demo to see how Skuad supports Pakistan employment compliance end-to-end.

Contractors vs. Full-time employees

Pakistani employers hire both full-time employees and independent contractors, and the right choice depends on the nature of the work. Pakistan's Supreme Court applies a substance-over-form test and looks at how the relationship actually works.

Full-time employees fall under the Standing Orders framework introduced in the Employment section above. Each province's Standing Orders Act and the federal Ordinance applying in ICT classify workers into six categories under Standing Order 1:

Full-time employees are entitled to statutory leave under the Factories Act and Shops and Establishments Ordinance, four-insurance equivalents through EOBI and the relevant provincial Social Security Institution, gratuity under Standing Order 12(6), and one month's written termination notice under Standing Order 12.

Fixed-term employment contracts for tasks of a permanent nature are limited to 9 months in most provinces.

An independent contractor runs their own business, works project-to-project (often for more than one client), pays their own income tax under Section 153 of the Income Tax Ordinance 2001 (withholding on services, typically 3-10% depending on category), and operates without statutory leave, gratuity, or social security entitlements from the engaging company.

Contractors are required to hold a National Tax Number (NTN) registered with the Federal Board of Revenue.

The Supreme Court of Pakistan has consistently ruled that the substance of the relationship determines status, including in cases where workers engaged through outsourcing contractors have been recognised as employees of the principal company because the principal retained control over the means and methods of the work.

The Supreme Court reinforced this approach in IFFCO (International Foodstuffs Company) Pakistan v. Ghulam Murtaza in April 2024, granting 55 contract workers the status of permanent IFFCO employees after nearly a decade of litigation. There is no statutory test, and the classification is decided on a case-by-case basis.

Factors that lean toward employment in Pakistani court analysis:

• The hiring company controls working hours, location, and how the work is done
• The worker uses the company's tools, equipment, and infrastructure
• The worker is integrated into the company's core operations
• The worker bears no financial risk (paid regardless of project outcome)
• The worker engages exclusively or near-exclusively with one client

A worker reclassified as an employee can claim unpaid gratuity, back-paid EOBI and social security contributions, statutory leave, and overtime. The company also faces administrative penalties and tax audits from the Federal Board of Revenue.

The Supreme Court has struck down outsourcing arrangements designed to deny statutory employee rights in multiple cases.

You can decide to bring someone on as a full-time employee or engage them as a contractor in Pakistan, but the classification has to hold up if a Labour Court or the FBR (Federal Board of Revenue) looks, and the cost of getting it wrong results.

Skuad supports both hiring models from a single platform:

EOR for full-time employees

• Acts as the legal employer across 160+ countries, so you can hire without setting up a local entity
• Facilitates employment contract generation aligned with local labor laws and statutory requirements
• Supports payroll processing in 70+ currencies with accurate tax withholding and statutory deductions
• Helps administer statutory benefits, paid leave, and termination entitlements in line with local requirements
• Assists with offboarding, including notice periods and severance calculations as required locally

Contractor management

• Helps onboard contractors with locally compliant agreements that reduce misclassification exposure
• Flags worker classification risk before it becomes a compliance issue with built-in classification checks
• Supports invoice generation, approval workflows, and payment processing in local currency
• Facilitates multi-currency payouts across 70+ currencies with no manual reconciliation

Full-time or contractor? Skuad supports both. See pricing.

Hiring in Pakistan

Hiring in Pakistan is governed by provincial labour laws, the Standing Orders framework (covered in the previous section), and a developing data protection landscape. A few requirements worth knowing before you make your first hire.

Personal data and consent: Pakistan does not yet have a general data protection law. The Personal Data Protection Bill 2023 was approved by the Federal Cabinet but remains pending before Parliament.

Until enacted, employers operate under the constitutional right to privacy (Article 14), the Prevention of Electronic Crimes Act 2016 for digital data, and sector-specific protections in banking and telecoms.

Common practice is to obtain written consent for processing employee personal data, particularly CNIC (computerised national ID card) and salary information.

Workplace harassment compliance: The Protection Against Harassment of Women at the Workplace Act 2010, amended in 2022, requires every organisation to constitute an internal Inquiry Committee to handle harassment complaints.

The 2022 amendment expanded "workplace" to include formal and informal work settings, and "harassment" to include gender-based discrimination, not only sexual harassment. The Federal Ombudsperson Secretariat for Protection Against Harassment (FOSPAH) handles escalations.

Background checks: In Pakistan, CNIC verification through NADRA is standard practice, and candidates expecting access to financial or senior roles will also face criminal record and credit checks, meaning an unverified hire carries real onboarding risk before a contract is even signed.

Skuad facilitates background checks as part of the hiring workflow, covering identity verification, employment history, and education credentials, so you have a clear picture of who you're onboarding before contracts are signed. Combined with Skuad's local EOR infrastructure, candidate verification and compliant onboarding run through one platform.

See how Skuad's background checks work

Social insurance enrolment: New hires must be enrolled in EOBI (Employees' Old-Age Benefits Institution) and the relevant provincial Social Security Institution (SESSI in Sindh, PESSI in Punjab, KPESSI in KPK, BESSI in Balochistan). Establishments with five or more employees are required to register with EOBI.

The major hiring platforms in Pakistan:

• Rozee.pk
• Mustakbil.com
• BrightSpyre
• Indeed Pakistan
• LinkedIn

Pakistani hiring runs across CNIC (Computerised National Identity Card) verification through NADRA(National Database and Registration Authority), EOBI, and provincial Social Security Institution enrolment, written appointment letters aligned with the applicable provincial Standing Orders Act, and FOSPAH-compliant harassment policies (Federal Ombudsman Secretariat for Protection Against Harassment ), all required before day one.

Probation & termination

Pakistan has two distinct pathways to end employment, and they carry very different procedural requirements. Foreign employers who treat them the same way are the ones who end up in the Labour Court.

Probation: Probationary employees can be terminated without notice during the probation period. The standard probation is 3 months under the Standing Orders framework, extendable up to 6 months in private-sector practice for senior or technical roles by mutual agreement.

Once probation ends and the employee is confirmed, the full Standing Orders protections apply, including the notice and procedural requirements below.

Termination simpliciter (Standing Order 12): Termination on any ground other than misconduct requires one month's written notice or one month's wages in lieu. The termination order must be in writing and must state the reason.

Pakistani law doesn't list specific fair grounds, but case law has accepted serious illness, inefficiency in performing the job, and financial or economic needs of the establishment. Gratuity is payable for all employees with at least 6 months of service, calculated at 30 days' wages for every completed year (and any part exceeding 6 months).

Dismissal for misconduct (Standing Order 15): Dismissal on the ground of misconduct does not require notice, but the procedural bar is high. The employer must:

• Issue a written charge sheet to the worker within one month of the misconduct or its coming to the employer's notice
• Allow the worker to explain
• Conduct an independent domestic inquiry
• Record the reasons for dismissal in writing
• Obtain employer approval for every dismissal

Misconduct under Standing Order 14 includes theft, fraud or dishonesty in connection with the employer's business or property, willful insubordination, habitual absence without leave, habitual late attendance, habitual breach of standing orders, riotous or disorderly behaviour, and striking work without permission.

Gratuity is not payable if the dismissal is for misconduct and the inquiry process was properly followed.

Termination in Pakistan is one of the most litigated areas of employment law. Foreign employers who skip the Standing Order 15 inquiry, fail to issue written reasons, or miscalculate gratuity under Standing Order 12(6) end up paying reinstatement and back wages in the Labour Court two years later.

EOR solution in Pakistan

Hiring in Pakistan without a local entity is an operational challenge for foreign employers. The alternative is setting up your own Pakistani company. SECP (Securities and Exchange Commission of Pakistan) registration through the eZfile portal takes about 5 to 10 working days for a straightforward private limited filing.

Post-incorporation, you're committing to FBR National Tax Number filings, monthly sales tax returns at the 18% federal rate (or the relevant provincial services tax), EOBI registration, provincial Social Security Institution registration, Labour Department filings, and corporate income tax compliance with the Federal Board of Revenue.

For a small team or a market-entry test, that overhead is hard to justify. An Employer of Record is the alternative. Skuad acts as the legal employer in Pakistan, so you can hire, pay, and run statutory compliance for Pakistani employees without registering locally.

Here is what Skuad helps with:

• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Payroll processing in 70+ currencies with accurate tax withholding and statutory deductions
• Statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Statutory benefits administration across supported markets, including maternity, paternity, sick, and annual leave entitlements
• Termination and offboarding support aligned with local notice, severance, and disciplinary requirements
• Contractor onboarding and management with built-in classification risk flags across 160+ countries

Book a demo to see how Skuad supports your first Pakistan hire in days.

Types of visas in Pakistan

Foreign nationals working in Pakistan need a valid work visa, and the sponsoring company must be registered with the SECP. The work visa process runs through the Board of Investment (BOI), the Directorate General of Immigration and Passports (DGI&P), and the Ministry of Interior.

For commercial visits or investor scenarios, the SIFC (Special Investment Facilitation Council) Business Visa and SIFC Investor Visa, introduced in December 2023, offer streamlined alternatives to the standard categories.

For EOR hiring scenarios, four visa categories matter:

For most foreign companies hiring Pakistani nationals through an EOR, work visas aren't a factor because Pakistani citizens don't need them. Work visas only come into play when the role is being filled by a foreign national who needs to be physically present in Pakistan.

Pakistani visa documentation is paperwork-heavy and runs across SECP, BOI, the Ministry of Interior, and Pakistan Missions abroad. Skuad helps coordinate visa and work authorization documentation as part of onboarding across 160+ countries, so foreign-national hires get onboarded as quickly as your local hires.

Book a demo to walk through your specific Pakistan hiring scenario, including foreign-national visa requirements.

Work Permit

In Pakistan, the work permit is functionally the recommendation letter issued by the Board of Investment (BOI). It's separate from the work visa itself, but the visa application requires it. For foreign hires entering Pakistan to work, both pieces have to be in place.

BOI recommendation letter confirms that the foreign hire has been reviewed and cleared by the Board of Investment. The Ministry of Interior issues the actual work visa based on the BOI recommendation. Without the recommendation, the visa application doesn't move forward.

Documents required for the BOI submission

• Employer cover letter on company letterhead, justifying the hire
• Undertaking on company letterhead
• Company profile and incorporation documents (SECP certificate)
• Company's FBR National Tax Number (NTN) certificate
• Employment contract or offer letter
• Candidate's CV with attested educational and professional certificates
• Passport copy and recent photographs
• Salary and assignment duration details

Pakistani government processing times for a work visa are up to 15 business days for a single-entry and up to 30 business days for a multiple-entry. Pakistan Missions abroad can issue an initial entry visa within 48 hours once the BOI recommendation is in hand, while extensions and security clearances typically further extend the timeline.

The work permit process in Pakistan is paperwork-heavy and runs across SECP, BOI, the Ministry of Interior, and security agencies.

Book a demo to see how Skuad supports work permit documentation for your foreign hires in Pakistan.

Payroll & taxes in Pakistan

Pakistan's payroll runs through federal income tax (FBR), the Employees' Old-Age Benefits Institution (EOBI), provincial Social Security Institutions, and provincial Sales Tax on services.

The tax year runs from July 1 to June 30. For foreign companies without a Pakistan entity, an EOR handles all federal and provincial obligations without requiring a subsidiary.

Income tax for salaried employees

Pakistan's Finance Act 2025 revised the salaried tax slabs for the tax year 2025-26, with reduced rates in the lower and middle brackets. The slabs apply where the salary exceeds 75% of the total taxable income.

Salaried individuals with annual taxable income above PKR 10 million pay an additional 9% surcharge, reduced from 10% under the Finance Act 2025.

Tax is withheld at source from the monthly salary based on the applicable slab. Individuals are required to file an annual return and a wealth statement by 30 September following the fiscal year-end of 30 June. Resident individuals must reconcile movement in net assets against income in the wealth statement.

Employer-side wage contributions

Employees' Old-Age Benefits Institution (EOBI): Employers contribute 5%, and employees contribute 1% of the applicable minimum wage to EOBI, Pakistan's federal statutory pension scheme.

Provincial Social Security Institutions: Each province operates its own SSI. SESSI (Sindh), PESSI (Punjab), KPESSI (Khyber Pakhtunkhwa), and BESSI (Balochistan). Employer contribution is generally 6% of wages, subject to the applicable wage ceiling.

Minimum wage by province

Minimum wage rates are notified provincially. The applicable rate determines EOBI contribution amounts. The federal baseline is PKR 37,000 per month for unskilled workers, while Sindh has notified separate higher rates for semi-skilled (PKR 38,200) and skilled workers (PKR 45,910).

Punjab raised its rate to PKR 40,000 effective July 1, 2025, with Sindh and Khyber Pakhtunkhwa aligning at the same rate.

Sales tax

Pakistan's federal sales tax on goods is 18%. Provincial sales tax on services ranges from 15% to 16%, administered by PRA (Punjab, 16%), SRB (Sindh, 15%), KPRA (KP, 15%), BRA (Balochistan, 15%), and FBR for ICT (15-16%).

Withholding tax on payments to non-residents

For non-residents without a permanent establishment in Pakistan, withholding tax on cross-border payments ranges from 5% to 20%, depending on payment type, subject to relief under applicable double tax treaties.

Other compliance basics

Residents are taxed on worldwide income and non-residents on Pakistan-source income. Pakistan operates a filer vs. non-filer regime, with higher withholding rates for individuals.

Pakistan's payroll obligations sit across FBR (federal income tax), EOBI (federal pension), provincial Social Security Institutions, and provincial Sales Tax authorities, each with its own filing deadlines and contribution ceilings.

You can use Skuad's cost calculator to estimate the total employer cost for a Pakistani hire, including base salary, statutory contributions, gratuity accrual, and Skuad's service fee.

Incorporation: How to set up a subsidiary in Pakistan

For most foreign companies hiring in Pakistan, incorporation isn't necessary, but if you do choose to incorporate, the landscape looks like this. Pakistan's corporate framework is governed by the Companies Act 2017, administered by the Securities and Exchange Commission of Pakistan (SECP). The most common structures for foreign investors:

Public Limited Companies, LLPs under the Limited Liability Partnership Act 2017, and Export Processing Zone (EPZ) entities under the EPZA Ordinance 1980 are also available for specific use cases.

Private limited company requirements

• Minimum two shareholders and two directors. Foreign nationals can serve in both roles
• Memorandum and Articles of Association filed with SECP
• A legal adviser must be appointed on retainership only if paid-up capital exceeds PKR 7.5 million, under the Companies (Appointment of Legal Advisers) Act 1974, as amended in 2017

Branch and liaison Offices

Foreign companies that don't want a full subsidiary have two intermediate options:

• Branch Office. Executes specific contracts in Pakistan on behalf of the foreign parent. Subject to Pakistan corporate tax at the standard rate, with an additional 15% tax on after-tax profits transferred to the head office. Requires Board of Investment (BOI) permission before SECP registration.
• Liaison Office. Limited to non-commercial activities. Cannot generate direct sales revenue or sign contracts in Pakistan. Also requires BOI permission.

The process and timeline

SECP has digitized incorporation through its eZfile (LEAP) portal. Standard incorporation runs five to ten working days for Private Limited Companies with complete documentation, including digital signature procurement, name reservation, MoA/AoA filing, and fee payment. Branch Office registration takes longer because of the BOI clearance step.

Setting up a Pakistani subsidiary makes sense for companies expecting significant in-country operations, scaling existing manufacturing, or pursuing CPEC-linked projects. For everyone else, the SECP, FBR, EOBI, and provincial SSI registrations add weeks of paperwork and ongoing compliance overhead that doesn't pay back at a small headcount.

Compare entity setup costs against Skuad's EOR pricing for your Pakistan hiring plan.

Professional Employer Organization (PEO)

A PEO provides outsourced HR and payroll services to companies that already have a registered entity in Pakistan. An EOR is itself the legal employer, so the client company doesn't need its own SECP registration. The practical difference for a foreign company entering Pakistan:

Start hiring in Pakistan without an entity

Pakistan is a strong market for foreign employers who understand the employment laws and hiring framework. Provincial Standing Orders Acts mean a hire in Karachi and a hire in Lahore can carry different leave, maternity, and termination rules.

Gratuity, EOBI, and provincial social security run alongside federal income tax. Standing Order 15 inquiries, Section 153 contractor classification, and the Maternity and Paternity Leave Act 2023 all sit on top.

Setting up a Pakistani entity to handle all of this takes weeks of paperwork and ongoing compliance across SECP, FBR, EOBI, and provincial Social Security Institutions. For most foreign companies hiring small teams in Pakistan, an EOR removes that overhead. Skuad acts as the legal employer in Pakistan, so you can hire your first Pakistani employee without any local entity set up.

Start hiring in Pakistan compliantly, without entity setup. Book a demo with Skuad

FAQs

1. What is an employer of record in Pakistan?

An Employer of Record in Pakistan is a locally registered entity that acts as the legal employer of your workforce. It holds the employment contract, processes payroll, and takes on statutory compliance with FBR, EOBI, and provincial Social Security Institutions on your behalf.

2. How much does an EOR in Pakistan cost?

Most EOR services in Pakistan typically range from USD 199 to USD 800 per employee per month, depending on the provider and service scope. This fee sits on top of the employee's gross salary and statutory employer contributions like EOBI (5%) and provincial SSI (around 6%).

3. Can a foreign company hire in Pakistan without a local entity?

A foreign company can hire Pakistani employees through an EOR, without registering with SECP, FBR, EOBI, or provincial Social Security Institutions. The EOR holds the employment contract under its own Pakistani entity.

4. What are the risks of misclassifying employees as contractors in Pakistan?

Pakistan's Supreme Court applies a substance-over-form test and has reclassified contractors as employees in multiple cases, most recently in IFFCO Pakistan v. Ghulam Murtaza (April 2024). Reclassified workers can claim back-paid gratuity, EOBI, provincial SSI, statutory leave, and overtime, plus FBR audit exposure.

5. How is an EOR in Pakistan different from hiring contractors?

An EOR engages full-time employees with full statutory benefits (EOBI, provincial SSI, gratuity, leave) through its own Pakistani entity. Contractors are self-employed under Section 153 of the Income Tax Ordinance, with no statutory benefits, and the misclassification risk sits with the engaging company.

6. How quickly can an EOR onboard an employee in Pakistan?

EOR onboarding typically takes two to fifteen business days, depending on documentation and any background checks or NADRA CNIC verifications. By comparison, SECP entity incorporation takes five to ten working days, followed by weeks of FBR, EOBI, and provincial SSI registrations before your first hire.