Employer Of Record In Pakistan

The Pakistan EOR (Employer of Record) solution makes it possible to expand your company into Pakistan without having to create a new firm, which may be a difficult undertaking. Any organisation’s growth depends on having a strong HR team, especially one that can efficiently and accurately handle tasks like payroll management, attendance tracking, compliance, and remote team onboarding. You may utilise their worldwide network to satisfy your global HR demands with the help of our automated and unified platform.

We make it simple for you to build outstanding remote teams, recruit freelancers or full-time staff, and comprehend the nuances of compliance and taxes processes in Pakistan. 

Overview of Pakistan

• Estimated population: 23 million
• Currency: Pakistani Rupee
• Capital: Islamabad
• Languages spoken: Urdu, English
• GDP: 1.02% (2021)

Employment In Pakistan

A wide range of topics relating to industrial, commercial, and labour institutions are covered by Pakistan’s broad body of employment regulations. These laws cover a wide range of legislation, ordinances, actions, rules, and regulations that are relevant to both domestic employees and foreign workers. The Workmen Compensation Act, the Payment of Wages Act, and the Employer’s Liability Act are a few of the federal labour laws in Pakistan. Other laws also apply to particular Pakistani provinces, including Sindh, Punjab, and Khyber Pakhtunkhwa.

With the exception of situations when Pakistan and their home country have signed a visa abolition agreement, foreign workers can enter Pakistan with a valid work visa. The employee must submit an application to the Board of Investment in Pakistan in order to get a work visa. Pakistan provides a favourable environment for firms looking to grow their operations thanks to its clearly defined labour regulations and simple work visa application procedure.

Here are some important aspects of employment in Pakistan:

• 48 hours per week are required as statutory working hours.
• Weekly Rest Period – Between each week’s seven working days, employees are given a day off before going back 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 – According to the Maternity Benefit Act, female employees in Pakistan are entitled to 12 weeks of paid maternity leave and an extra 6 weeks of post-natal leave. This law makes sure that female workers get enough time off to rest and care for their newborns.

Additionally, the Punjab province’s Revision of Leave Rules 1981 permits male employees to take paternity leave. Fathers are entitled to a 15-day paid paternity leave that can be used at the time of the baby’s birth or right before it, with a maximum extension of three months. This forward-thinking policy recognizes the importance of fathers in raising children and gives them the freedom to be there and helpful throughout a child’s critical first few months of life.

• Annual Leave Accrual Entitlement –

Laws

• Factories Act, 1934 (applicable in Balochistan, ICT, and Punjab)
• The Khyber Pakhtunkhwa Factories Act, 2013
• Sindh Factories Act, 2015

Earned annual leave

• 14 Consecutive days

Laws

• 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

Earned annual leave

• 14 consecutive days

Laws

• Mines Act, 1923 (Applicable in Pakistan)

Earned annual leave

• 1 day of leave for every 17 days of work below ground
• 1 day of leave for every 20 days of work above ground

Laws

• Newspaper Employees Act, 1973 (Applicable in Pakistan)

Earned annual leave

• At least 1/11th of time spent on duty

Laws

• Road Transport Workers Ordinance 1961 (Applicable in Pakistan)

Earned annual leave

• At least 14 days leave with full pay
• Overtime Compensation – Employees in Pakistan are entitled to overtime compensation at a rate that is twice as high as their normal salary when they work above their scheduled working hours. This policy makes sure that workers are adequately rewarded for any extra work they do outside of regular business hours. Paying overtime is a crucial labour-protection strategy that values employees’ time and labour and encourages companies to appreciate employees’ time and encourage a good work-life balance.
• Employment Security – The Standing Orders Ordinance in Pakistan outlines the necessary details of written employment particulars, fixed-term contracts, and probationary periods.

Contractors vs. Full-Time Employees

There are often two possibilities for recruiting when a business grows and extends internationally: contractors or full-time workers. Companies should be aware of Pakistan’s current rules regarding employing contractors and full-time workers before making a recruiting decision.

In Pakistan, the following laws apply to defining employment:

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

An official employment letter outlining the terms and conditions of employment is sent to the workers to whom the aforementioned ordinances apply. In Pakistan, there are six different sorts of workers.

• Permanent: After 9 months of employment and after the probationary term of 3 months has been properly completed.
• Probationers – For the first three months, probationers.
• Alternate – When a replacement is appointed to fill in for a permanent or probationary employee who is temporarily out of the office.
• Temporary – Someone employed temporarily is one whose contract expires in less than nine months.
• Apprentices: Individuals receiving training under the apprenticeship system
• Contract worker: A worker hired on a piece-rate basis for a predetermined amount of time. There is no mention of overtime compensation for working longer hours.

Recruiting In Pakistan

In Pakistan, finding and hiring the best applicant for the position is essential for the development of any firm. The hiring process is focused on publishing job ads in major newspapers or using well-known employment websites. The screening procedure for candidates comprises a test and an interview, both of which call for a formal outfit, including a necktie. Due to lower literacy rates, women may not always have equal work possibilities. In Pakistan, contract work provides decent pay and perks in the short term, but job stability is rarely assured.

Probation & Termination

Probationary term – The Standing Order Ordinance of 1968 specifies that the probationary term is three months long.

Notice of Termination of Employment – Under the Standing Order Ordinance of 1968, a one-month notice period is required before ending an employment contract. (Only permanent employees are covered by this.)

Severance Pay – The employee is entitled to severance pay or gratuity if their job is terminated for any cause other than wrongdoing. For every year of service that has been completed, or any portion of a year that exceeds six months, this is the equivalent of 30 days’ pay.

EOR Solution

A service called an Employer of Record (EOR) solution allows businesses to recruit workers in Pakistan without creating a local legal company. We provide EOR services in Pakistan that let companies manage payroll, HR operations, and compliance with local legislation without establishing a separate corporation. Businesses may grow their worldwide workforce without worrying about the challenges of compliance and taxation thanks to our EOR solution in Pakistan. Businesses may easily manage their multinational teams and obtain excellent talent with the help of our EOR solution.

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
• For Pakistani citizens, the following information and documents are necessary: name, address, ID proof, curriculum vitae, bank information, and work information. Personal information, employment information, educational background, technical background, CV, copy of passport, copy of ID, bank information, pictures, and employment contract on stamp paper are required for expatriates.

Different Categories of Visas in Pakistan

• Visitor Visa – For a period of three months, you must have a visitor visa if you want to travel to Pakistan to visit family or friends, or for any other permissible reason at their request.
• Business Visa: This type of visa is available to those whose yearly income is at least PKR 5,00,000 or whose company’s annual sales or turnover exceed PKR 30,00,000. It is valid for one year and allows holders to travel to five different locations every four months.
  Additionally, if you are a businessman earning at least PKR 50,00,000 per year or if the annual sales or turnover of your company exceeds PKR 3,00,000 per year (duration: 1-year multiple entry business visas for up to ten locations with exemption from police reporting).
• Conference Visa: You need this visa if you want to attend a specific conference, seminar, or exhibition.
• Pilgrim Visa – A party of pilgrims (of more than 10) travelling to a religious location is granted a pilgrim visa.
• Medical/Medical Attendant Visa: If you need to travel to Pakistan for specialised medical care or to accompany a patient who needs such care, you will need to apply for this visa.
• Journalist visas – given to qualified journalists so they can cover events or go to seminars, conferences, or exhibitions.
• Student Visa: Those who want to study in Pakistan at an accredited institution of higher learning are granted a student visa.
• An official visa – is issued to the holder of a diplomatic or official passport.
• Assignment Visas: Only those with diplomatic or official passports stationed in Pakistan are eligible to get assignment visas.

Work Permits

It’s crucial to be aware of Pakistan’s work permit and visa regulations when establishing a subsidiary and recruiting remote teams for commercial operations there. The employee’s passport and picture, a letter of company registration from the Securities and Exchange Commission of Pakistan (SECP), and a letter of recommendation for an extension from the Board of Investors (BOI) or Ministry of Interior (MOI) are all required in order to apply for a work visa. An interview may be necessary throughout the three to four month long visa application procedure. Our EOR software may help with the application process for a work permit in Pakistan and with effectively managing staff activities for client enterprises.

Payroll & Taxes In Pakistan

In Pakistan, managing payroll and making sure tax regulations are followed may be a difficult and time-consuming process. However, you can speed up this procedure and make sure that your payroll complies with local laws by using our EOR solution. We guarantee that your payroll is done properly and promptly whether you want to manage payroll remotely or outsource to us. Furthermore, you must create a subsidiary in Pakistan in order to run your business legally and handle payroll. With our knowledge and experience, you can streamline payroll administration while concentrating on expanding your company’s presence in Pakistan.

Employer Taxation

• Tax year-The tax year is the financial year.
• 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%
  • Payroll Tax No specific payroll taxes.

• No particular payroll taxes are imposed.
• Social Security Contributions – On behalf of the employee, the employer might contribute up to 6% of salaries to the social security organisation. On salaries exceeding PKR 600 per day or PKR 15,000 per month, no contribution is required.
• Health insurance – There are no healthcare benefits because they are handled by pricey private insurance firms.
• Additional benefit –  A pilgrimage-related exceptional leave of up to 60 days is offered to the employee. Some businesses provide life insurance, health insurance, and tuition assistance.

Employee Taxation

• Income tax
  • 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 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 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
• Filing & Payment – After the tax year finishes on June 30th, it must be filed by August 31st. As of June 30th, residents are also required to file a declaration of wealth and a wealth reconciliation statement.
• Public Pension: The Pakistan Pension Fund is responsible for overseeing pensions in Pakistan.
• Contributions to Social Security: 0
• Sales tax ranges from 13% to 16% for services and items.

A corporation must choose the state in which it wants to establish its subsidiary before extending its operations in Pakistan. It is essential to remember that each location has specific subsidiary laws that might affect how the business operates.

Limited Liability Company (LLC), Free Zone Company (EPZ Company), Limited Liability Partnership (LLP), Public Limited Company (PLC), and representative offices are just a few of the commercial entities that can be founded in Pakistan. The Limited Liability Company is the type of company structure that is most frequently adopted.

The Pakistan Limited Liability Company (LLC)

In Pakistan, an LLC must have $1,000 in initial capital as well as a minimum of two owners and two directors. Non-resident shareholders and directors are authorised, however they must each submit a separate NTN number application to the local tax office. Additionally, if the share capital exceeds US$5,000, the Pakistani government mandates that the LLC have a legal counsel who typically resides in Pakistan.

Before an LLC may be created, the Securities and Exchange Commission must approve the name. Opening a bank account in Pakistan, paying application fees at a recognized Muslim commercial bank, signing the memorandum, and submitting a list of directors are further steps in the procedure. 

In addition, you need to register with the labour department, get a digital signature from the National Institutional Facilitation Technologies, wait six weeks before forming an LLC, and register with your local tax office, social security agency, and location-based social security agency.

With our EOR solution, businesses may operate legally, recruit workers, manage payroll, and maintain business relationships on their behalf. Establishing a subsidiary in Pakistan could give rise to a variety of concerns and questions.