Multiplier Logo
Loading Animation Image
Starting a business in Pakistan

Benefits & Compensation in Pakistan

What are Employee Benefits?

Employee benefits are the additional perks that employees receive from the employer. The additional perks are decided by employee compensation and other associated internal policies. Such benefits can fall into monetary or non-monetary categories depending on the company’s budget and employees’ requirements.

Employers provide compensation to employees to cover additional expenses and make them feel rewarded for the work they do. Employee benefits are crucial elements that support an employee’s health insurance. Moreover, employee benefits can help companies bring in and retain top talent.

The primary law in Pakistan that looks after the issues of employees’ benefits, compensation in case of injuries or accidents, sickness leaves, and other leaves is The Workmen’s Compensation Act, 1923. Pakistan receives employee benefits, including paid, sick, public holidays, death grants, maternity, parental, and medical care for themselves and their dependents, health insurance, etc.

Employers must perform intensive market research before choosing employee benefits in Pakistan. The following guide simplifies the setup process of compensation and benefits policy in Pakistan and keeps employees motivated.

Compensation Laws in Pakistan

Various compensation laws in Pakistan administer employee benefits in the country. These include

  1. Workmen’s compensation act 1923 governs employee compensation in Pakistan. It manages workmen’s compensation due to personal injury, disablement, accidental death, and specified occupation diseases suffered during employment.
  2. As per Industrial Relations Ordinance, 2002 Section 33, permits the existence of collective agreements. 

iii. The existing minimum wage is 20,000–25,000 PKR per month (as per the Minimum Wages Ordinance 1961). As per the Minimum Wages Ordinance 1961, employees are liable to receive a minimum wage that suggests all remuneration, expressed in monetary terms. It is owed to an employee on fulfillment of the express or implicit terms of the employment contract. 

  1. In Pakistan, Factories Act, 1934, employees are required to complete the specified working hours, i.e., nine hours a day and 48 hours a week. 

How to Design an Employee Benefits Program for Employees in Pakistan?

Before designing a compensation package in Pakistan, you must consider a few critical aspects, including the employee’s needs. They are mentioned below.

Step 1: Set the budget and the goals

Before drafting the compensation policy, you must determine a set of objectives you are anticipating from the compensation structure in Pakistan. You must review employment contracts or collective bargaining agreements to ensure their contractual terms are maintained. Furthermore, you must consider your organization’s commercial climate before drafting the policy.

The policy’s objectives must entail the maximum budget to deal with all benefits effectively. You can consider the following criteria to set goals:

  • Encouraging the existing workforce and attracting new talent
  • Abiding by all the applicable labor laws
  • Sticking to the budget when designing a plan for employee benefits in Pakistan

Before determining the benefits policy in Pakistan, you need to consider the company’s size and the economic sector it operates. Also, you must consider your organization’s commercial environment setting up this policy.

Step 2: Understand employee requirements and the industry standards

You must integrate the best benefits into the employee benefits plan to ascertain your employees’ satisfaction. However, you must have a fixed budget you want to capitalize on in the compensation policy.

It is advisable to perform meticulous research to understand the existing industry standards and the benefits your competitors offer to their employees. The relevant findings will help you to smoothly and effectively design an all-inclusive compensation and benefits policy in Pakistan, meeting the industry standards and the competition.

It is also advantageous to perform an internal survey to decode employee expectations from the benefits plan. This survey streamlines the task of determining the areas of improvement and making necessary changes to the compensation and benefits policy in Pakistan. As per the survey outcomes, you exclude those benefits and reduce company costs. 

Step 3: Prepare a flexible compensation structure

Once you thoroughly evaluate the survey and research outcomes, the subsequent step is to prepare a framework for worker’s compensation in Pakistan.

Employers in Pakistan must consider every employee’s demands and curate a flexible benefits structure. It helps the employees select appropriate benefits, and the company must clarify how to make the most of them.

Step 4: Communicate the benefits to the stakeholders and get feedback

This step involves communicating the plan’s benefits to all the stakeholders and employees. You can share the draft of the plan with them and ask for their feedback. If you find any valuable feedback, you should implement it into the compensation policy.

If the feedback specifies that a particular benefit will remain unused, you can make the necessary changes to make it valuable or remove it altogether.

Step 5: Plan analysis

The volatile business environment can impact the employee’s benefit plan. Businesses may encounter different types of changes. So, you must regularly evaluate the entire compensation structure in Pakistan, and determine feasibility and competence.

You must check for any possible errors before implementing the employee compensation policy in Pakistan. It suggests that you must evaluate all the benefit plan elements and implement them. You can use precise metrics to determine how effective the benefit plan is for the employees. Subsequently, you can take the necessary actions. 

Types of Guaranteed Benefits in Pakistan

Employers provide various employee benefits in Pakistan to their employees. Many of these benefits are mandatory and are discussed below:

Minimum wage

According to Pakistan’s compensation laws, the minimum wage ranges from 20,000–25,000 PKR per month in Pakistan.

Working hours and overtime

The working hours in Pakistan are 8-9 hours a day and 48 hours a week. The maximum weekly overtime hours in Pakistan are 12 hours. The employees may work 2-3 hours of overtime per day. The total annual overtime work hours must be at most 624 hours. It is important to note that rest intervals and lunch breaks are unpaid time. So, employees don’t receive any compensation for that.

The overtime compensation that employees receive is as mentioned below:

  • 200% of their regular pay for overtime during standard days.
  • 300% of their regular pay for overtime during holidays.

An employee in Pakistan is entitled to 14 calendar days of paid annual leave, provided they have completed 12 months of continuous service. (according to section 49-B of the Factories Act).

Public holidays

Pakistan follows a list of public holidays. They apply to all employees, irrespective of the sector and industry they work in. The employees in Pakistan get 15 public holidays per year. They are listed below:

5 Feb

Kashmir Day

23 Mar

Pakistan Day

1 May

Labour Day

3 May


4 May

Eid-ul-Fitr Holiday

5 May

Eid-ul-Fitr Holiday

10 Jul

Eid al-Adha

11 Jul

Eid al-Adha Holiday

12 Jul

Eid al-Adha Holiday

7 Aug


8 Aug

Ashura Holiday

12 Aug

Independence Day

9 Oct

Eid Milad un-Nabi

25 Dec

Christmas Day

25 Dec

Quaid-e-Azam Day

Sick leaves

The sick leave entitlement’s duration relies on the duration of employment under the employer.

The employees in Pakistan are eligible for ten days of paid sick leave per year upon presenting a medical certificate. Employees taking sick leave are eligible for 50% of regular wages.

A secured person (who has been paid for at least 90 days in the last six months) is entitled to get the sickness benefit all through the sickness period. For diseases like cancer and tuberculosis, a secured person has to be compensated with 100% of the wages (50% of the wages in Balochistan and Khyber Pakhtunkhwa) for 365 days. If an employee suffers from any other disease, they are entitled to receive 75% of their wages (50% of the wages in Balochistan and Khyber Pakhtunkhwa) for 121 days.

Maternity leaves

According to Maternity and Paternity Leave Act 2020, female employees in Pakistan are entitled to up to 180 days of maternity leaves on first birth. In the case of the second birth, 120 days and 90 days of maternity leave are granted on the third child-birth. 

An insured female employee with at least 180 days of contribution waged in the past 12 months immediately before the expected delivery date will get her full compensation for the 12 weeks of maternity leave.

Parental leaves

Male employees in Pakistan are eligible to receive up to 30 days of paid paternity leave. It is applicable for the first three separate births. The unpaid leave can be granted for additional children.

Death Grant

If an insured employee dies while receiving injury benefits/sickness benefits/medical care, their survivors are entitled to a death grant. The corresponding grant amount must equal the daily rate of sickness benefit multiplied by 30. This amount must be at least PKR 1500.

An insured female employee is entitled to iddat benefits if her husband passes away. Must provide it during the iddat period, and its amount equals the rate of her wages.

Medical Care for Self and Dependents:

Under the Workers Compensation Act, of 1923, employees in Pakistan get medical care compensation during sickness and maternity. The benefits encompass medical care, medicine, specialist, maternity, and hospitalization. The law also offers medical care to the dependents for one year after the death of the secured person (the secured employee’s employee duration must be at least one year continuously before their demise).

After the death of an employee (owing to an employment injury), the survivors’ pensions are to be paid to each dependent (according to the provisions of section 42 of the ordinance). The widow/widows or a needy widower is entitled to receive 60% of the dead employee’s total disablement pension.

Each orphan below age 21 is entitled to receive 20% of the total disability pension (no age bound for unmarried daughters). Each orphan above age 21 is entitled to receive 40% of the disability pension.

How are Employee Benefits Taxed in Pakistan?

It is crucial to how taxes are calculated for the benefits which employers provide to their employees in Pakistan. A massive share of these benefits is incorporated and covered in the employee’s compensation package in Pakistan. The range of Pakistan’s income tax rate is 0 to 35%:

Apart from the Pakistan personal income, the employees must also contribute to social security. The employer makes such deductions from the employee’s salary. Note that it is directly funded by the institutions administering the social security accounts.

Restrictions for Pakistan Benefits and Compensation

Identical to other economies, most benefits in Pakistan are taxable. Hence, you must know these benefits’ monetary value to calculate the tax amount that the employee will have to pay. An employer must also ensure that all tax payments are timely released and conveyed to the respective authorities.

Before preparing a benefits plan for your employees, make sure that your business is incorporated in Pakistan and that your business can legitimately operate in the country. Furthermore, companies must pay the minimum wages to the employees per their sectors. The benefits and compensation package in Pakistan must abide by all the labor laws administered by the government.

Supplemental Benefits for Employees in Pakistan

Here are some additional benefits employees in Pakistan receive during their employment:

13th-month pay

In Pakistan, the 13th-month pay is not mandatory. But, businesses with over 20 employees are obliged to provide bonuses with a minimum of 90 days of consecutive service.


In Pakistan, two general social security schemes offer coverage for their employees. They are mentioned below:

  1. The Provincial Employees Social Security (PSSS): It provides benefit coverage for employees in cases like injury, maternity, sickness, employment, or death.
  2. The Employees Old Age Benefit (EOBI): It offers four benefits to insured employees or survivors. These four benefits are, namely, Old-Age Pension (or Reduced Pension), Old-Age Grant (if an employee is not eligible for pension), Survivors’ Pension, and Invalidity Pension.

How Can Multiplier Help with Benefits Management in Pakistan?

Setting up a business abroad and hiring qualified employees may take a lot of work. Employers should abide by local laws and regulations while formulating employment contracts and offering employee benefits. You can seek assistance by contacting a global EOR platform like Multiplier.

Multiplier helps in compliance with Pakistan labor rules. We also help you with accessing competent workforces. Our proficient staff can assist you in effectively managing the workforce without establishing a subsidiary in the country. Therefore, you can swiftly explore new markets and lessen your employment expenditures.

Frequently Asked Questions

The standard VAT rate is 17% in Pakistan.

Employee contracts can be either oral or written in Pakistan. The written documents should adhere to the National Labor Law of Pakistan that must not distinguish or eliminate those who are members of trade unions. The employee contract’s language must be English, Urdu, or both.

The Workmen’s Compensation Act of 1923 applies to all establishments, including commercial and industrial, mines, railways, organizations employing ten or more workers, road transport services, and many others.

Need Reliable Help In Obtaining A Work Visa?

Table of Contents

World’s Preferred EOR/PEO Platform for a Global Workforce