Pakistan is a middle-income country that has opened its gates to newer businesses in technological domains. The government has launched a slew of tax reforms and has worked to delete barriers to international trade and capital inflow. Across most sectors of business in Pakistan, there are no restrictions for foreigners for equity participation or investment.
Thanks to business-friendly policies, hiring in Pakistan is a comprehensive process. Of late, global names such as Kia, Renault, and Volkswagen are weighing in on entering the country’s auto segment via Joint Ventures. Hyundai successfully did so in March 2022.
Thanks to the re-entry of names such as Exxon Mobil, an American oil and gas giant, employment opportunities are improving.
The corporate sector in Pakistan is attracting interest from investors. The government has brought in Accelerator programs that help spread the word among the youth while enabling better training opportunities and business awareness opportunities. This has opened up more scope for employment while also making it necessary for foreign employers to enter the hiring market.
The workforce in Pakistan is friendly and has competitive labor costs. The employment laws in Pakistan are extensive, but the best way to hire in Pakistan is to know these laws in depth. This guide will aid in hiring employees in Pakistan while ensuring you follow the best practices.
Things to Know Before Hiring in Pakistan
Before hiring employees and going ahead with recruitment and selection in Pakistan, here are some pointers to bookmark-
- International hiring- Several firms hire locally in Pakistan despite being offshore entities. This is best guided with assistance from a local expert because of the extensive nature of Pakistani Labor laws.
- Trade unions– Pakistan does not have a legal setup promoting trade unions and associations.
- Workplace hierarchy– The workplace structure is hierarchical, with seniority being valued. Each new employee is subject to onboarding and training too.
The Labour Law constitutes many smaller Acts and is the primary source for all employment-related norms. The country’s visa policy is liberal as well, but once a valid work visa is in place, employers cannot extract services from a hired resource.
It is recommended in Pakistan to have a written employment contract. A written statement mentioning all employment conditions and related payments is considered a valid contract once both employer and employee sign.
This contract of employment must mention the following-
- Employer and employee name
- Work location with an address of business premises
- Main duties of an employee
- Duration of employment contract
- Probationary period
- Salary or wage
- Work hour
- Annual holiday
- Notice period
An employee can be terminated on the grounds of misconduct immediately without notice. The employer must pay severance if another reason behind firing an employee is not based on performance or conduct issues.
The notice period is one month for termination of service from either employer or employee. If this is not fulfilled, payment of value comprising a month’s pay is mandatory.
Working hours and breaks
When hiring staff in Pakistan, the applicable working hours and breaks are as under-
- Pakistani working hours range between 8 and 9 per day with a maximum of 48 hours a week.
- Overtime pay is applicable at twice the rate of salary paid when the work-hour window exceeds the above time frame.
- Once you set up a company and begin to hire employees in Pakistan, payment occurs as salary every month unless the payment is made in the form of daily/weekly wages.
- In 2022, Pakistan’s minimum wage was fixed at PKR 25,000 for every month.
- Minimum wage varies across the four provinces in Pakistan, with changes across skilled and unskilled sectors.
- Pakistani laws do not mandate bonus payments for employees.
- Companies with 20-plus employees might pay bonuses per the company’s profits.
- Employees receive daily payments during the annual vacation.
Holidays for employees
Official public holidays in Pakistan are listed below-
- 5 February-Kashmir Solidarity Day
- 23 March-Pakistan Day
- 1 May-Labor Day
- Date varies-Eid al-Fitr
- Date varies- Eid al-Azha
- 14 August-Independence Day
- Date varies-Ashura
- 28-29 October-Prophet’s Birthday
- 25 December-Quaid-e-Azam Birthday
- If an employee completes a year of service, there is an entitlement to 14 days of paid annual leave.
Casual and sick leaves
- Employees can avail of ten days of casual paid leave and 16 more for sickness at half pay.
- A medical certificate is mandatory for the grant of sick leave.
- Casual leaves are granted for sudden illness.
Maternity and Paternity Leave
- Pregnant employees are entitled to 180 days of maternity leave.
- Fathers can also take paid paternity leave for up to a week, only twice during the entire service period.
- An employer is mandated by law to contribute towards employee social security every month.
- Employer contribution stands at 5% of the minimum wage, while employee contribution stands at 1% of the same.
- The main heads for social security are-
- Pension for old age
- Pension for survivors
- Pension for invalidity
- Social security benefits include health, injuries, death, maternity, and related employee issues.
- The applicable taxes for companies and individuals in Pakistan are-
- Corporate tax is between 20%( for small companies), 39% (for banking companies), and 29% (for private and public companies)
- Sales tax (a form of VAT) at 17%
- Personal income tax at progressive rates
The annual income tax brackets for income above PKR 400,000 are as below-
Income More Than (In PKR)
PKR 1000 on an amount that is above the minimum threshold
PKR 2000 on an amount that is above the minimum threshold
5% on an amount that is above the minimum threshold
PKR 60,000 on overall annual salary above the minimum threshold plus 10% of an amount over the same
PKR 300,000 on overall annual salary above the minimum threshold plus 15%of an amount over the same
The Cost of Hiring an Employee in Pakistan
The recruitment fees in Pakistan vary as per a company’s policies and requirements. Here are the primary costs of the recruitment process in Pakistan.
- Advertisement cost
- Social security
- Salary and benefits
- Hiring and legal costs
- Onboarding and training
- HR-related expenses
What Does a Company Need to Hire Employees in Pakistan?
Employers in Pakistan can employ permanent or part-time employees. To hire employees in Pakistan, a company must adhere to all taxation and legal norms. Employers must fulfill the following requirements to launch businesses in Pakistan-
- Registration certificate
- Local bank account
- Employment contracts
- Tax ID
Various Options for Hiring Employees in Pakistan
To complete the process for recruitment in Pakistan, pick from-
- Hiring a global EOR service: Collaborate with a global PEO-EOR service platform such as Multiplier for hiring in Pakistan. It can help with company compliance, benefits, payroll, and workforce hiring without requiring a branch or subsidiary to be set up directly.
- Direct hiring via HR department: This needs a functional HR team that hires using the usual processes. It can be an expensive and time-consuming option for businesses.
The Steps to Hiring in Pakistan
The general steps applicable for hiring are also applicable to the recruitment process in Pakistan:
Step 1- Job post advertisements
- Advertise a job post as the first step in the hiring process in Pakistan via job portals, boards, and social networking sites.
- List all the job post requirements needed for the open post.
Step 2-Check applications
- Review applications for shortlisting candidates that match the requirements for a role.
Step 3- Interviews
- A virtual or physical interaction with prospects helps employers best judge their abilities.
Step 4-Background checks
- Background checks are permitted with a prospective employee’s consent, provided such checks will not be used discriminatorily from the employer’s end.
Step 6-Final offer
- The closing step of the hiring process in Pakistan involves dispatching an offer letter to the selected candidate mentioning all working norms and conditions.
- The employee accepts this before signing the employment contract.
Let Multiplier be Your EOR Platform in Pakistan
Recruiting employees needs compliance with much more than a single law. A PEO-EOR firm as reputed as Multiplier can be of help here.
Experts here make the recruitment process in Pakistan smoother than you imagine. Thanks to our SaaS-based EOR solutions, hiring becomes easier. You are not required to set up a subsidiary in the country. Multiplier does all the groundwork as you get set to explore newer markets in the country.