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Pakistani Rupee (PKR)
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A guide to employing and growing your team in Pakistan
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Pakistan’s employment landscape is governed by a mix of federal and provincial laws, including the Industrial and Commercial Employment (Standing Orders) Ordinance and the Minimum Wages Ordinance. Following the 2025-2026 Budget, the country has seen significant updates to wage floors and tax slabs to address inflation. As of April 2026, the national minimum wage for unskilled workers is PKR 40,000 per month in most provinces (Punjab, Sindh, and Khyber Pakhtunkhwa), while Balochistan and Islamabad maintain a floor of approximately PKR 37,000.
Employer Contributions
Social Security (PESSI/SESSI): 6%
Old-Age Benefits (EOBI): 5%
Workers’ Welfare Fund (WWF): 2% (For companies with profits above a certain threshold)
Workers’ Profit Participation Fund (WPPF): 5% (Of annual net profits)
Total Employer Contribution: ~11%
Employee Payroll Taxes
Old-Age Benefits (EOBI): 1% (Calculated on the minimum wage)
Income Tax Withholding: Based on progressive tax slabs (Deducted monthly via PAYE)
Total Employee Contribution: 1% (plus applicable progressive income tax)
Employee Income Tax Rates
Pakistan utilizes a progressive salary tax system. The first PKR 600,000 per year remains tax-exempt.
PKR 600,001 – PKR 1,200,000: 5% of amount exceeding PKR 600,000
PKR 1,200,001 – PKR 2,200,000: PKR 30,000 + 15% of amount exceeding PKR 1,200,000
PKR 2,200,001 – PKR 3,200,000: PKR 180,000 + 25% of amount exceeding PKR 2,200,000
PKR 3,200,001 – PKR 4,100,000: PKR 430,000 + 30% of amount exceeding PKR 3,200,000
Above PKR 4,100,000: PKR 700,000 + 35% of amount exceeding PKR 4,100,000
Statutory Leave
Employees are entitled to 14 consecutive days of paid annual leave after completing one full year of service. Pakistan is also known for a high number of public holidays (14-16 days). Additionally, workers typically receive 10 days of fully paid casual leave for urgent personal matters and 16 days of sick leave at 50% pay (though 100% pay is standard in competitive private sector roles).
Pregnancy and Maternity Leave
The Maternity and Paternity Leave Act provides generous protections. Maternity leave is tiered by birth order: 1st Child: 180 days (fully paid) 2nd Child: 120 days (fully paid) 3rd Child: 90 days (fully paid)Leave can begin up to six weeks before the anticipated delivery date.
Paternity Leave
Fathers are entitled to 30 days of fully paid paternity leave. This leave is mandatory and must be paid at 100% of the employee’s regular salary. Similar to maternity leave, this is generally limited to the first three births.
Work-Related Injury Leave
Special (Iddat) Leave: Muslim female employees are entitled to 130 days (4 months and 10 days) of fully paid leave following the death of their husband.
Pilgrimage Leave: Many employers provide unpaid or partially paid leave for Hajj or other religious pilgrimages.
Termination Process
Termination must be issued in writing, clearly stating the reason for dismissal. For “without cause” termination of a permanent employee, the employer must provide a notice period or pay in lieu. If dismissed for misconduct, a formal inquiry is required. Employees with over 5 years of service are typically entitled to a Gratuity payment of 30 days’ wages per year served, unless a Provident Fund is in place.
Notice Period
Standard Notice: 1 month (for both resignation and termination).
Pay in Lieu: Employers may terminate immediately by paying one month’s gross salary.
Probationary: Generally no notice is required unless specified in the letter of appointment.
Probation Period
The standard probation period is 3 months, which can be extended to 6 months. During this period, the employee is usually not entitled to the same termination protections as permanent staff, and “at-will” termination is common.