How to Use An Employer of Record in
Pakistan

Hiring in Pakistan means navigating the Industrial Relations Act 2012, Provincial Employees' Social Security Ordinances, and mandatory contributions to the Employees' Old-Age Benefits Institution (EOBI) and Provincial Social Security Institutions, each with different rates depending on the province and employee salary threshold. An Employer of Record in Pakistan becomes your legal employer on record, handling all statutory registrations, payroll tax withholding under the Income Tax Ordinance 2001, and compliance filings so you can hire compliantly in 7 to 10 business days without incorporating a local entity. The EOR removes the risk of misclassifying workers under the Industrial Relations Act, missing the 7-day EOBI registration deadline after hire, or miscalculating severance under the Industrial and Commercial Employment (Standing Orders) Ordinance 1968.

What Is an Employer of Record in Pakistan?

An Employer of Record in Pakistan is a third-party organisation that becomes the legal employer of your staff under Pakistan law, handling all statutory obligations, payroll, and compliance while you retain full operational control. The EOR signs the employment contract, appears on payslips, and takes on all legal liability for compliance with federal and provincial labour legislation. You continue to direct the employee's daily work, set performance goals, and manage their role completely.

Under Pakistan's employment law framework, which includes the Industrial Relations Act 2012, the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, and the Factories Act 1934, every employment relationship must include written contracts with mandatory clauses on working hours, leave entitlements, and termination notice. Employers must register with the Employees' Old-Age Benefits Institution (EOBI), Provincial Social Security Institutions (PSSI), and the Federal Board of Revenue (FBR) for income tax withholding, and comply with provincial labour laws that vary by jurisdiction. Collective bargaining agreements in unionised sectors add further obligations around wage scales and dispute resolution.

The split is clear: you retain day-to-day management, performance reviews, task assignment, and operational decisions. The EOR owns the employment contract, payroll processing, statutory contributions to EOBI and PSSI, income tax withholding and remittance, compliance with termination procedures under the Standing Orders Ordinance, and all government filings and reporting.

How Does an Employer of Record Work in Pakistan?

When you hire through an Employer of Record in Pakistan, the EOR takes on the legal employer role while you maintain full control over the employee's work. The process involves contract preparation under Pakistan employment law, government registrations with multiple federal and provincial authorities, compliant payroll in Pakistani Rupees, and ongoing statutory filings. Here's how it works step by step.

Step 1: Define Role and Terms

You provide the job title, salary, role scope, and any benefits you want to offer beyond statutory minimums. The EOR reviews these terms against Pakistan's minimum wage requirements, which vary by province and are set annually by Provincial Minimum Wage Boards under the Minimum Wages Ordinance 1961. If your employee falls under a collective bargaining agreement in a unionised sector like banking, textiles, or manufacturing, the EOR ensures the salary and benefits meet the negotiated floor set by the relevant trade union agreement. The EOR confirms that the proposed terms comply with federal and provincial labour laws and any applicable industry-specific regulations.

Step 2: EOR Compliance Check

The EOR conducts a full compliance review of the role and proposed salary against Pakistan's statutory framework. As of 2026, the minimum wage in Punjab is PKR 37,000 per month, in Sindh PKR 37,000, in Khyber Pakhtunkhwa PKR 36,000, and in Balochistan PKR 35,000, with Islamabad Capital Territory set at PKR 37,000. The EOR verifies that the role falls within the maximum 48-hour working week under the Factories Act 1934 and the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, with overtime capped at 12 hours per week unless otherwise permitted by provincial rules. The EOR also determines whether the employee should be classified as a permanent worker, fixed-term contract employee, or probationer, as misclassification can trigger penalties under the Standing Orders Ordinance and disputes under the Industrial Relations Act 2012.

Step 3: Employment Contract

The EOR prepares a written employment contract in English or Urdu, as both are acceptable under Pakistan law, though Urdu is preferred for blue-collar and non-executive roles. The contract must include mandatory clauses on basic salary and allowances, working hours and overtime, probation period not exceeding six months under the Standing Orders Ordinance, leave entitlements including 14 days of casual leave and 10 public holidays, termination notice periods of 30 days or one month's salary in lieu, and dispute resolution mechanisms. The contract is governed by the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, the Industrial Relations Act 2012, and applicable provincial labour laws. Fixed-term contracts are permitted but must state the contract end date, and if the employee continues working beyond that date without a new agreement, the contract automatically converts to permanent employment under Pakistan case law and labour tribunal precedents. The probation period cannot exceed six months, and termination during probation requires 14 days' notice or 14 days' wages in lieu.

Step 4: Government Registrations

The EOR registers the employee with the Employees' Old-Age Benefits Institution (EOBI) within 7 days of hire, as required under the Employees' Old-Age Benefits Act 1976, and with the relevant Provincial Social Security Institution (PSSI) within 10 days under the Provincial Employees' Social Security Ordinances. The EOR also registers the employee's tax details with the Federal Board of Revenue (FBR) to enable monthly income tax withholding under the Income Tax Ordinance 2001. Late registration with EOBI or PSSI results in penalties starting at PKR 5,000 and can escalate to PKR 25,000 per employee, plus arrears of contributions with interest at 12 percent per annum. If the employee is part of a workforce of 20 or more in a commercial or industrial establishment, the EOR must also ensure compliance with the Standing Orders Ordinance by filing certified standing orders with the Chief Inspector of Factories or relevant provincial labour authority.

Step 5: Payroll in Local Currency

Payroll in Pakistan is processed monthly, with payment due by the last working day of the month unless otherwise agreed in the contract. Salaries are paid in Pakistani Rupees (PKR) via bank transfer to the employee's local bank account. The EOR calculates and withholds income tax under the Income Tax Ordinance 2001 using the progressive tax slabs published annually by the FBR, which for 2026 range from 0 percent on income up to PKR 600,000 per annum to 35 percent on income exceeding PKR 12 million per annum. The EOR remits withheld income tax to the FBR by the 15th of the following month and submits monthly withholding statements. The EOR also deducts and remits the employee's 1 percent EOBI contribution and employer's 5 percent EOBI contribution, plus the employee's 1 percent PSSI contribution and employer's 6 percent PSSI contribution on applicable wages.

Step 6: Ongoing Compliance

The EOR manages monthly income tax withholding and remittance to the Federal Board of Revenue by the 15th of each month, accompanied by form 149-IV filed electronically via IRIS. The EOR files quarterly income tax statements and annual reconciliation statements under the Income Tax Ordinance 2001. The EOR submits monthly contribution reports and payments to EOBI and the Provincial Social Security Institution by the 15th of the following month. The EOR maintains up-to-date records of leave accrual, public holidays, overtime hours, and disciplinary actions to comply with the Standing Orders Ordinance and potential labour inspections. If your employee is covered by a collective bargaining agreement, the EOR ensures ongoing compliance with negotiated terms on annual wage increases, bonus payments, and dispute escalation procedures under the Industrial Relations Act 2012.

Step 7: Termination

Termination in Pakistan requires just cause or compliance with contractual notice periods under the Industrial and Commercial Employment (Standing Orders) Ordinance 1968 and the Industrial Relations Act 2012. Notice periods are typically 30 days for permanent employees, though collective agreements in unionised sectors may set longer periods of 60 or 90 days. The EOR calculates and pays severance, which for employees with one or more years of continuous service is 30 days of wages for each completed year of service under the Standing Orders Ordinance. The EOR follows the mandatory procedural steps for termination, which include issuing a show-cause notice, conducting a domestic inquiry if the termination is for misconduct, and providing written notice of termination with reasons stated. The EOR processes the final payslip including all accrued but unused leave, pro-rata bonus if applicable, and severance payment, and deregisters the employee with EOBI, PSSI, and FBR to close the tax and contribution records.

Employment Laws and Compliance an Employer of Record Handles in Pakistan

When you hire through an Employer of Record in Pakistan, they take on full compliance responsibility across federal and provincial labour legislation so you don't need to build an in-country HR function or legal team.

• Employment Contracts: Every employment relationship must be documented in a written contract under the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, specifying salary, working hours, leave, probation period not exceeding six months, and termination notice. Failure to provide a written contract or omitting mandatory clauses can result in fines up to PKR 50,000 and disputes before provincial labour courts. The EOR ensures every contract includes clauses required by federal law and any applicable collective bargaining agreement.
• Payroll Tax and Income Tax Withholding: Employers must withhold income tax monthly under the Income Tax Ordinance 2001 using progressive tax slabs ranging from 0 percent to 35 percent as of 2026, and remit withheld tax to the Federal Board of Revenue (FBR) by the 15th of the following month via form 149-IV filed electronically. Non-compliance results in penalties of up to 100 percent of the tax due, plus default surcharge at 12 percent per annum. The EOR calculates withholding accurately, remits on time, and files quarterly and annual reconciliation statements.
• Social Security and Pension: Employers must register employees with the Employees' Old-Age Benefits Institution (EOBI) within 7 days under the Employees' Old-Age Benefits Act 1976, contributing 6 percent of the employee's wage (5 percent employer, 1 percent employee) on monthly wages up to PKR 30,000. Employers must also register with the Provincial Social Security Institution (PSSI) within 10 days, contributing 7 percent of wages (6 percent employer, 1 percent employee) on wages up to the provincial ceiling, which varies by province. Late registration or non-payment results in penalties starting at PKR 5,000 per employee and arrears with 12 percent annual interest.
• Statutory Leave: Employees are entitled to at least 14 days of casual leave per year under the Factories Act 1934 and provincial labour rules, plus 10 gazetted public holidays, and annual leave calculated as 1 day per 22 days worked after 12 months of continuous service. Female employees are entitled to 12 weeks of paid maternity leave under the Maternity Benefit Ordinance 1958, with wages paid by the employer or PSSI depending on coverage. Failure to provide statutory leave can result in penalties under provincial labour ordinances and disputes before labour courts.
• Termination and Severance: Termination of a permanent employee requires just cause or 30 days' written notice under the Standing Orders Ordinance, and severance pay of 30 days' wages for each completed year of service after one year of continuous employment. Termination without just cause or without following the mandatory show-cause and domestic inquiry process can result in orders for reinstatement, back pay, and compensation of up to 3 years' wages by provincial labour courts. The EOR manages the entire termination process, calculates severance accurately, and handles any disputes or tribunal filings.
• Working Time and Overtime: The standard working week is 48 hours over 6 days under the Factories Act 1934 and provincial labour ordinances, with a maximum of 9 hours per day in most sectors. Overtime is capped at 12 hours per week unless extended by provincial rules, and must be compensated at twice the ordinary hourly rate under the Factories Act. Failure to pay overtime correctly or exceeding statutory working hours without exemption can result in fines up to PKR 20,000 per violation and prosecution of the employer.
• Health and Safety: Employers in factories and commercial establishments must comply with the Factories Act 1934 and provincial Shops and Establishments Ordinances, which mandate workplace safety standards, accident reporting, and provision of first aid facilities. Employers must also obtain registration certificates from the Chief Inspector of Factories or provincial labour department. Non-compliance results in fines, closure orders, and prosecution of the employer in cases of serious workplace accidents.
• Data Protection and Employee Privacy: While Pakistan does not yet have comprehensive data protection legislation, employers must handle employee personal data in accordance with the Prevention of Electronic Crimes Act 2016 and emerging privacy guidelines from the Pakistan Telecommunication Authority (PTA). Unauthorized disclosure of employee data, especially biometric or financial information, can result in criminal penalties up to PKR 5 million and 3 years' imprisonment. The EOR ensures employee data is stored securely and processed in compliance with applicable privacy standards.
• Collective Agreements and Union Relations: The Industrial Relations Act 2012 governs collective bargaining, trade union registration, and dispute resolution in establishments with 20 or more employees in specified industries. If your employee is covered by a registered collective bargaining agreement, the EOR ensures compliance with negotiated terms on wages, bonuses, dispute escalation, and layoff procedures. Failure to comply with a valid collective agreement can result in disputes before the National Industrial Relations Commission (NIRC) or provincial labour courts, and penalties including back pay and reinstatement orders.
• Provident Fund: In addition to EOBI, employees in certain sectors or establishments with 20 or more employees may be required to participate in a company-managed provident fund or the Workers' Welfare Fund under the Workers' Welfare Fund Ordinance 1971, which requires annual contributions of 2 percent of net profits by companies meeting specific turnover thresholds. The EOR ensures contributions are calculated and remitted correctly to the Workers' Welfare Board and files annual returns by the statutory deadline.

How Much Does It Cost to Use an Employer of Record in Pakistan?

Using an Employer of Record in Pakistan involves two separate cost components: the EOR's service fee and statutory on-costs mandated by Pakistan law. Statutory on-costs are fixed by federal and provincial legislation and cannot be negotiated or reduced. Playroll's EOR service fee starts from $399 per employee per month, invoiced separately from the employee's gross salary and statutory contributions, with no setup fees or minimum contract term.

Let's look at an example that includes a base salary and the EOR service fee.

The EOR service fee covers employment contract preparation under the Standing Orders Ordinance and Industrial Relations Act, all government registrations with EOBI, PSSI, and the Federal Board of Revenue, monthly payroll processing and income tax withholding via IRIS, ongoing compliance monitoring including provincial labour law changes, and termination management including severance calculation and tribunal support. The fee also includes access to Playroll's platform for managing employee documents, payslips, and leave records in one secure location.

Employer of Record vs Setting Up an Entity in Pakistan

Deciding between using an Employer of Record and setting up your own entity in Pakistan depends on your hiring timeline, budget, and long-term commitment to the market. Foreign companies typically incorporate a Private Limited Company under the Companies Act 2017, which requires registration with the Securities and Exchange Commission of Pakistan (SECP), opening a corporate bank account, obtaining a National Tax Number from the Federal Board of Revenue, and registering with EOBI, Provincial Social Security, and provincial labour departments. The entire process realistically takes 8 to 14 weeks and costs between $4,000 and $8,000 in legal, registration, and compliance fees, excluding ongoing accounting and HR costs.

For companies hiring fewer than 12 employees in Pakistan, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries, so you can transition from EOR to your own compliant entity in Pakistan when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in Pakistan Through an Employer of Record?

The total realistic timeline to hire an employee in Pakistan through an Employer of Record is 7 to 10 business days from finalising employment terms to the employee's official start date.

• Stage 1: Contract preparation and signing (2 to 3 business days): The EOR drafts a compliant employment contract in English or Urdu with all mandatory clauses under the Standing Orders Ordinance and Industrial Relations Act, including probation period, leave entitlements, termination notice, and any applicable collective agreement terms. The timeline depends on how quickly you and the employee review and sign the contract, and whether any custom clauses or benefits need legal review.
• Stage 2: Government registrations (3 to 5 business days): The EOR registers the employee with the Employees' Old-Age Benefits Institution (EOBI) within the statutory 7-day deadline, with the Provincial Social Security Institution (PSSI) within 10 days, and with the Federal Board of Revenue for income tax withholding via the IRIS portal. Missing the EOBI or PSSI registration deadline before the employee's start date can result in immediate penalties starting at PKR 5,000 and delays in contribution remittance, which accrue interest at 12 percent per annum.
• Stage 3: Payroll configuration and first cycle (1 to 2 business days): The EOR sets up the employee's payroll profile, calculates monthly gross-to-net based on the employee's tax slab under the Income Tax Ordinance 2001, configures EOBI and PSSI deductions, and schedules the first payroll run. Payroll in Pakistan is processed monthly, with payment due by the last working day of the month, so the employee's first full payslip arrives at the end of their first month of employment.
• Stage 4: Pakistan-specific requirements (can run in parallel, 1 to 2 business days): If the employee is joining a workforce of 20 or more in a unionised sector, the EOR verifies compliance with any applicable collective bargaining agreement registered under the Industrial Relations Act 2012, including wage floors and dispute resolution clauses. This verification usually runs in parallel with contract preparation and does not extend the overall timeline unless the collective agreement requires trade union notification or approval before hire, which is uncommon but can add 3 to 5 business days in certain industries like banking or textiles.

The timeline can extend to 12 to 15 business days if the employee requires a work visa or work permit (rare for Pakistani citizens but applicable for foreign nationals), if there are delays in obtaining the employee's National Tax Number or CNIC verification, or if the employee is in a province with slower Provincial Social Security Institution processing times. Contract negotiation, especially around non-standard clauses or sign-on bonuses, can also add 2 to 3 business days if legal review is needed.

By comparison, incorporating your own Private Limited Company in Pakistan and completing all registrations before you can legally hire takes 8 to 14 weeks.

How Playroll's Employer of Record Process Works in Pakistan

Hiring through Playroll in Pakistan is designed around speed, compliance, and transparency. Here's what the process looks like from your side.

1. You define who you want to hire

You share the job title, salary, start date, and any benefits or allowances beyond Pakistan's statutory minimums. Playroll reviews the terms against the applicable minimum wage set by the Provincial Minimum Wage Board, the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, and any relevant collective bargaining agreement if the role falls within a unionised sector.

2. Playroll prepares a compliant contract

Playroll drafts an employment contract in English or Urdu, governed by the Standing Orders Ordinance and the Industrial Relations Act 2012, with mandatory clauses on probation period (maximum six months), leave entitlements including 14 days casual leave and 10 public holidays, and 30 days' termination notice. The contract is ready for signature within 2 to 3 business days.

3. Employee onboarded and payroll goes live

Once the contract is signed, Playroll registers the employee with the Employees' Old-Age Benefits Institution (EOBI), the Provincial Social Security Institution (PSSI), and the Federal Board of Revenue (FBR) for income tax withholding within the statutory deadlines. The employee is onboarded and ready to start within 7 to 10 business days. Playroll processes monthly payroll in Pakistani Rupees, withholding income tax under the Income Tax Ordinance 2001 and remitting employer and employee contributions to EOBI and PSSI by the 15th of each month.

4. Playroll manages ongoing compliance

Playroll monitors changes to federal and provincial labour legislation, including annual minimum wage adjustments, updates to income tax slabs, and amendments to the Industrial Relations Act or Standing Orders Ordinance. You receive monthly payslips, contribution summaries, and compliance reports via the Playroll platform. If your hiring grows to where a local entity makes commercial sense, Playroll can handle that too through its global entity setup service, incorporating your Private Limited Company under the Companies Act 2017 and transitioning employees to your own local payroll without disruption.