Pakistan, located in South Asia with a population of more than 200 million people, is an ideal place to grow and build business relationships in Asia. However, before you expand, you need to consider all the steps you must take along the way, including establishing payroll, hiring employees, and providing benefits and compensation.

Taxation rules in Pakistan

Pakistan uses an income tax scale based on different slab rates. Salaried employees owe anywhere from 0% to 35% and employers have to contribute to Pakistan’s social security program on behalf of every employee. The current minimum wage rate is PKR 32,000 per month. Social security is 6% of minimum wage, if applicable, and Employees’ Old-Age Benefits Institution (EOBI) employer contribution is 5% of 25,000 per employee.

Pakistan payroll options for companies

You have 3 payroll options to choose from in Pakistan:

  • Internal: Running an internal payroll is an effective way for larger companies to demonstrate their commitment to their long-term business operations in Pakistan. However, you need the budget and time to build an HR team dedicated to setting up your Pakistan payroll.
  • Pakistan payroll processing company: Outsourcing with a Pakistan payroll processing company will take care of having to set up your payroll, but you’ll still be held accountable for complying to all laws and regulations.
  • G-P: By partnering with an Employer of Record like G-P, you can expand your global footprint without the hassle of payroll setup and management. With us, companies can rest assured that all employees will be paid punctually and compliantly.

How to set up a payroll in Pakistan

Before you can choose a Pakistan payroll option, you need to establish a subsidiary in the country. Doing so will allow you to start business operations in Pakistan legally and is required before you can begin working in the new market.

Entitlement/termination terms

We recommend outlining key entitlement and termination terms in a written employment contract before adding an employee to your payroll. In Pakistan, a permanent worker must be provided 1 month’s notice (or pay in lieu) when terminated without cause. If an employee is terminated for any reason other than for cause, they are entitled to severance pay equivalent to 30 days’ wages for every year of service.

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