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Compensation & Benefits in PkPakistan.








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Pakistani rupee (₨) (PKR)

Employees care about compensation and benefits, so you need to prepare a Pakistan benefits management plan that aligns with both your company and employees’ needs. However, you also have to ensure you meet Pakistan compensation laws, provide statutory benefits, and keep your business running smoothly.

Pakistan compensation laws

It’s important to note that all wages in Pakistan must be paid in the local currency (PKR). The minimum wage in Pakistan varies by region. As of 2022, Pakistan raised its monthly minimum wage for unskilled workers to PKR 25,000. These numbers could continue to rise in the years to come, so it’s important to keep an eye on any Pakistan compensation law changes. The country does not have a minimum wage for skilled labor. Instead, it’s between you and the employee to decide during contract negotiation.

Industrial and commercial businesses with 20 or more employees must pay profit bonuses to employees who have worked at least 90 continuous days. The company also has to declare profit in that year to be required to give out bonuses.

Employees receive 1 bonus per year, if the company declares profit. The bonus owed to the employee depends on specific circumstances around the company’s current profits:

  • No profit means there will not be a bonus.
  • If profit is more than 1-month’s wages, then 1 bonus may be disbursed.
  • If profit is equal to 1-month’s wages, then a 30% bonus may be disbursed.
  • If profit is less than 1-month’s wages, then a 15% bonus may be disbursed.

Guaranteed benefits in Pakistan

Every company must provide guaranteed benefits that include time off for holidays and paid vacation days. Pakistan has 11 national and religious holidays for which employees get the day off. Employees who have worked continuously for at least 1 year get 14 consecutive days of annual leave during the next year. Those vacation days carry over into the next year if they’re not all used.

Another guaranteed benefit is 10 days of casual leave with full pay and another 16 days of sick or medical leave where employees get 50% of their regular pay. Employers can grant casual leave for situations such as a sudden illness. However, taking sick leave requires a medical certificate (more than 3 consecutive leaves or on demand).

Statutory maternity leave is 180 days for the 1st birth and statutory paternity leave is 30 days.

Pakistan benefits management

Some companies opt to offer additional medical insurance, life insurance, and tuition reimbursement. Without a national health insurance system, the majority of the population pays healthcare expenses out of pocket, and private-sector insurance companies control the market.

Restrictions for benefits and compensation

The biggest restriction for Pakistan compensation and benefits is that you must establish a subsidiary before you can hire employees and run a Pakistan benefits management plan. However, with G-P, you won’t have to set up a subsidiary before starting operations. We’ll use our established subsidiary to help you start working faster and mitigate compliance risk throughout each stage of your growth journey.

Pakistan competitive benefits

When you grow your business in a new region, it’s important to build your team with leading professionals. Strategic employee benefits planning can help you competitively recruit and show your current employees how much you value them. With a strong benefits scheme, you’ll be able to start hiring sooner and keep your provisions compliant and competitive in the long term.

Pakistan employee benefits plans

As you establish your company internationally, you’ll want to create a benefits program that stands out in the region. A great benefits plan will make your open positions more appealing to job seekers. It will also boost morale among current employees, leading to better retention rates and less turnover.

Beyond complying with legal responsibilities, you should demonstrate that you are genuinely invested in your teams. Some fringe benefits you can provide include:

  • Childcare and education assistance
  • Employer-sponsored retirement accounts
  • Critical illness insurance
  • Ongoing education resources
  • Emotional and physical health services and support

Requirements for employee benefits in Pakistan

While supplemental benefits will help you stand out, you’ll need to focus on compliance first. Legal regulations stipulate that you must provide these benefits at a minimum for all employees:

  • Leave for national and religious holidays
  • Vacation leave
  • Casual leave
  • Sick leave
  • Maternity leave
  • Paternity leave

How to design your employee benefits program

Creating a compliant benefits program that balances your budget with employee needs can be a complex task, but the right approach will make the process easier. You can use this general strategy to meet critical requirements while hiring in Pakistan.

1. Choose your priorities and allocate resources.

As you begin the planning process, take the time to evaluate your company’s goals for the benefits program and set priorities. Identify the resources you have available for your benefits administration plan and ensure you’re setting a scope that fits your budget.

2. Assess key employee needs.

The best benefits are those that offer the most value to employees. Connect with local workers to learn what they’re looking for in a program. Conduct feedback sessions, create questionnaires, and research local economic conditions to identify what offerings employees would most appreciate. You might also want to research other local companies like yours and explore their benefits offerings during this stage to ensure your benefits are competitive.

3. Create your plan.

Once you’ve set your priorities for the program and have conducted the necessary research, you can begin designing your plan. Ensure that you’re accounting for factors such as employee contributions, cost containment features, and administration requirements.

Average cost of benefits per employee

Program expenses can vary widely from one company to another based upon individual benefits offerings. A national average cost may not be the most useful metric when designing your Pakistan employee benefits plan. Instead, focus on your budget, ensuring that your program prioritizes key benefits.

How to calculate employee benefits

Some benefits calculations are outlined in Pakistan’s labor laws. When employees take annual vacation leave, holiday leave, and casual leave, you must provide full payment for the duration. Employees taking sick leave are entitled to 50% of regular wages.

You must also contribute 5% of minimum wages for Old Age Benefit and 7% for social security benefits.

Calculations for any bonuses or other fringe benefits may vary. To help determine competitive rates for these offerings, research local companies’ provisions.

How are employee benefits taxed in Pakistan?

Unless a specific offering has an exemption by law, all benefits are considered taxable income, whether monetary or non-monetary. The Pakistani tax scale is progressive based on salary, so withholding taxes will range from no income tax to a 32.5% rate. You’ll need to determine each employee’s income bracket to find the appropriate taxation rates.

Employee health benefits plans

Pakistan provides national healthcare for employees, but some companies choose to offer additional coverage as a supplemental benefit.

Partner with G-P to build your everywhere workforce.

As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.

Learn more about our platform and request a proposal today.


THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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