Pakistan Country Facts

We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.

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Expanding into Pakistan generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.

What Types of Work Visas or Permits for Pakistan are there?

Approval for a visa does not automatically give right of entry, which comes under the jurisdiction of the Immigration officer. There can be no changes to the type of visa issued according to the terms and conditions. There is also a ‘no-refund policy’ regarding online visa applications. Pakistan also issues its own visas and does not use visa centres, so buyer beware.

There are different visa types for foreigners depending on the purpose and duration of their stay. Most nationals require a visa to enter and duration can be between 30 days and three months depending on country of origin. Citizens of Nepal, Samoa, Tonga, Trinidad and Tobago, and the Maldives are visa-exempt.

However, to work in Pakistan, employees require a Work Visa. Sometimes this is also termed a Work Permit.

Authorities involved with issuing Visas

Ministry of Interior (MOI) delegates diplomatic missions abroad i.e., embassies and consulates, to issue visas under certain circumstances. Most visas, since the introduction of their online service POVS – Pakistan Online Visa Service are issued as a soft or hard copy online. There are around 11 different categories (some amalgamated with other visas as subcategories).

The Directorate General of Immigration and Passports is part of the MOI responsible for visas, passports and immigration.

The Board of Investment (BOI) issues a Letter of Recommendation for foreigners applying for a Work Visa.

Main Visas

There are 192 countries’ nationals who can apply for visas through POVS with nationals from 64 countries able to apply for a ‘Visa Inbox’ for the Tourist category and 103 countries’ citizens eligible for the ‘Visa Inbox’ business category

Visas can be attained through:

  • Electronic Travel Authorisation (ETA) or Visa Inbox before travel and then collect a Visa stamp on Arrival (VoA) for a 30-day stay, at the Federal Investigation Agency (FIA) at the airport. This can be for either Tourism or Business. However, this visa is restricted to certain countries’ nationals: Not extendable
  • E-Visa. Applied for with a form from the official website; processing time of around three days. There may also be a request for an interview at an embassy or consulate in country of residence. Again, there are restriction on who can apply.
    A list of required documents is provided during the process
  • Pakistan Embassy or Consulate Visa overseas, especially if a Third Country National wants to apply but is not resident in that country. This is at the discretion of consulate officials

Visas can be divided into two types – ‘First Time’ Visa, which is issued for a single trip of up to three months, or Visa Extension which depends on the category and whether the applicant is residing in Pakistan; this can be for up to two years.

  • Tourist / Visit Visa through an e-Visa or Visa Inbox
  • Business Visa granted for five years for investment purposes. There is also a CPEC Business visa for Chinese applicants. This can be used for multiple entries. Countries whose citizens can apply for a short term ‘Visa Inbox’ for a 30-day trip
  • Family Visit Visa for Pakistan family members up to one year per entry, valid for a five-year period. Multiple entry
  • Work Visa for living and working in the country
  • Study Visas is a two-year visa for foreign students

Plus, Official Visa, NGO/INGO Visa, ‘Other’ Visa includes categories such as cultural visits, sporting events: Also, a Medical Visa, Religious Tourism and Journalist Visa.

Work Visa

For 192 countries’ nationals, the Work Visa can be applied for by employees through the e-Visa portal (POVS). However, foreigners must apply from their country of origin or where they have residence. Applying from a Third Country as a foreigner can only be done and approved through Pakistan diplomatic missions in that country.

Below are the different types of work visa granted to qualifying applicants:

  • Work Visa for Employment. For eligible applicants with a confirmed job offer from companies/sponsors inside Pakistan. Available as First-Time Visas or as a Visa Extension. Generally, the first work visa issued is for three months and single entry; after which an extension is applied for, up to two years. This can cover such as labourers, professionals, teachers, CEOs, artists
  • Work Visa for Reko Diq Project. The first visa can be for up to five years with a three-year extension
  • Work Visa for CPEC projects. Available to Chinese citizens who have a confirmed job offer on one of the CPEC projects
  • Journalist Visa which is valid for three months (extendable) and needs eligibility recommendations
  • Domestic Aides sponsored by employers for one year
  • Driver/Helper/Transporter. For citizens of Economic Cooperation Organization (ECO) countries to allow travel within Pakistan. First time validity for six month (single or multiple entry) and one year for extensions

Applying for the Work Visa or Work Permit for Pakistan

Work Visas in Pakistan can be referred to as Work Permits. Applicants need proof of residence in the country when the application is submitted, if not their country of origin.

For 192 countries’ nationals, the Work Visa can be applied for through the e-Visa portal (POVS). The authorities involved with issuing visas are:

The Ministry of Interior (MOI) delegates their embassies and consulates abroad to issue visas under certain circumstances, as most visas, since the introduction of the online service POVS – Pakistan Online Visa Service are issued as a soft or hard copy online. There are around 11 different categories (some amalgamated with other visas as subcategories).

The Directorate General of Immigration and Passports is part of the MOI responsible for visas, passports, and immigration.

The Board of Investment (BOI) issues Letter of Recommendation for foreigners applying for a Work Visa.

Types when applying for the Work Visa

  • First-Time Visa. A new visa which is issued for a single trip of up to three months
  • Extension Visa. Multiple entry visa which can be extended for up to two years from inside Pakistan

Three steps to take when applying for the Work Visa are:

  • Visa eligibility assessment
  • Preparation of all documentation from employer and employee, any required translations or authentication including the photograph: and having a valid debit or credit card for paying the fee online
  • Online application through POVS. Create an account. Login and complete application online, upload documents, pay fee and submit application

The process can take up to four months, especially if the application is returned for re-submission.

Documents required for general ‘First-Time’ Work Visa for entry

Sign into your account and from ‘upload section’ use the drop-down facility to choose documents for visa type. They should be in JPEG format and no more that 500kb. Follow instruction from the site.

A security clearance is not required for the Work Visa at entry level.

  • National passport with a minimum of six months validity from date of application with two or more empty pages for entry and exit visas and photocopies are recommended
  • Photographs along passport guidelines
  • Certificate of incorporation of company from Pakistan’s Securities and Exchange Commission of Pakistan (SECP)
  • Information regarding the sponsor/employer
  • Letters involving any ministry or department regarding any project, or company/employer undertaking, should be on company headed paper. For example, CPEC projects
  • Most recent Curriculum Vitae from employee
  • Covering letter-headed invitation from company inviting applicant and guaranteeing the employees’ credentials and qualifications
  • Profile of company and business interests
  • Employment contract or letter of agreement with all details
  • Provide National Tax Number (NTN) of company from the Federal Bureau of Revenue (FBR)

Regarding the Work Extension

Extensions are applied for from within Pakistan and for holders of a current Pakistan entry visa for work. All the above documents are required PLUS:

  • Letter of Recommendation from the Board of Investment (BOI)
  • Security clearance is required through agencies
  • Pakistan entry visa for work and entry stamp in passport

Cases are decided within 30 days of receiving documentation and if no agencies have raised an objection, the application is assumed to have been approved. However, if the application is returned for more information, the process starts again. If the application is not re-submitted within seven days, it is considered to be cancelled.

Exit Permit

If a foreigner wishes to leave the country but does not have a valid visa (rejected, cancelled, or expired), an exit permit has to be applied for and is valid for a 15-day period, during which the foreign national has to leave Pakistan.

Documents required are a photograph, passport, proof of entry and last visa. If rejected or cancelled, a letter from the MOI.

There are fines and sanctions for foreigners who are found working or living in Pakistan illegally and they can also be detained.

Business Visa

This is one of the most common visas applied for to stay long term in Pakistan and allows investors to engage in numerous business activities, from business meetings to market research, but they still need a corporate sponsor, and this is NOT a Work Visa for employment.

This five-year multiple entry visa is for businesspersons looking to invest. There is a list of eligible countries (BVL) Documents below:

  • Valid passport and photograph on passport guidelines
  • Company extending the invitation must prove its registration with SECP/Certificate from Chamber of Commerce and Industries (CC&I)
  • Letter from CC&I from businessperson’s home country OR relevant Trade Association in Pakistan OR Letter of Recommendation from the Board of Investment (BOI), whichever apply

Overview of Taxes in Pakistan

Figures are given in Pakistani rupees (PKR) with equivalents in euros and US dollars.

Personal Income Tax (PIT): Tax free band up to PKR 600,000 (€1,926, US$2,140) and six further bands up to 35% on income over PKR 12 million (€38,520, US$42,860) plus a payment of PKR 2,955,000 (€9,485, US$10,555).

Corporate Income Tax (CIT): Rates from 2023 and onwards: Banking 39%; other public companies and any other company type 29%; classified small companies 20%.

Super Tax: Since 2022, 1% applies to corporate income over PKR 150 million (€481,500, US$535,790) up to PKR 200 million (€642,023, US$714,390); 2% on excess up to PKR 250 million (€802,530, US$892,990) 3% on excess up to PKR 300 million (€963,035, US$1,071,590); 4% on income above that.

Alternative Minimum Tax: A minimum turnover tax of 1.5% applies where the company suffers losses or the tax payable is less than 1.5% of turnover. The company’s liability can be the higher of the alternate minimum tax of 17% or the total corporate tax taking into account net taxable income, minimum tax and final taxes.

Capital Gains Tax (CGT): Taxes from the sale of immovable property are 5%, 10%, 15% or 20% depending on the property’s value or the length of time it was held.

Value Added Tax (VAT): Known as ‘Sales Tax’ with a standard federal rate of 17%, although it varies between 13% and 16% in the provinces. Goods imported for sale are taxed at an extra 3%.

Withholding Tax: Generally 12.5% on dividends paid to non-residents; 15% on royalties and fees for technical services.

Other Taxes: Minimum Turnover Tax; Women’s Enterprises Tax; Customs, Import and Excise duties applied at various rates according to the Harmonized System Code.

Personal Income Tax in Pakistan

Pakistan has a complex two-tier system, with income tax assessed on salaried individuals, and non-salaried individuals and Associations of Persons (AOP).

Figures are given in Pakistani rupees (PKR) with euro and US dollar equivalents.

Personal income tax for individuals where their salary exceeds 75% of total taxable income

Income | Percentage Tax on Excess
PKR 600,000 (€1,926, US$2,140) | 0%
Excess up to PKR 1,200,000 (€3,852, US$4,286) | 2.5%
Excess up to PKR 2,400,000 (€7,700, US$8,570) plus PKR 15,000 (€48, US$54) | 12.5%
Excess up to PKR 3,600,000 (€11,556, US$12,860) plus PKR 165,000 (€530, US$590) | 20.0%
Excess up to PKR 6,000,000 (€19,260, US$21,430) plus PKR 405,000 (€1,300, US$1,446) | 25.0%
Excess up to PKR 12,000,000 (€38,520, US$42,863) plus PKR 1,005,000 (€3,226, US$3,590) | 32.5%
Over PKR 12,000,000 plus PKR 2,955,000 (€9,485, US$10,555) | 35%

Income tax on non-salaried individuals and Associations of Persons

Income | Percentage Tax on Excess
PKR 600,000 (€1,926, US$2,140) | 0%
Excess up to PKR 800,000 (€2,568, US$2,857) | 5%
Excess up to PKR 1,200,000 (€3,852, US$4,286) plus PKR 10,000 (€32, US$36) | 12.5%
Excess up to PKR 2,400,000 (€7,700, US$8,570) plus PKR 60,000 (€192, US$214) | 17.5%
Excess up to PKR 3,000,000 (€9,630, US$10,715) plus PKR 270,000 (€866, US$964) | 22.5%
Excess up to PKR 4,000,000 (€12,840, US$14,290) plus PKR 405,000 (€1,300, US$1,446) | 27.5%
Excess up to PKR 6,000,000 (€19,260, US$21,430) plus PKR 680,000 (€2,182, US$2,428) | 32.5%
Over PKR 6,000,000 plus PKR 1,330,000 (€3,627, US$4,036) | 35.0%

Individual Tax Rules in Pakistan

  • The tax year runs from July 1 until June 30
  • Returns must be filed by September 30 of the tax year
  • Filing a revised return requires permission of the Tax Commissioner
  • Persons are tax residents if they are present in Pakistan for a period or periods adding up to 183 days
  • Resident taxpayers must file a wealth statement in a set format
  • Resident taxpayers with foreign income exceeding €8,990 (US$10,000) or with foreign assets exceeding €89,870 (US$100,000) must file a separate statement
  • Non-salaried taxpayers must pay in four instalments if income on the previous return exceeded PKR one million (€3,210, US$3,572)
  • Resident taxpayers are taxed on worldwide income, non-residents on income sourced in Pakistan
  • Taxable income is divided into salary, professional fees, property income, capital gains and ‘any other income’
  • Spouses are not allowed to file joint returns

Employers’ and Employees’ Social Security and Statutory Contributions in Pakistan

Employers contribute 6% of payroll to the Social Security Administration for the Employees’ Old-Age Benefit Institution (EOBI), capped at a maximum monthly salary of PKR 15,000 (€48, US$53).

International companies expanding operations into Pakistan need to establish a subsidiary in the country in order to legally hire staff and run the payroll for their new entity.

Pakistan’s location is one of the attractions for incoming companies. The third largest economy in South Asia has borders with the business and commercial powerhouses of India and China, while its Arabian Sea coastline opens sea routes into the Indian Ocean, Africa, and the Far East and beyond. Its position as a potential stepping stone for further expansion is boosted by free trade agreements with Sri Lanka, Indonesia and Malaysia. In 2015, Pakistan signed the China-Pakistan Economic Agreement.

Agricultural products, textiles, light engineering and pharmaceuticals are among the front-runners of Pakistan’s exports. The federal and provincial governments are jointly working to advance both the digital economy and the Micro, Small and Medium Enterprises sector.

Special Economic Zones and Export Processing Zones, where it is possible for foreign companies to open an entity, are another factor in attracting international expansion. Also, the government has implemented Foreign Direct Investment policies for specific ventures, such as alternative and renewable energy, electric vehicles and the merchant marine.

Companies attracted by this potential to invest in Pakistan can opt to do so through a subsidiary, and typically look at establishing a limited liability company (Pvt. or Ltd.). It will operate under the Companies Ordinance (1984) and incorporate through Pakistan’s Board of Investment (BOI) and the Securities Exchange Commission of Pakistan (SECP).

Incoming companies can make a better choice. The more practical, fastest and simpler route into the Pakistan economy avoids the complications of opening a subsidiary. Bradford Jacobs has the expertise to remove any potential obstacles. Our Professional Employer Organisation (PEO) teams and Employer of Record (EOR) consultants will be alongside you from day one – from recruiting staff to managing every legal aspect of compliance. Instead of waiting weeks or months, you and your staff can be up-and-running in days … and your employees always remain under your daily operational control.

How to set up a Pakistan Subsidiary

Incorporation and registration procedures to set up a limited liability company in Pakistan can vary between provinces in some details, but generally include the following:

  • Firstly, the BOI must issue the ‘letter of permission’ to open and operate a business in Pakistan, in effect a ‘no objection certificate’
  • Verify and register unique company name with the SECP, which can be done online through their e-services portal
  • Obtain a National Tax Number (NTN) at the Regional Tax Office (RTO) of the Federal Bureau of Revenue (FBR)
  • Register with the District Excise and Taxation Department (Professional Tax)
  • Obtain Sales Tax Number from the RTO
  • Register for sales tax by obtaining the Sales Tax Number (STN) from the relevant Regional Tax Office of the FBR
  • File company’s Memorandum and Articles of Association with the SECP
  • Provide copies of Computerised National Identity Card (CNIC) for all Pakistani directors and officers. Foreigners must provide copies of their passports
  • There are a minimum of two shareholders
  • Provide details of directors and officers, such as CEO, company secretary, CFO, auditors and legal adviser
  • Provide details of the company’s registered office, which must be in Pakistan
  • Register with the Social Security Administration for the Employees’ Old-Age Benefits Institution (EOBI)
  • On completion of all documents, obtain the Corporate Universal Identification Number (CUIN) and receive the Certificate of Incorporation from the SECP. Once validated by the SECP, a digital signature is granted by the National Institutional Facilitation Technologies (NIFT)

A number of forms must completed and registered with the SECP, these include:

  • Form 34 – Pattern of Shareholding
  • Form 43 – Declaration on Ultimate Beneficial Owners

What are the Benefits of setting up a Subsidiary in Pakistan?

The subsidiary functions in Pakistan as an independent legal entity from the parent company, which is generally absolved from responsibility for the subsidiary’s debts or liabilities, including legal issues. Shareholders, partners and members are typically liable only to the value of their contribution to the equity. Equally, the subsidiary can operate independently, pursue different business opportunities and draw up contracts.

Opening a subsidiary in Pakistan provides the parent company with the opportunity to explore new markets outside its regular economic orbit. The subsidiary opens the potential to enter into agreements with other registered companies in Pakistan, throughout South Asia and further afield. Also, the permanency of a subsidiary has greater credibility with clients and suppliers, compared with branches which are limited in their area of operations. Foreign companies can open a branch only if they have existing contracts with Pakistan companies.

However, taking the step of setting up a subsidiary is still a long journey compared with taking the most efficient and financially sensible route to starting operations in Pakistan.

Here is the best solution … let Bradford Jacobs locate top-rated talent for your company in Pakistan through our in-country Professional Employer Organisation (PEO) specialists. Employees can be working at their desks and screens in days … not weeks, or even longer. We remove all concerns regarding employment laws and compliance. Our Employer of Record (EOR) teams handle the hassle … while you have day-to-day operational control over your workforce.

Subsidiary Regulations in Pakistan

Procedures applying to a limited liability company include:

Registration and Documentation:

  • Board of Industry (BOI) issues a ‘no objection certificate’, which gives permission to operate a business in Pakistan
  • Verify and register unique company name with the Securities Exchange Commission of Pakistan (SECP)
  • File company’s Memorandum and Articles of Association with the SECP
  • Give details of registered office address and main place of business
  • Register the Pakistan resident authorised to carry out instructions on behalf of the parent company
  • Register with the Social Security Administration for the Employees’ Old-Age Benefits Institution (EOBI)
  • On completion of all documents, obtain the Corporate Universal Identification Number (CUIN) and receive the Certificate of Incorporation from the SECP. Once validated by the SECP, a digital signature is granted by the National Institutional Facilitation Technologies (NIFT)

Accounts and Taxation:

  • Register with the Federal Board of Revenue for taxation purposes
  • Register for sales tax by obtaining a Sales Tax Number (STN) at the relevant Regional Tax Office of the FBR
  • Corporate Tax generally paid at 29%
  • Statutory audit and annual tax returns must be filed
  • There is no statutory minimum capital requirement, either paid-up from shareholders, or authorised capital that the company is permitted to issue to shareholders. However, any capital of either sort must be declared in the Articles of Association. Depositing PKR 100,000 (€320, US$357) is common practice, but capital should be sufficient to cover immediate business plans of the company

Management:

  • Register a minimum of two shareholders and two directors and give full details of company directors, principal officers, auditors and CEO
  • Can set a limit of 50 shareholders
  • Complete Form 34 – Pattern of Shareholding
  • Complete Form 43 – Declaration on Ultimate Beneficial Owners
  • Name shareholders and directors in the Public Gazette
  • First annual general meeting must be held within 18 months of incorporation, and then annually

International companies planning expansion into the Islamic Republic of Pakistan enter a South Asian nation where the essence of its heritage has withstood countless invasions, while integrating the culture of other civilisations and conquerors. The region’s known history reaches back 2,500 years BCE. Invaders came from the north, from Persia, the Arab world and then Greeks led by Alexander the Great, before systematic conquest by Muslims dated from the 10th till the 18th century. The current state of Pakistan became independent from British colonial rule in 1947.

Pakistan’s huge landmass is the size of the United Kingdom and France combined. It stretches from the Himalayan Mountains in the north to the Arabian Sea in the south, opening into the Indian Ocean. Its land borders are shared with Iran, Afghanistan, China and India. The Indus River flows from China through the entire length of Pakistan, with most of the population and agriculture in the areas along its banks.

Today, Pakistan’s economy has developed from a traditionally agrarian base although agriculture still accounts for over 22% of Gross Domestic Product, ahead of manufacturing and industry. The government is attracting Foreign Direct Investment into the sector with tax breaks in Special Economic Zones, incentives to improve infrastructure and further develop production of iron, steel and non-metallic minerals, petroleum products, chemicals and fertilizers.

Pakistan has been a regional late-comer to the e-commerce culture, but start-ups attracted US$347.44 million of capital in 2022, with US$190.27 million of funding into e-commerce. A joint public-private initiative targets integrating ICT, financial services, animal husbandry, textiles and the services sector fully into the digital economy.

Starting your business in Pakistan

Foreign companies intending to start business operations need to open a subsidiary to legally hire employees and operate their payroll. Options include a limited liability company, free zone company, limited liability partnership and public limited joint stock company. The typical choice, for local and foreign investors, is a limited liability company, often known locally as a private company (Pvt. Ltd.) The company operates under the Companies Ordinance (1984) and registration and incorporation begins with the Securities and Exchange Commission of Pakistan (SECP) and the Pakistan Board of Investment (BOI).

Procedures can vary between provinces, but as an example, stages for a foreign entity registering a limited liability company include the following:

  • Obtain ‘letter of permission’ from the BOI to open and operate a business in Pakistan, in effect a ‘no objection certificate’
  • Confirm availability of unique company name with the SECP, which can be done online via their e-services portal
  • File company’s Memorandum and Articles of Association with the SECP on Form 38
  • Obtain a National Tax Number (NTN) at the Regional Tax Office (RTO) of the Federal Bureau of Revenue (FRB)
  • Register with the District Excise and Taxation Department (Professional Tax)
  • Obtain Sales Tax Number from the RTO
  • Register with the Social Security Administration for the Employees’ Old-Age Benefits Institution (EOBI)
  • Provide details of the company’s registered office, which must be in Pakistan
  • Provide copies of Computerised National Identity Card (CNIC) for all Pakistani directors and officers. Foreigners must provide copies of their passports
  • There are a minimum of two shareholders
  • Details of directors and officers, such as CEO, company secretary, CFO, auditors and legal adviser
  • On completion of all documents, obtain the Corporate Universal Identification Number (CUIN) and receive the Certificate of Incorporation from the SECP. Once validated by the SECP, a digital signature is granted by the National Institutional Facilitation Technologies (NIFT)
  • There is no statutory minimum capital requirement, either paid-up from shareholders, or authorised capital that the company is permitted to issue to shareholders. However, any capital of either sort must be declared in the Articles of Association. Depositing PKR 100,000 (€320, US$357) is common practice, but capital should be sufficient to cover immediate business plans of the company

It may also be necessary to complete various forms for the SECP, under requirements of the Companies Act (2017). These include:

  • Form 34 – Pattern of Shareholding
  • Form 43 – Declaration on Ultimate Beneficial Owners

This incorporation process underlines the importance of taking the best possible advice. By making the right choice now, you can steer a course around these obstacles by working alongside Bradford Jacobs. Our Professional Employer Organisation (PEO) specialists and Employer of Record (EOR) experts will recruit the staff and undertake every step of compliance to have them up-and-running in the shortest possible time. Instead of waiting weeks to complete the process for opening a subsidiary, you can be operational in days.

Expanding your business into Pakistan

Pakistan’s economy ranks third in South Asia, behind India and Bangladesh. Foreign companies expanding their business into the region will look not only at Pakistan’s potential, but also its strategic position in the region. Pakistan has land borders with economic powerhouses of China and India and an Arabian Sea coastline that opens global sea routes to the Indian Ocean, East Africa, the Far East and Australasia.

Generally, the government places few limits on businesses expanding into Pakistan. Apart from airlines, banking, the media and some sectors of agriculture there are few limits on foreign ownership. Foreign investors can hold 100% equity in the services sector, education, health and infrastructure operations.

Special Economic Zones are another attraction for companies expanding business into the country, offering tax breaks and other financial incentives, and the rapidly developing start-up scene attracted close to US$350 million from venture capitalists in 2022.

Expanding business in Pakistan offers considerable potential and many options. However, for companies aiming to establish their own entity in the country, expansion comes with issues of incorporation, recruitment and contracts, company and employment legislation and much more. By working with Bradford Jacobs as your Professional Employer Organisation (PEO) and Employer of Record (EOR), we deal with everything on that list. We can ensure that the only item on your list is … ‘global expansion’.

Advantages and Challenges when entering the Pakistani Market

Some Advantages:

  • Population of 235 million, with a predominantly young demographic, offers huge potential consumer market helped by wages paid into economy by overseas workers
  • Large and inexpensive labour force
  • Growing middle class
  • Strategic location bordering major economies of China and India
  • Coastline on Arabian Sea opens routes into the Indian Ocean and beyond

Some Challenges:

  • Large unregulated informal economy undermines tax revenues, along with slow pace of tax reform
  • Educational system leaves 40% illiterate and unemployable in higher-end jobs
  • Manufacturing sector accounts for less than 20% of GDP
  • 40% of workforce depends on employment in agriculture which is vulnerable to natural disasters, i.e. 2022 floods, and global demand
  • Disjointed incorporation procedures between provinces
  • Perception of corruption and bribery in business

Employers must comply with Standing Orders Ordinance (1968) and federal and provincial laws and provide a standard format written contract or letter of appointment for workers and non-managers (not managers), although the law does not specify which terms should be included. Typically, however, they cover such as contract type, job description, location, remuneration and payment schedule, statutory benefits. Employees are classified as permanent, probationers, alternate employees (Badlis), temporary employees, apprentices or contract workers. Be aware that definitions can change between provinces.

Different types of Employment Contracts in Pakistan

Open-ended, permanent employment contracts:  The normal type of contract with a start date, but no specified end date.

Fixed-term or temporary employment contracts:  These cannot be used for work that the employer knows to be of a permanent nature. For workers and non-managers if the fixed term exceeds nine months they become permanently employed, with entitlement to certain rights and benefits. Federal and provincial laws set no limits on fixed-term contracts for managers or administrative staff.

Probation periods:  These are included in the contact and cannot exceed three months for workers. Probation periods for managers are covered by their contact and there are no regulations to their length or if they can be extended.

Collective Bargaining Agreements (CBAs):  Article 17 of the Pakistan Constitution gives workers the right to form associations or trade unions, as do employers have the right to join organisations and federations. The Industrial Relations Ordinance provides for the appointment of Collective Bargaining Agents, entitled to negotiate with employers and employers’ federations on all aspects of employment. For more information:

Laws that regulate the labour relationship in Pakistan

Between 2000 and 2002 various pieces of specific legislation were consolidated into six draft laws, or Ordinances. They cover:

  • Industrial Relations
  • Conditions of Employment
  • Payment of Wages
  • Occupational Safety and Health
  • Labour Welfare and Social Security
  • Human Resources Development and Control of Employment

General requirements for Contracts

The statutory requirement to provide written contracts applies to workers and non-managers, under the Standing Orders Ordinance (1968). The contract is provided in a standardised format. Although the law does not specify what terms should be covered, they generally include: job description and location; salary and payment schedule; probation period; termination and disciplinary procedures; paid leave and other entitlements. Employees are classified as permanent, probationers, alternative employees (Badlis), temporary employees, apprentices or contract workers. Be aware that definitions can change between provinces.

Workers’ entitlements and guarantees in Pakistan are set by a variety of legislation and Ordinances. Collective Bargaining Agreements cannot undercut statutory minimums. General guidelines may not apply in all provinces or all sectors.

What are the Compensation Laws?

National Minimum Wage (NMW): This is set at PKR 25,000 (€82, US$89) for 2023, but varies between provinces. In March 2023, the Punjab government gave notice of raising the minimum to PKR 32,000 (€103, US$114).

Working Hours and Breaks: Working hours should not exceed nine per day or 48 a week, with a one hour break for food or prayer after at the most six hours. In practice, hours can vary between sectors, seasonal work (up to 50 or 56 hours a week) and individual companies. There must be one free day a week.

Overtime: This is generally twice the normal hourly rate for working more than nine hours a day or 48 hours a week. Entitlement can vary between provinces.

Sick Leave and Benefits: When verified by a medical certificate, after two days sickness benefit for a regular illness is 75% of wages up to a maximum 121 days in a calendar year. For cancer or tuberculosis benefit is 100% of salary for up to 365 days. In the case of Khyber Pakhtunkhwa and Balochistan, benefit in both cases is 50% of wages.

Paid Vacations: After completing 12 months service, employees are entitled to a minimum 14 days paid leave the following year. They will be considered to have fulfilled the 12 months service, even if up to 90 days is lost to work through sickness, accidents, other authorised leave or industrial action. A maximum of 14 days unused holiday can be carried forward to the following year.

Public Holidays: Dates for the annual Islamic holidays of Eid-al-Fitr and Eid-al-Adha vary according to the Muslim calendar. Paid public holidays generally at least include:

Probation Periods: Trial periods are covered in the employment contract. They cannot exceed three months for workers or non-managers. Probation periods for managers are covered by their contact and there are no restrictions to their length or if they can be extended.

Notice Periods: Workers and non-managers permanently employed are entitled to the statutory one month’s notice, or equivalent pay in lieu of notice.

Termination, Severance and Redundancies: Labour law requires the employer to issue a letter giving reasons for termination. Case law has established valid reasons, including such as serious illness, inability to perform the job, economic reasons of the company. Serious misconduct can be grounds for termination, but Standing Orders Ordinance also suggest fines as an alternative. Unless dismissal is for serious misconduct, workers are entitled to 30 days’ severance pay for each year of completed service, or a year where they have worked for at least six months. In the case of redundancies, employers cannot dismiss more than 50% of workers without prior permission from the provincial government or the relevant labour court.

Maternity / Paternity Leave and Benefit: Under the Maternity and Paternity Leave Act (2020), the Senate of Pakistan ruled women are entitled to 180 days leave for their first child, 120 days for the second and 90 days for the third or subsequent births, all on full pay provided qualifying conditions are met. Leave is usually split equally before and after the birth. Fathers are entitled to 30 days paid paternity leave for the first three births, after which 30 days unpaid leave can be taken.

13th Month Bonus: There is no legal requirement to pay a 13th month salary bonus.

Pensions: Retirement age for earnings-related private sector workers is 60 years for men and 55 for women based on a minimum 15 years of contributions. The earliest retirement ages are 55 and 50 respectively. They are insured under the Employees’ Old Age Benefit Insurance scheme, to which employers contribute from their employees’ payroll.

Healthcare and Insurance:  The system comprises private and public sectors, with provinces primarily responsible for administering the system apart from in federally-controlled areas. In 2020, MedCOI ranked Pakistan only 154th out of 190 nations for the quality and accessibility of healthcare for the general population. The World Health Organisation notes that despite an extensive infrastructure, the system has an uneven distribution of health professionals, many of whom choose to work abroad, insufficient funding and limited access to quality care. The system is further stretched by high population growth. Insurance-based private healthcare services and facilities, which are well staffed and well equipped, are found in urban areas such as Karachi and Lahore.

Foreign companies recruiting staff in Pakistan as part of their international expansion need expert guidance. Incoming companies must hit the ground running in the shortest possible time, but federal and provincial red tape can frustrate a smooth hiring process.

In Pakistan, companies must comply with every aspect of labour regulations, which comprise provisions from the Constitution, and six draft laws which pulled together 20 pieces of specific legislation. It is a complex picture, particularly as some provinces propose reforms to aspects of the law.

Legislation also includes drawing up contracts with recruits. Under Standing Orders Ordinance (1968), employers must give every employee a contract specifying the terms of their employment from the day they start work. This is provided on a standard format document. Employers are also responsible for maintaining and updating any changes to a contract in the event of promotion or transfers.

These issues add to a recruitment ‘to do’ list that is already long. Locating new talent will be the No. 1 requirement and it is certain to raise major issues. In Pakistan, finding staff with the relevant qualifications and experience is hampered by an educational system that does not always meet the demands of manufacturing and commerce. Once staff are recruited and onboarded, employers must comply with the raft of employment legislation, which spells out the legal rights of their staff and their own obligations.

These demands add up to a heavy burden. There is a better option … a direct, swift and economical alternative that will have your new staff operational in just a few days, without needing to unravel the red tape surrounding recruitment and other aspects of employing staff.

Bradford Jacobs has the experience and contacts you need to provide a straightforward route for your journey into the Pakistani economy. The global reach of our Professional Employer Organisation (PEO) networks will locate the perfect recruits for your plans. Then, through our Employer of Record (EOR) platforms we have your new employees soon sitting at their desks and screens. This guide highlights the essentials of recruitment and onboarding in Pakistan. You can trust Bradford Jacobs to put the brightest talent in position for your company – today!

Recruiting in Pakistan

Pakistan’s population of around 235 million was estimated to contain a formal economy workforce of 71.76 million in 2021 by Pakistan’s Bureau of Statistics. Their survey showed that close to three-quarters of this number were wholly or partly employed in the unregulated informal, or shadow, economy.

Employers hoping to sidestep these issues by importing non-Pakistani staff from abroad or from their home country, must establish their company’s subsidiary in the country before they can legally offer the foreigner a job. A work visa is mandatory for every foreign national wanting to work in Pakistan, obtained through the Ministry of the Interior … but the process can take around three months.

Although there are no strict quotas on the number of foreigners who can be employed by a company, the government must be informed of the precise number of non-Pakistanis on their staff.

Complicated? Yes! This highlights where the global experience and local know-how of Bradford Jacobs is essential. Our Professional Employer Organisation (PEO) platforms will bridge the gap between the skills you need and finding the best-qualified talent for your company.

Employees’ pre-hire checks in Pakistan

General:  Pakistan’s employment legislation does not prohibit employers, or third parties on their behalf, conducting background checks on potential employees. Similarly they are not prohibited from requiring medical tests or drug and alcohol screening as a requirement for employment. Also, they are not barred from refusing to employ individuals who refuse to undergo such tests, provided it is not seen to be based on other discriminatory reasons. Employers must also beware data privacy constraints.

Discrimination:  Laws prohibiting discrimination are not uniform. In general, legislation against discrimination applies to skilled, unskilled, clerical or manual workers and non-managers in the provinces of Balochistan, Khyber Pakhtunkhwa and Sindh. Categories of gender, religious or political affiliation, sect, skin colour, creed, ethnic background or age are all prohibited reasons for discrimination. In Balochistan, it is not discriminatory for employers to employ locals in preference to those from other provinces, with the same skills or experience.

Criminal Checks:  Only the individual in question can apply for a Police Character Certificate; employers cannot apply themselves.

Reference and Educational Checks: Can be conducted as long as avoiding discrimination or abusing the individual’s data privacy.

Basic requirements when recruiting in Pakistan

All Pakistan’s provinces have legislation under the Standing Orders Ordinance (1968), which stipulates that all employers must provide every employee with a contract or appointment letter, which details the terms of their employment. Employees are classified as permanent, probationers, alternate employees (Badlis), temporary employees, apprentices or contract workers.

Although legislation does not specify terms that must be included, contracts generally cover the following:

  • Start date of employment and duration of the contract
  • Remuneration and payment schedule
  • Description of role and duties and the job’s location
  • Paid vacation and other types of leave
  • Duration of any probation period
  • Procedures for termination and dispute resolution

The Basics of Pakistani Culture

Pakistan’s history is a vast mix of ethnic groups and their languages, which have existed alongside each other over centuries to create a vibrant culture. Pakistan is a South Asian nation that has absorbed influences from West and North Asia, India, Afghanistan, Persia, Africa, the Mediterranean and mountainous Tibet.

Heritage reflects the customs of many ethnic groups, including Pashtun, Punjabi, Kashmiri and Makrani, largely bound together since the seventh century by the religion of Islam. Urdu is the national language, sharing official status with English as a result of British colonial rule that ended with independence in 1947. However, there are close to 80 official languages spoken throughout the nation that equals a combined France and the UK in landmass.

This cultural diversity, however is bound together by the traditional Asian concepts of family and the collective values of society. Respect for seniority and experience, dignity, generosity and patriotism are also key elements of the Pakistani outlook.

Pakistan Work Culture

Hierarchy:  Identify and show deference to the most senior member of the other team, as the structure is hierarchical.

Punctuality:  Be on time, but be prepared to wait for the other team’s arrival.

Introductions/Greetings:  Initially, members of the same sex shake hands, but may exchange brief, light hugs when the relationship is established. Introductions will be in order of age, status and experience. Men should always wait for a female to offer hand first. Using titles is important and shows respect and it is advisable to ask how the other party prefers to be addressed as there can be significance in the combination of names. Pakistanis tend not to be too concerned about personal space and may stand quite close … do not back away.

Language:  English, which is an official language alongside the national language of Urdu, is widely spoken in business. But check if an interpreter is needed as a safeguard.

Gift Giving:  Any gifts should be modest and thoughtful and men should not give gifts to a woman on the other team. Offer gifts with both hands.

Business Cards:  Offer with the right hand or both hands together, and receive in the same fashion.

Dress Code: Smart, conservative attire is the norm, especially for women who may also wear a scarf or hijab around their head.

Negotiations and Meetings:  The business scene is driven by relationships, so expect to spend time building them and developing trust. Expect chat about family and roundabout conversational topics on culture, for example, before moving onto business after a few light refreshments. Do not expect decisions at the first meeting; avoid frustration if discussions become heated and do not apply high-pressure tactics. Introductions from a third party will be helpful.

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