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Pakistan

399 EUR per employee per month

Discover everything you need to know about Pakistan

Hire in Pakistan at a glance

Here ares some key facts regarding hiring in Pakistan

Capital
Islamabad
Currency
Pakistan Rupee
Language
Urdu
Population
220,892,340
GDP growth
5.7%
GDP world share
0.38%
Payroll frequency
Monthly
Working hours
48 hours/week

Overview in Pakistan

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Pakistan, a South Asian country, is characterized by its diverse landscapes, ranging from the Himalayas to the fertile Indus Valley, which significantly influence its socio-economic and cultural identity. The nation's history includes ancient civilizations like the Indus Valley Civilization and periods under the Mauryas, Mughals, and British Raj, culminating in its establishment as a separate Muslim-majority country in 1947.

The socio-economic landscape presents both challenges, such as uneven development and political instability, and opportunities, including a strategic location and a young population. The workforce, predominantly in the informal sector, faces skill gaps and high unemployment, prompting efforts to enhance vocational training and education aligned with market needs.

Cultural norms in Pakistan impact employment practices, emphasizing family commitments and featuring indirect communication and formal hierarchical structures in workplaces. The economy is driven by agriculture, textiles, services, and manufacturing, with significant growth in the IT sector and potential in tourism. Addressing infrastructure and skill deficiencies is crucial for sustainable development and leveraging the economic sectors for broader employment opportunities.

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Employer of Record in Pakistan

Rivermate is a global Employer of Record company that helps you hire employees in Pakistan without the need to set up a legal entity. We act as the Employer of Record for your employees in Pakistan, taking care of all the legal and compliance aspects of employment, so you can focus on growing your business.

How does it work?

When you hire employees in Pakistan through Rivermate, we become the legal employer of your staff. This means that we take on all the responsibilities of an employer, while you retain the day-to-day management of your employees.

You as the company maintain the direct relationshiop with the employee, you allocate them the work and manage their performance.
Rivermate takes care of the local payrolling of the employee, the contracts, HR, benefits and compliance.

Responsibilities of an Employer of Record

As an Employer of Record in Pakistan, Rivermate is responsible for:

  • Creating and managing the employment contracts
  • Running the monthly payroll
  • Providing local and global benefits
  • Ensuring 100% local compliance
  • Providing local HR support

Responsibilities of the company that hires the employee

As the company that hires the employee through the Employer of Record, you are responsible for:

  • Day-to-day management of the employee
  • Work assignments
  • Performance management
  • Training and development

Taxes in Pakistan

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  • Income Tax Deduction at Source (TDS): In Pakistan, employers must deduct income tax from employee salaries based on the Federal Board of Revenue (FBR) tax tables. Employees earning under PKR 600,000 annually are exempt. Deductions are calculated from the employee's taxable income, which is their gross salary minus exempt allowances, and must be deposited within 7 days of salary payment.

  • Employee Social Security Institution (ESSI) Contributions: Employers with over five employees must contribute 5% of the employee's wages to ESSI, with rates varying by province. Employees contribute 1%. Deadlines for these contributions also vary by province.

  • VAT Regulations: The standard VAT rate in Pakistan is 17%, with some services taxed at a reduced rate of 14%. Services like education, healthcare, and public transport are exempt from VAT. Businesses with an annual turnover exceeding PKR 30 million must register for VAT and file returns electronically, either monthly or quarterly.

  • Tax Incentives: Pakistan offers various tax incentives including tax holidays for businesses in Special Economic Zones (SEZs), tax credits for R&D activities, reduced tax rates for new businesses in specific sectors, and special treatment for export-oriented businesses. These incentives aim to encourage investment and economic growth in targeted sectors and activities.

  • Additional Considerations: Employers need to register with the FBR to obtain a National Tax Number (NTN) and file bi-annual income tax withholding statements. Certain allowances are exempt from income tax calculations, potentially reducing taxable income.

Leave in Pakistan

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  • Annual Leave: Employees in Pakistan are entitled to 14 consecutive days of annual leave after completing twelve months of continuous service, as per the Factories Act, Section 49-B. Unused leave can be carried forward, with a maximum accumulation of 28 or 30 days.

  • Payment During Leave: Employees receive their daily wages while on annual leave.

  • Public Holidays: Pakistan celebrates various public and Islamic holidays, including Eid al-Fitr, Eid al-Adha, Eid Milad-un-Nabi, Ashura, Pakistan Day, Independence Day, Kashmir Day, Labour Day, Iqbal Day, Quaid-e-Azam Day, and Christmas. These holidays reflect the country's rich religious and cultural heritage.

  • Leave Policies: Other leave entitlements include sick leave and casual leave, with specific provisions varying by region and type of employment. Unpaid leave options like extraordinary leave and Hajj leave are also available, subject to certain conditions.

Benefits in Pakistan

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In Pakistan, employers are mandated to provide several benefits to their employees, focusing on health, well-being, and financial security. These include paid leave for national and religious holidays, annual leave, casual leave, and sick leave. Additionally, employers contribute to social security and the Employees' Old-Age Benefits Institution (EOBI), which offers pensions and other benefits.

The Workers' Compensation Act, 1923, ensures employees receive medical care and compensation for work-related injuries or illnesses, including death benefits for dependents.

Optional benefits provided by some employers include health insurance, financial benefits like gratuity and provident funds, work-life balance perks such as flexible working hours and remote working options, and training and development opportunities to enhance employee skills and career growth.

Health insurance, while currently optional, may become mandatory as the Securities and Exchange Commission of Pakistan (SECP) is considering a proposal for compulsory health coverage for private sector employees.

Retirement plans vary, with mandatory schemes like EOBI and voluntary options like provident funds, gratuity, and the Voluntary Pension System (VPS), each offering different benefits and suited to varying individual needs and financial goals.

Workers Rights in Pakistan

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The Industrial and Commercial Employment (Standing Orders) Ordinance, 2018 in Pakistan provides a legal framework for employment termination, specifying lawful grounds for dismissal such as misconduct, incompetence, and absence without leave, among others. It mandates a fair inquiry process before dismissal and sets notice requirements based on the length of service, ranging from one to three months. Severance pay is also outlined, with employees entitled to one month's pay for each year of service, except in cases of misconduct or gross negligence.

Additionally, Pakistan has various laws to protect against workplace discrimination, covering characteristics like religion, race, gender, and disability. Employers are required to implement anti-discrimination policies and provide diversity training. The legal landscape for anti-discrimination in the private sector, however, still needs more comprehensive legislation.

Workplace regulations under the Factories Act, 1934, and other ordinances set maximum working hours and mandate rest periods, but lack specific provisions for ergonomic requirements. Health and safety obligations for employers include maintaining a safe work environment and minimizing exposure to hazardous substances, with employee rights to a safe workplace and information on safety procedures also recognized.

Enforcement of these regulations is primarily the responsibility of Provincial Departments of Labour and other relevant agencies, though there are concerns about the effectiveness of these enforcement mechanisms.

Agreements in Pakistan

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In Pakistan, employment contracts vary based on duration, purpose, and specific terms, accommodating different types of employment relationships:

  • Permanent Employment Contracts: These offer long-term employment and full benefits, crucial for ongoing company operations. Although not mandated by law to be in writing, it is recommended for clarity and security of rights.

  • Badli (Alternate) Employment Contracts: Temporary arrangements where a Badli worker fills in for an absent permanent employee, without the benefits of permanent staff.

  • Temporary Employment Contracts: Used for specific projects or seasonal work, these contracts are typically less than nine months long.

  • Apprenticeship Agreements: Designed for individuals in formal training programs, detailing training duration, stipends, and job placement upon completion.

  • Contract Worker Agreements: For employees hired for a specific period to complete a task, often paid by piece rates and possibly exempt from overtime pay under certain conditions.

The employment agreement should clearly outline terms regarding remuneration, benefits, working hours, overtime, leave policies, termination, and dispute resolution. It should comply with Pakistani labor laws, and consulting a legal professional is advisable.

The probation period, typically three to six months, allows both employer and employee to assess suitability. The employment agreement should detail the probation terms, including duration, performance evaluation, and consequences of completion or termination during probation.

Additionally, employment agreements may include confidentiality clauses to protect sensitive information and non-compete clauses to prevent employees from joining competitors immediately after leaving the company. However, non-compete clauses are scrutinized to ensure they do not unreasonably restrict an employee's right to earn a livelihood. Alternatives like non-solicitation clauses are often more favorably viewed by courts.

Remote Work in Pakistan

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  • Legislation and Framework: Pakistan lacks specific legislation for remote work, but existing laws like The Employment Act, 1923, and The West Pakistan Shops and Establishments Ordinance, 1965 provide a basic framework. These laws cover employee rights, working conditions, and leave policies adaptable to remote work. Pakistan has not ratified the ILO Convention C177 on Telework.

  • Technological Infrastructure: Successful remote work in Pakistan requires reliable technology infrastructure, including stable internet, communication tools, and cybersecurity measures. Employers are responsible for providing or reimbursing the necessary technological equipment.

  • Employer Responsibilities: Employers must develop clear remote work policies, provide technology training, support ergonomic home setups, ensure fair compensation, and address potential social isolation to promote mental well-being.

  • Flexible Work Options: Options like part-time work, flexitime, and job sharing are available, with existing labor laws providing a regulatory basis.

  • Equipment and Expense Reimbursements: There is no legal obligation for employers to provide equipment or reimburse expenses, but clear policies are essential for a fair work environment. Employers may provide equipment or stipends and reimburse internet costs.

  • Data Protection: The Constitution of Pakistan and The Electronic Transactions Ordinance, 2002 ensure data protection, emphasizing the privacy and security of employee data in remote work settings. Employers must implement robust data security measures and policies.

  • Employee Rights and Best Practices: Remote employees have rights to data privacy and security, with responsibilities to maintain data integrity and report security issues. They should practice strong password hygiene and be cautious with data sharing.

Working Hours in Pakistan

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Overview of Labor Laws in Pakistan

Pakistan's labor laws regulate working hours to protect employee well-being and prevent exploitation. The Factories Act, 1934, sets daily working hours for adults at a maximum of nine hours, with women not allowed to work past 7 pm. The weekly limit is 48 hours, with overtime capped at 56 hours weekly, including a maximum of 8 overtime hours. Overtime pay is double the regular rate, increasing to triple on festival holidays, though exceptions like The Railways Act offer a minimum of 1.25 times the rate.

Daily and Weekly Rest Requirements

Employees must not work more than five consecutive hours without a break, with a total rest period of at least one hour. Weekly, they are entitled to 24 consecutive hours off, typically on Sundays, though alternatives can be negotiated.

Special Considerations

During Ramadan, work hours are reduced by 2 to 3 hours. Night work, defined as work between 7 pm and 6 am, is generally prohibited for women, with specific exceptions for pregnant women. Weekend work on designated rest days requires overtime compensation.

These regulations aim to ensure the health, safety, and well-being of workers, with additional provisions for breaks, night shifts, and weekend work. For the most accurate and specific information, consulting the Ministry of Labour & Manpower or relevant legislation is recommended.

Salary in Pakistan

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Understanding market competitive salaries in Pakistan is crucial for ensuring fair employee compensation and for companies to attract and retain talent. Factors influencing these salaries include:

  • Cost of Living: Varies by location, with urban areas like Karachi and Lahore being more expensive than rural areas.
  • Job Title and Industry: Different sectors and job titles have varying salary benchmarks, with fields like technology and finance often offering higher salaries.
  • Experience and Qualifications: More experienced and qualified candidates typically command higher salaries.
  • Company Size and Reputation: Larger companies may offer better salaries and benefits, while smaller ones might offer quicker career progression.
  • Negotiation Skills: Effective negotiation can significantly impact salary outcomes.

Resources for Researching Salaries:

  • Salary surveys, job boards, and recruitment agencies provide data and insights into current salary trends.

Minimum Wage Regulations:

  • Governed by the Minimum Wages Ordinance, 1961, which allows provinces and the Islamabad Capital Territory to set minimum wages for various worker categories.
  • Minimum Wage Boards recommend rates for different worker types and must review these at least every three years.
  • Enforcement of minimum wage laws includes penalties like imprisonment or fines for non-compliance.

Employee Compensation:

  • Includes mandatory bonuses like profit bonuses, which are dependent on company performance and employee eligibility.
  • Common allowances cover housing, travel, education, and overtime, with additional industry-specific allowances also available.

Payroll System:

  • Employers in Pakistan can choose their pay frequency, with monthly being the most common.
  • The Factories Act, 1934 mandates monthly payments at minimum.
  • Payslips, detailing earnings and deductions, are legally required for transparency and record-keeping.

These components are integral to understanding and implementing competitive salary and compensation practices in Pakistan.

Termination in Pakistan

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In Pakistan, the Industrial Relations Ordinance (IRO) 2002 governs employment termination and outlines the legal requirements for notice periods. The key points include:

  • Minimum Notice Period: A one-month notice is mandatory for terminating indefinite or permanent contracts, with compensation equivalent to one month's wages if notice isn't given.
  • Notice Period Variations: Notice periods can be extended via contractual agreements. During a probation period, typically three months, contracts can be terminated without notice or compensation.
  • Additional Considerations: Fixed-term contracts may have specific clauses that override general provisions. Disputes are handled by labor or civil courts, and financial compensation, known as severance pay, is mandated for eligible employees unless termination is due to misconduct.
  • Severance Pay: Eligible employees receive a minimum of 30 days' wages for each year of service, calculated pro-rata for periods over six months, based on the average earnings of the last three months.
  • Alternative to Severance Pay: Employers may opt to contribute to a provident fund instead of direct severance pay, which accumulates and is disbursed upon retirement or termination.

Termination procedures require adherence to specific steps including written notice, honoring notice periods, final payments, and issuing a certificate of service. Documentation throughout the process is crucial to minimize disputes.

Freelancing in Pakistan

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In Pakistan, the distinction between an "employee" and a "workman" significantly affects their rights and obligations. The classification of a worker, whether as an employee or contractor, is determined by factors such as control over work, nature of work, integration into the business, and handling of benefits and taxes. The legal landscape for worker classification is still evolving, with case law providing some guidance but lacking a definitive framework.

For independent contractors, it's crucial to have a well-structured contract that outlines the scope of work, payment terms, and termination clauses. Effective negotiation practices are essential, focusing on setting rates, defining payment terms, and managing scope creep. Independent contracting is prevalent in industries like IT, creative sectors, and consulting, benefiting from the flexibility and specialized skills offered.

Freelancers must navigate intellectual property rights carefully, ensuring contracts clearly define copyright ownership and usage rights. The Copyright Act of 1976 primarily governs these aspects, with specific provisions for "work made for hire." Freelancers are advised to take steps to protect their work, such as copyright registration and using NDAs.

Regarding tax obligations, freelancers and independent contractors in Pakistan must register with the Federal Board of Revenue, file income taxes, and may voluntarily contribute to social security for future benefits. They also have various insurance options to secure their health and financial well-being. Consulting with legal and financial experts is recommended to navigate these complexities effectively.

Health & Safety in Pakistan

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Pakistan has a robust legal framework for public health and occupational safety, governed by both federal and provincial laws. The Pakistan Occupational Health and Safety Act, 2018 (POHSA 2018) sets the national standard, while provinces like Sindh, Punjab, Khyber Pakhtunkhwa, and Balochistan have their own specific legislation. Other important laws include the Factories Act, 1934, the Mines Act, 1923, and the Dock Workers Act, 1934, which address safety in specific work environments.

Public health is also well-regulated with laws like the National Institute of Health Ordinance, 1980, various food safety laws, communicable disease control laws, and the Environmental Protection Act, 1997. These laws aim to manage public health risks and promote a safe living environment.

The enforcement of Occupational Health and Safety (OSH) involves identifying and eliminating workplace hazards, providing a safe work environment, developing OSH policies, training employees, and reporting accidents. Regular inspections by Provincial Labour Departments ensure compliance with OSH standards, focusing on general workplace safety, hazard control, emergency preparedness, and worker training.

In case of workplace accidents, employers must report incidents promptly, with investigations potentially following to determine causes and prevent future occurrences. Workers affected by accidents may be entitled to compensation through schemes like the Employees' Old-Age Benefits Institution or Workers' Compensation Scheme, or through civil lawsuits for employer negligence.

Dispute Resolution in Pakistan

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Pakistan's legal system offers two primary methods for resolving labor disputes: Labor Courts and Arbitration Panels, each with distinct roles, structures, and jurisdictions.

  • Labor Courts: Established under the Industrial Relations Ordinance (IRO) 2002, these courts deal with a wide range of employment issues including unfair termination, non-payment of wages, and industrial disputes. The process involves filing a petition, issuing a summons, conducting hearings, and delivering a binding judgment.

  • Arbitration Panels: Governed by the IRO 2002 and the Arbitration Act 1940, arbitration allows parties to choose a neutral third-party arbitrator to resolve disputes in a less formal setting than Labor Courts. The arbitrator's decision is usually final and preferred for complex or urgent disputes.

Additionally, compliance audits and inspections are crucial for ensuring businesses adhere to legal and regulatory standards. Various entities, including government agencies and private certification bodies, conduct these audits, which can be mandatory or risk-based.

Non-compliance can result in severe consequences such as financial penalties, operational restrictions, and reputational damage. Meanwhile, whistleblower protections are provided under specific laws like the National Accountability Bureau Ordinance 1999, although comprehensive legislation is lacking.

Pakistan's adherence to international labor standards is evidenced by its ratification of numerous International Labour Organization conventions and its compliance with the EU's GSP+ requirements, which necessitate continuous improvement of domestic labor laws. However, challenges remain in enforcement and legislation, particularly concerning informal sector workers and freedom of association.

Cultural Considerations in Pakistan

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  • Communication Styles: In Pakistan, indirect communication is preferred due to respect for hierarchy and a desire to maintain group harmony. Directness increases with familiarity, but messages often remain implied.

  • Formality: Formal language, in Urdu or English, is used in professional settings, reflecting the high power distance in Pakistani culture. Meetings are structured with agendas, emphasizing the hierarchical nature of interactions.

  • Non-Verbal Cues: Non-verbal communication, such as eye contact, gestures, and facial expressions, plays a crucial role in conveying messages, especially given the indirect communication style.

  • Negotiation: Pakistani business culture values long-term relationships, leading to a collaborative negotiation style, though distributive elements are present. Negotiations are lengthy and involve multiple rounds, with a significant reliance on non-verbal cues and personal relationships.

  • Hierarchy in Business: Pakistani businesses are characterized by clear hierarchical structures, with decisions typically made at the top. This impacts team dynamics, limiting cross-functional collaboration and reinforcing deference to authority.

  • Holidays and Observances: Major Islamic holidays like Eid al-Fitr and Eid al-Adha, along with national holidays such as Independence Day, significantly affect business operations. Regional observances also impact business activities, and businesses must respect these cultural and religious significances in their scheduling and operations.

Frequently Asked Questions for Employer of Record services in Pakistan

What options are available for hiring a worker in Pakistan?

When hiring a worker in Pakistan, employers have several options to consider, each with its own set of benefits and challenges. Here are the primary methods:

  1. Direct Hiring:

    • Local Entity Establishment: This involves setting up a legal entity in Pakistan, such as a branch office, subsidiary, or representative office. This option allows full control over the hiring process and employee management but requires significant investment, time, and understanding of local regulations.
    • Compliance: Employers must comply with Pakistani labor laws, including employment contracts, minimum wage requirements, social security contributions, and tax obligations.
  2. Freelancers and Independent Contractors:

    • Flexibility: Hiring freelancers or independent contractors can provide flexibility and cost savings, as there are no long-term commitments or benefits to manage.
    • Risk: However, misclassification risks exist, and contractors may not be as integrated or loyal as full-time employees. Additionally, managing compliance with local tax laws and ensuring proper contracts are in place is crucial.
  3. Outsourcing to Local Agencies:

    • Staffing Agencies: Employers can work with local staffing agencies to hire temporary or permanent employees. These agencies handle recruitment, payroll, and compliance, reducing the administrative burden on the employer.
    • Cost: This option can be more expensive due to agency fees, but it provides a streamlined hiring process and local expertise.
  4. Employer of Record (EOR) Services:

    • Rivermate and Similar Providers: Using an EOR like Rivermate allows companies to hire employees in Pakistan without establishing a local entity. The EOR acts as the legal employer, handling all HR, payroll, tax, and compliance matters.
    • Benefits:
      • Speed and Efficiency: Rapidly onboard employees without the need to navigate complex local regulations.
      • Compliance Assurance: EORs ensure adherence to Pakistani labor laws, reducing the risk of legal issues.
      • Cost-Effective: Avoid the costs associated with setting up and maintaining a local entity.
      • Focus on Core Business: Allows companies to focus on their core operations while the EOR manages administrative tasks.
      • Scalability: Easily scale the workforce up or down based on business needs without long-term commitments.

In summary, while direct hiring and working with local agencies are viable options, using an Employer of Record like Rivermate offers significant advantages in terms of compliance, cost savings, and operational efficiency when hiring workers in Pakistan.

Who handles the filing and payment of employees' taxes and social insurance contributions when using an Employer of Record in Pakistan?

When using an Employer of Record (EOR) in Pakistan, the EOR handles the filing and payment of employees' taxes and social insurance contributions. This includes the calculation, withholding, and remittance of income tax to the Federal Board of Revenue (FBR) as well as contributions to the Employees' Old-Age Benefits Institution (EOBI) and other relevant social security schemes. The EOR ensures compliance with local tax laws and regulations, thereby relieving the client company of the administrative burden and complexities associated with payroll and tax compliance in Pakistan.

What is HR compliance in Pakistan, and why is it important?

HR compliance in Pakistan refers to the adherence to the country's labor laws, regulations, and standards that govern employment practices. This includes a wide range of legal requirements related to hiring, wages, working hours, employee benefits, workplace safety, termination, and dispute resolution. Key legislation in Pakistan includes the Industrial Relations Act, the Shops and Establishments Ordinance, the Factories Act, and various provincial labor laws.

Importance of HR Compliance in Pakistan:

  1. Legal Protection: Compliance ensures that the company operates within the legal framework set by the Pakistani government. This helps protect the organization from legal disputes, fines, and penalties that can arise from non-compliance.

  2. Employee Rights: Adhering to HR compliance ensures that employees' rights are protected. This includes fair wages, safe working conditions, and appropriate working hours. Protecting these rights helps in maintaining a motivated and productive workforce.

  3. Reputation Management: Companies that comply with HR laws are seen as responsible and ethical employers. This enhances the company's reputation, making it more attractive to potential employees, customers, and investors.

  4. Operational Efficiency: Compliance helps in establishing clear policies and procedures, which can lead to more efficient and effective management of human resources. This can reduce misunderstandings and conflicts within the workplace.

  5. Risk Management: By ensuring compliance, companies can mitigate risks associated with labor disputes, workplace accidents, and other HR-related issues. This proactive approach can save the company from costly litigation and compensation claims.

  6. Employee Retention: A compliant workplace fosters a positive work environment, which can lead to higher employee satisfaction and retention rates. Employees are more likely to stay with a company that respects their rights and provides a safe and fair working environment.

  7. Global Standards: For multinational companies operating in Pakistan, HR compliance ensures that the local operations align with global standards and practices. This is crucial for maintaining consistency and integrity across different regions.

Using an Employer of Record (EOR) service like Rivermate can significantly simplify HR compliance in Pakistan. An EOR takes on the responsibility of ensuring that all employment practices adhere to local laws and regulations. This includes managing payroll, taxes, benefits, and other HR functions, allowing companies to focus on their core business activities without worrying about compliance issues.

What is the timeline for setting up a company in Pakistan?

Setting up a company in Pakistan involves several steps and can take a variable amount of time depending on the efficiency of the processes and the preparedness of the applicant. Here is a detailed timeline for setting up a company in Pakistan:

  1. Name Reservation (1-2 days):

    • The first step is to reserve a company name with the Securities and Exchange Commission of Pakistan (SECP). This can be done online through the SECP's eServices portal. The approval typically takes 1-2 days.
  2. Preparation of Documents (2-3 days):

    • Prepare the necessary incorporation documents, including the Memorandum and Articles of Association, Form 1 (Declaration of Compliance), Form 21 (Notice of Situation of Registered Office), and Form 29 (Particulars of Directors, Secretary, etc.).
  3. Submission of Incorporation Documents (1-2 days):

    • Submit the incorporation documents to the SECP. This can also be done online. The SECP will review the documents and, if everything is in order, will issue a Certificate of Incorporation. This process usually takes 1-2 days.
  4. Digital Signature and NTN Registration (1-2 days):

    • Obtain a digital signature from the National Institutional Facilitation Technologies (NIFT) and apply for a National Tax Number (NTN) from the Federal Board of Revenue (FBR). This can take an additional 1-2 days.
  5. Registration with the Excise and Taxation Department (1-2 days):

    • Register the company with the local Excise and Taxation Department to obtain a Professional Tax Registration Certificate. This step typically takes 1-2 days.
  6. Social Security and EOBI Registration (2-3 days):

    • Register with the Employees Old-Age Benefits Institution (EOBI) and the relevant Social Security Institution. This process can take 2-3 days.
  7. Opening a Bank Account (1-2 days):

    • Open a corporate bank account in the name of the company. This usually takes 1-2 days, depending on the bank's requirements and processes.
  8. Final Steps and Operational Readiness (1-2 days):

    • Complete any remaining formalities, such as obtaining any necessary business licenses or permits, and ensure the company is operationally ready. This can take an additional 1-2 days.

In total, the process of setting up a company in Pakistan can take approximately 10-16 days, assuming there are no significant delays or complications. However, this timeline can vary based on the specific circumstances and the efficiency of the involved authorities.

What are the costs associated with employing someone in Pakistan?

Employing someone in Pakistan involves several costs that employers need to consider. These costs can be broadly categorized into direct compensation, statutory benefits, and administrative expenses. Here is a detailed breakdown:

  1. Direct Compensation:

    • Basic Salary: This is the primary component of an employee's compensation. The amount varies based on the role, industry, and experience of the employee.
    • Allowances: These may include housing, transportation, medical, and other allowances as per company policy or industry standards.
  2. Statutory Benefits:

    • Social Security Contributions: Employers are required to contribute to the Employees' Old-Age Benefits Institution (EOBI) and the Social Security Institution. The EOBI contribution is typically 5% of the minimum wage, while the Social Security contribution varies by province but is generally around 6% of the employee's salary.
    • Provident Fund: Some employers offer a provident fund, which is a retirement benefit. Contributions are usually a percentage of the employee's salary, often matched by the employer.
    • Gratuity: This is a lump sum payment made to employees upon termination or retirement, calculated based on the length of service and last drawn salary. It is typically equivalent to one month's salary for each year of service.
    • Health Insurance: While not mandatory, many employers provide health insurance coverage for their employees, which can be a significant cost.
  3. Administrative Expenses:

    • Recruitment Costs: These include expenses related to advertising job openings, conducting interviews, and onboarding new employees.
    • Training and Development: Employers often invest in training programs to enhance the skills of their workforce.
    • Compliance Costs: Ensuring compliance with local labor laws and regulations can incur legal and administrative costs. This includes maintaining proper documentation, filing necessary reports, and possibly engaging legal counsel.
    • Payroll Processing: Managing payroll, including calculating salaries, deductions, and disbursements, can involve additional administrative costs, especially if outsourced to a payroll service provider.
  4. Other Benefits:

    • Paid Leave: Employers must provide paid leave, including annual leave, sick leave, and public holidays, as mandated by Pakistani labor laws.
    • Bonuses and Incentives: Depending on company policy and industry practices, employers may offer performance-based bonuses and other incentives.

Using an Employer of Record (EOR) like Rivermate can help manage these costs effectively. An EOR handles all aspects of employment, including payroll, benefits administration, compliance, and more, allowing businesses to focus on their core operations while ensuring they meet all legal requirements in Pakistan. This can be particularly beneficial for companies looking to expand into Pakistan without establishing a legal entity, as it simplifies the complexities associated with local employment laws and reduces administrative burdens.

Do employees receive all their rights and benefits when employed through an Employer of Record in Pakistan?

Yes, employees in Pakistan can receive all their rights and benefits when employed through an Employer of Record (EOR) like Rivermate. An EOR ensures compliance with local labor laws and regulations, which is crucial in a country like Pakistan where labor laws can be complex and vary by region. Here are some key points on how an EOR ensures employees receive their rights and benefits:

  1. Compliance with Labor Laws: An EOR like Rivermate ensures that employment contracts comply with Pakistani labor laws, including the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, and the Shops and Establishments Ordinance, 1969. This includes adherence to regulations regarding working hours, overtime, and termination procedures.

  2. Wages and Salaries: The EOR ensures that employees are paid in accordance with the Minimum Wages Ordinance, 1961. They handle payroll processing, ensuring timely and accurate payment of salaries, including any statutory bonuses or allowances.

  3. Social Security and Benefits: An EOR manages contributions to the Employees' Old-Age Benefits Institution (EOBI) and the Workers' Welfare Fund (WWF). They also ensure compliance with the Employees' Social Security Ordinance, 1965, which provides medical benefits and pensions.

  4. Leave Entitlements: Employees are entitled to various types of leave, including annual leave, sick leave, and maternity leave, as per the West Pakistan Shops and Establishments Ordinance, 1969. An EOR ensures these entitlements are granted and managed properly.

  5. Health and Safety: Compliance with the Factories Act, 1934, and other relevant health and safety regulations is ensured by the EOR. This includes providing a safe working environment and necessary safety training.

  6. Dispute Resolution: An EOR can assist in resolving any employment disputes in accordance with the Industrial Relations Act, 2012. This ensures that employees have a clear channel for addressing grievances.

  7. Tax Compliance: The EOR handles all aspects of tax compliance, including income tax deductions at source as per the Income Tax Ordinance, 2001. This ensures that employees' tax obligations are met without any legal complications.

By partnering with an EOR like Rivermate, employers can ensure that their employees in Pakistan receive all their statutory rights and benefits, while also mitigating the risks associated with non-compliance with local labor laws.

Is it possible to hire independent contractors in Pakistan?

Yes, it is possible to hire independent contractors in Pakistan. However, there are several important considerations to keep in mind to ensure compliance with local laws and regulations.

  1. Legal Framework: Independent contractors in Pakistan are governed by the Contract Act of 1872. This act outlines the general principles of contract law, including the formation, execution, and enforcement of contracts. It is crucial to draft a clear and comprehensive contract that specifies the terms of engagement, scope of work, payment terms, and termination conditions.

  2. Distinction Between Employees and Contractors: It is important to distinguish between employees and independent contractors to avoid misclassification issues. Employees are entitled to benefits such as social security, health insurance, and other statutory benefits under Pakistani labor laws, while independent contractors are not. Misclassification can lead to legal and financial penalties.

  3. Taxation: Independent contractors are responsible for their own tax filings and payments. They must register with the Federal Board of Revenue (FBR) and obtain a National Tax Number (NTN). Contractors are required to pay income tax on their earnings, and businesses must ensure that appropriate withholding tax is deducted at source.

  4. Intellectual Property: When hiring independent contractors, it is essential to address intellectual property (IP) rights in the contract. Clearly specify the ownership of any work product or inventions created during the engagement to avoid disputes over IP rights.

  5. Dispute Resolution: Include a dispute resolution clause in the contract to outline the process for resolving any disagreements that may arise. This can include mediation, arbitration, or litigation, depending on the preferences of both parties.

  6. Compliance with Local Laws: Ensure that the engagement complies with all relevant local laws and regulations, including those related to labor, taxation, and business operations. This may require consulting with legal experts or using services like an Employer of Record (EOR) to navigate the complexities of local compliance.

Using an Employer of Record (EOR) like Rivermate can simplify the process of hiring independent contractors in Pakistan. An EOR can handle the administrative and legal aspects of the engagement, including contract management, tax compliance, and payroll processing. This allows businesses to focus on their core operations while ensuring that they remain compliant with local laws and regulations.

What legal responsibilities does a company have when using an Employer of Record service like Rivermate in Pakistan?

When a company uses an Employer of Record (EOR) service like Rivermate in Pakistan, several legal responsibilities are effectively managed by the EOR, simplifying compliance for the company. Here are the key legal responsibilities and how they are handled:

  1. Employment Contracts:

    • EOR Responsibility: The EOR drafts and manages employment contracts in compliance with Pakistani labor laws. This includes ensuring that contracts are in Urdu or English, as required, and contain all necessary legal provisions.
    • Company Responsibility: The company must provide the EOR with the necessary details about the job role, compensation, and any specific terms they want included.
  2. Payroll and Tax Compliance:

    • EOR Responsibility: The EOR handles payroll processing, ensuring that all salaries are paid accurately and on time. They also manage the calculation and withholding of income tax, social security contributions, and other statutory deductions.
    • Company Responsibility: The company needs to fund the payroll and provide any necessary information regarding employee compensation and benefits.
  3. Social Security and Benefits:

    • EOR Responsibility: The EOR ensures compliance with Pakistan’s social security laws, including contributions to the Employees' Old-Age Benefits Institution (EOBI) and other mandatory benefits.
    • Company Responsibility: The company must inform the EOR of any additional benefits they wish to offer beyond the statutory requirements.
  4. Work Permits and Visas:

    • EOR Responsibility: For foreign employees, the EOR assists with obtaining the necessary work permits and visas, ensuring compliance with immigration laws.
    • Company Responsibility: The company should provide the EOR with all required documentation and support for the visa application process.
  5. Labor Law Compliance:

    • EOR Responsibility: The EOR ensures that all employment practices comply with Pakistani labor laws, including working hours, overtime, leave entitlements, and termination procedures.
    • Company Responsibility: The company must communicate any specific policies or practices they wish to implement, ensuring they align with local laws.
  6. Health and Safety Regulations:

    • EOR Responsibility: The EOR advises on compliance with health and safety regulations, ensuring that the workplace meets the required standards.
    • Company Responsibility: The company must maintain a safe working environment and implement any recommended health and safety measures.
  7. Employee Termination and Severance:

    • EOR Responsibility: The EOR manages the termination process, ensuring it complies with Pakistani labor laws, including notice periods and severance pay.
    • Company Responsibility: The company must inform the EOR of the reasons for termination and provide any necessary documentation.
  8. Record Keeping and Reporting:

    • EOR Responsibility: The EOR maintains accurate records of employment, payroll, and compliance-related documents, and handles any required reporting to government authorities.
    • Company Responsibility: The company should ensure that all relevant information is provided to the EOR in a timely manner.

By using an EOR like Rivermate in Pakistan, companies can significantly reduce their administrative burden and ensure full compliance with local laws, allowing them to focus on their core business activities.

How does Rivermate, as an Employer of Record in Pakistan, ensure HR compliance?

Rivermate, as an Employer of Record (EOR) in Pakistan, ensures HR compliance through a comprehensive approach that addresses the complexities of local labor laws, tax regulations, and employment standards. Here are the key ways Rivermate ensures HR compliance in Pakistan:

  1. Understanding Local Labor Laws: Rivermate has in-depth knowledge of Pakistan's labor laws, including the Industrial Relations Act, the Shops and Establishments Ordinance, and the Factories Act. This expertise ensures that all employment contracts, workplace policies, and HR practices are fully compliant with local regulations.

  2. Employment Contracts: Rivermate drafts and manages employment contracts that adhere to Pakistani labor laws. These contracts cover essential aspects such as job roles, compensation, benefits, working hours, and termination conditions, ensuring that both the employer and employee are protected under the law.

  3. Payroll Management: Rivermate handles payroll processing in compliance with Pakistani tax laws and social security regulations. This includes accurate calculation of salaries, deductions for income tax, and contributions to the Employees' Old-Age Benefits Institution (EOBI) and other mandatory benefits.

  4. Tax Compliance: Rivermate ensures that all tax obligations are met, including withholding and remitting income tax on behalf of employees. They stay updated with changes in tax legislation to ensure ongoing compliance and avoid any legal penalties.

  5. Benefits Administration: Rivermate manages statutory benefits such as EOBI, Workers' Welfare Fund, and other mandatory contributions. They also facilitate additional benefits like health insurance and provident funds, ensuring that all benefits are administered in line with local requirements.

  6. Employee Onboarding and Offboarding: Rivermate oversees the entire employee lifecycle, from onboarding to offboarding. This includes ensuring that all necessary documentation is completed, maintaining employee records, and managing the termination process in compliance with Pakistani labor laws.

  7. Workplace Policies and Procedures: Rivermate helps implement workplace policies that comply with local regulations, including anti-discrimination policies, health and safety standards, and grievance procedures. This ensures a fair and compliant work environment.

  8. Legal Updates and Advisory: Rivermate continuously monitors changes in Pakistani labor laws and regulations. They provide timely updates and advisory services to ensure that their clients remain compliant with any new legal requirements.

  9. Dispute Resolution: In the event of employment disputes, Rivermate provides support and guidance to resolve issues in accordance with Pakistani labor laws. This includes mediation, legal representation, and ensuring that any disciplinary actions are legally compliant.

  10. Data Protection and Privacy: Rivermate ensures that employee data is handled in compliance with Pakistan's data protection laws. They implement robust data security measures to protect sensitive information and maintain confidentiality.

By leveraging Rivermate's expertise as an Employer of Record in Pakistan, companies can navigate the complexities of HR compliance with confidence, allowing them to focus on their core business activities while ensuring that all legal and regulatory requirements are met.

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