Employment Laws in Pakistan

Contractual Agreements

Written contracts offer greater clarity and protection for both employers and employees. Therefore, contract employment law in Pakistan ensures every employer issues a formal appointment letter containing at least these key elements:

• Names of both parties (employer and employee)
• Employment start date
• Contract duration (indefinite or fixed-term with start and end dates)
• Job title or work description
• Place of work
• Wages
• Working hours and days
• The notice period for termination

The employees' data gathered during these contractual agreements are safeguarded through data processing agreements (DPA). 

Types of employment contracts in Pakistan

The employment laws in Pakistan categorize employment contracts in various forms:

• Permanent: Stable, long-term employment with full benefits.
• Probationary: Initial period to assess job suitability before becoming permanent.
• Badli (Alternate): Temporary replacement for a permanently absent employee.
• Temporary: Hired for specific projects lasting less than nine months.
• Apprentices: Undergoing formal training through an apprenticeship program.
• Contract Workers: Employed for a particular period and paid based on units produced, not the time spent.

Obligations and rights for both parties

Pakistani employment law outlines a balanced framework so that you avoid common global HR compliance mistakes. 

Further, Pakistan’s labor law upholds 30 International Labor Organization (ILO) conventions, obliging employers to ensure fundamental employee rights per international standards. Also, hiring fixed-term contract employees for permanent tasks is prohibited. Such contracts, including renewals, can be for a maximum of nine months.

Working Hours and Overtime

The employment laws in Pakistan state the rules regarding working hours and overtime. Let us take a look:

Regular working hours

• As per labor law in Pakistan, the weekly working limit is 48 hours, six days a week. 
• Maximum working hours are 9 hours a day and 48 hours a week, without overtime payment. 
• As per section 7(4), female employees can only work between 9 AM to 7 PM. 

Overtime regulations and compensation

• The Pakistan labor law prescribes overtime compensation at double the pay rate for eligible employees. 
• Employees must ensure their overtime hours do not exceed 50 hours within a quarter.

Minimum Wage and Compensation

The labor law in Pakistan requires you to pay employees above a threshold to ensure dignified compensation. 

The minimum wage rate in 2024

• The minimum wage in Pakistan currently is PKR 32,000 per month (approx. $114). 

Factors Affecting Wage Determination

Pakistan's minimum wage is set based on the cost of living, inflation, and broad economic conditions, but political pressures, labor market dynamics, and data limitations also play a role.

The lack of clear criteria and reliable data affects fair assessment and inconsistent minimum wage across sectors and regions. More so for remote employees who may be outside the scope of employment laws in Pakistan. 

In such cases, we encourage you to learn more about rightly determining the compensation for remote employees. 

Employee Benefits and Social Security

The employment laws in Pakistan prescribe several benefits for employees, categorized as follows:

Statutory benefits

• You must contribute to a provident fund (employee savings scheme) or gratuity (one-time payment) for each completed year of service and retirement benefits scheme. 

• You may provide group life insurance coverage for employees, with a minimum death benefit of PKR 500,000.
• Further, you cannot restrict employees’ right to form and join trade unions and bargain collectively for better wages and working conditions. Usually, employees elect their Collective Bargaining Agent (CBA) through a secret ballot. 

Learn more about managing compensation and benefits for remote employees. 

Social Security contributions and requirements

• The employment laws in Pakistan mandate all private sector offices with more than nine employees to legally register with the Employees Old-Age Benefits Institution (EOBI).
• You must include mandatory deductions like EOBI in employee paychecks. 
• EOBI contributions are shared: 5% from employers and 1% from employees. However, social security contributions may differ based on provincial jurisdiction. 

Vacations and Paid Time Off

Regular time off promotes a healthy work culture, and the employment laws in Pakistan approve of it. You can extend the following paid and unpaid leave benefits and entitlements per the law: 

Annual leave entitlement

• You must offer 14 consecutive days of annual leave to eligible employees. However, the labor laws of Pakistan allow you to include weekly or public holidays coinciding with the paid annual leave period. 
• You may extend paid annual leave entitlements to those over 12 months of service. 
• Employees can carry forward these leaves for up to 12 months. 

Public holidays and special leaves 

• There may be about 15 public holidays per year categorized into

• Paternity leave: Male employees are entitled to 30 days of paternity leave in Pakistan. However, they can avail of the leave a maximum of three times throughout their entire service with the company. 
• Sick leave: You must grant eight days of paid sick leave. These leaves can not be carried forward or cashed. 

• Casual leave: You may also extend paid leave of ten days for contingent situations. These leaves can not be carried forward. 

• Festival leave: Employees can take a maximum of 10 days of leave as a festival holiday 
• Carry forward of leave: Employees can carry a maximum of 30 days of leave to next year. They can also get their accumulated leaves cashed at the end of the year.

Termination and Severance

Employment termination is usually a consequence of employer dismissal, employee resignation, or end of the contract term. The employment laws in Pakistan have specified provisions to safeguard employers and employees from legal obligation. Let’s discuss it further.  

Probation

• Employees must serve at least three months as a probation period. 
• Depending on the employers, the probation period can also be six months.
• Employees who resign during probation must serve 1-15 days as a notice period. 

Grounds for termination

Notice period and severance pay 

• Employees are required to serve 30-60 days as notice period.  
• The provincial labor laws of Pakistan mandate you to offer severance pay or gratuity, equivalent to 30 days of wages for every year of service (including months exceeding six). You can opt for a provident fund in place of the gratuity.

Discrimination and Equal Opportunity

Pakistan's Constitution, via Article 25 and Article 38, aims for equality for all citizens, regardless of background. 

The employment laws in Pakistan, including The Employment Discrimination Act of 2010, The Protection Against Harassment of Women at Workplace Act of 2010, and The Sindh Terms of Employment (Standing Orders) Ordinance of 2016, uphold these rights. 

Prohibitions against workplace discrimination

Therefore, we recommend letting the experts handle compliance management to labor laws so that you avoid misclassification risks and expensive fines and safeguard employee data.  

Health and Safety Regulations

The employment laws in Pakistan mandate employers to do everything they can (within reason) to keep you healthy and safe at work. You need to:

• Provide a safe workplace and inform employees about potential risks and safety measures
• Give proper training, instructions, and supervision in employees’ native language to work safely.
• Comply with all relevant OHS regulations and provide additional facilities or meet requirements as prescribed.

Stay Compliant with Skuad

From contractual obligations to data processing agreements, ensuring compliance with employment laws in Pakistan requires closer adherence to evolving regulations.

This is where Skuad steps in. 

With our Employer of Record services, we help organizations like yours simplify building and managing remote teams in Pakistan and beyond. Here's how:

• Simplified Onboarding & Compliance: Skuad handles local payroll, taxes, benefits, and compliance, so you can focus on finding and hiring top talent.

• Automatic Legal Updates: Ensure your employment contracts and data handling practices meet the latest Pakistan labor law requirements.

• Seamless Global Expansion: Skuad provides a fully compliant and secure solution for managing and paying your team in Pakistan – and over 160 other countries.

With Skuad, you can confidently hire in Pakistan while ensuring compliance and a positive experience for your entire team.

Book a demo today with Skuad today.

FAQs

Q1. Does Pakistan have labor laws?

A1. Yes, Pakistan does have labor laws at the federal and provincial levels. 

The Factories Act, of 1934, and the Shops and Establishments Ordinance, of 1969 form the core of Pakistan labor law. These acts cover many aspects of employment, including working hours, leave entitlements, wages, and safety standards.

In addition to the federal laws, some provinces have specific labor laws that may apply in certain situations. Additionally, the ratification of ILO conventions reflects Pakistan's commitment to upholding international labor standards.

Q2. What is the employment contract law in Pakistan?

A2. The employment contract law in Pakistan emphasizes the requirement for written contracts and employee rights to negotiate better terms. It also mentions the existence of unwritten contracts in certain sectors and highlights the importance of data privacy through DPAs.

Q3. Is there a minimum wage law in Pakistan?

A3. Pakistan has provincial labor laws to determine the minimum wage for unskilled workers. As of July 2023, the minimum wage threshold is PKR 32,000 per month (approx. $114). Naturally, the minimum wages for skilled workers may be higher.

Q4. What are the employee benefits in Pakistan?

A4. Some of the key statutory benefits per labor law in Pakistan include employer contributions for retirement, disability, and death benefits, gratuity, and various paid leave schemes. Employers are encouraged to extend discretionary benefits like health insurance, travel allowance, training, and career development opportunities.