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EOBI, SESSi, labor laws, contract workers, remote hiring
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When you hire your first employee in Pakistan, you take on five compliance obligations as an employer:
Federal → required for all establishments with 5+ employees (or any factory). Employer pays 5% of minimum wage (Federal), employee pays 1%.
Provincial — required for establishments with 5+ employees (threshold varies). Covers medical, disability, maternity. Rates: 6%–7% of wages.
Federal (FBR) — deduct tax from salaries monthly under Section 149 of the Income Tax Ordinance 2001. File withholding statements monthly.
Federal/provincial — minimum wage, working hours, leave, notice periods. The Industrial Relations Act 2012 and provincial shop acts apply.
EOBI is a federal mandatory social insurance program established under the Employees' Old-Age Benefits Act, 1976. It provides retirement, disability, and survivor benefits to employees in the private sector.
| Benefit | Description | Eligibility |
|---|---|---|
| Old-Age Pension | Monthly pension after retirement at age 60 (men) / 55 (women) | 15 years of insurable employment (minimum 1,950 contribution days) |
| Survivor Pension | Monthly pension to widow/widower or children if employee dies | Employee was insured at time of death (min. 3,600 contribution days for full; 1,950 for reduced) |
| Invalidity Pension | Monthly pension if employee becomes permanently disabled | Invalidity arose during insurable employment; min. 1,950 contribution days (1,500 if under 40) |
| Old-Age Grant | Lump-sum payment if employee doesn't qualify for pension | Superannuation with < 15 years contributions but — 2 years |
Source: eobi.gov.pk — Employees' Old-Age Benefits Act, 1976
| Item | Rate | Basis |
|---|---|---|
| Employer Contribution | class="fw-bold text-success">5% | 5% of minimum wage (PKR 37,000/month (Federal minimum wage — FBR Notification) as of 2025) |
| Employee Contribution | 1% | 1% of minimum wage (Federal EOBI employee) |
| Total | class="fw-bold">6% | PKR 2,220/month per employee (Federal EOBI) (on PKR 37,000 — EOBI Act & Rules) |
| Filing Deadline | 15th of following month | Monthly contribution through prescribed form |
Minimum wage: Federal Government Notification SRO 153(I)/2025. EOBI rates: Employees' Old-Age Benefits Act, 1976 (Section 4 & 5).
Apply online at eobi.gov.pk or visit the nearest EOBI regional office. Required: CNIC of proprietor/partners/directors, NTN, business registration certificate, premises lease/ownership proof.
EOBI issues a unique 7-digit institution number. This is used on all future filings.
Sindh Employees' Social Security Institution (SESSI) — sessi.gov.pk
| Item | Detail |
|---|---|
| Governing Law | Sindh Employees' Social Security Act, 1965 |
| Employer Rate | 6% employer + 1% employee (total 7%) |
| Wage Ceiling | PKR 37,000/month (Federal minimum wage — FBR Notification) (minimum wage); benefits limited for wages above this ceiling |
| Applicability Threshold | 5+ employees in an industrial/commercial establishment |
| Benefits | Free medical treatment (SESSI hospitals/panel), sickness benefits (up to 121 days), maternity benefit (12 weeks), disablement pension, death grant, survivors' pension |
| Registration | Apply at sessi.gov.pk or nearest SESSI office; required documents: CNIC, NTN, business registration, employee list with salary details |
| Filing | Monthly contribution by 15th of following month |
Source: sessi.gov.pk, Sindh Employees' Social Security Act, 1965
Punjab Employees' Social Security Institution (PESSI) — PESSI — Rules & Acts
| Item | Detail |
|---|---|
| Governing Law | Punjab Employees' Social Security Ordinance, 1965 |
| Employer Rate | 7% of wages (employer only) |
| Wage Ceiling | PKR 37,000/month (Notification) |
| Applicability Threshold | 5+ employees |
| Benefits | Medical facilities at PESSI hospitals, sickness benefit, maternity benefit (12 weeks + additional 4 weeks for complications), disablement benefit, death grant, survivors' pension, old-age pension |
| Registration | Apply at PESSI — Rules & Acts or nearest PESSI regional office |
| Filing | Monthly contribution by 15th of following month |
Source: PESSI — Rules & Acts, Punjab Employees' Social Security Ordinance, 1965
Employees' Social Security Institution, Khyber Pakhtunkhwa (ESSK (KP))
| Item | Detail |
|---|---|
| Governing Law | KP Employees' Social Security Act |
| Employer Rate | 6% of wages (employer only) |
| Wage Ceiling | PKR 37,000/month (Notification) |
| Applicability Threshold | 5+ employees |
| Benefits | Medical treatment, sickness benefit, maternity benefit, disablement pension, death grant |
| Registration | Contact ESSK (KP) office in Peshawar or regional centers |
Balochistan Employees' Social Security Association (BESSA)
| Item | Detail |
|---|---|
| Governing Law | Balochistan Employees' Social Security Ordinance |
| Employer Rate | 6% of wages (employer only) |
| Wage Ceiling | PKR 37,000/month (Notification) |
| Applicability Threshold | 5+ employees |
| Benefits | Medical treatment, sickness benefit, maternity benefit, disablement pension, death grant |
Under the Income Tax Ordinance, 2001, every employer is required to deduct tax at source from employee salaries before payment. This is not an additional cost to the employer — it's the employee's tax deducted at source. But failure to deduct makes the employer liable.
Every employer paying salary exceeding PKR 50,000/month must deduct income tax from the employee's salary based on the applicable tax slab rates.
| Annual Taxable Income (PKR) | Tax Rate |
|---|---|
| 0–600,000 | 0% |
| 600,001–1,200,000 | 5% of amount exceeding 600,000 |
| 1,200,001–2,200,000 | 30,000 + 15% of amount exceeding 1,200,000 |
| 2,200,001–3,200,000 | 180,000 + 25% of amount exceeding 2,200,000 |
| 3,200,001–4,100,000 | 430,000 + 30% of amount exceeding 3,200,000 |
| Above 4,100,000 | 700,000 + 35% of amount exceeding 4,100,000 |
Source: fbr.gov.pk — Part I of First Schedule, Income Tax Ordinance 2001 (as amended by Finance Act 2024).
| Filing | Due Date | Form/Method |
|---|---|---|
| Monthly Withholding Statement | 15th of following month | Online via IRIS (FBR portal) |
| Annual Withholding Statement | August 31 (for TY ending June 30) | IRIS — Form 101 for each employee |
| Deposit Tax | By 15th of following month | Bank deposit via CPR (Computerized Payment Receipt) |
If an employer fails to deduct tax from salary (or deducts less than the applicable amount), the employer becomes liable to pay a minimum tax equal to the amount that should have been deducted, plus a penalty under Section 165.
Under Section 63 of the Income Tax Ordinance 2001, employer contributions to an approved pension fund (registered with SECP under the Voluntary Pension System Rules, 2005) are deductible from the employer's taxable income.
Source: Income Tax Ordinance 2001, fbr.gov.pk, SECP VPS Rules 2005
Labor laws in Pakistan are primarily governed by the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 (for non-industrial workers) and the Factories Act, 1934 (for factory workers). After the 18th Amendment, provinces have enacted their own versions.
For IT companies, the Standing Orders Ordinance is the primary reference (office-based workers). Provincial versions: Sindh (SCEFO 2015), Punjab (PICEFO 2024), KP (KPICEFO 2024).
| Item | Detail |
|---|---|
| Federal Minimum Wage | class="fw-bold text-success">PKR 37,000/month (Federal minimum wage — FBR Notification) (effective Jan 2025) |
| Notification | SRO 153(I)/2025 |
| Per Day (26 days) | PKR 1,423 |
| Per Hour (8 hrs) | PKR 178 |
| Applies To | All establishments (including IT companies) |
Source: labour.gov.pk — Federal Government Notification SRO 153(I)/2025
| Item | Standard | Exception |
|---|---|---|
| Weekly Hours | 48 hours/week | Maximum 54 hours/week (with overtime) |
| Daily Hours | 8 hours/day (6 days) | 9 hours/day (5-day week → increasingly common in IT) |
| Rest Day | 1 day per week (usually Sunday) | Compensatory off if work on rest day |
| Overtime Rate | Double rate | Max 12 hours overtime per week |
| Rest Interval | 1 hour break after 6 hours | ✓ |
Source: Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 — Section 8, 9, 10
| Leave Type | Entitlement | Conditions |
|---|---|---|
| Casual Leave | 10 days/year | Not more than 3 at a time; not encashable |
| Earned / Annual Leave | 14 days/year (increases with tenure) | After 12 months continuous service; encashable on termination |
| Sick Leave | 10 days/year | With medical certificate; extends up to 16 days in some provinces |
| Maternity Leave | 90 days (12 weeks) | Mandatory under Maternity Benefit Ordinance, 1958 (federal); 180 days in Sindh under Sindh Maternity Benefit Act 2018. Full pay. Cannot be fired during pregnancy/maternity. |
| Paternity Leave | 7 days | Varies by province (federal: 7 days) |
| Hajj Leave | Once during employment | Maximum 30 days; after 3 years service |
Source: Standing Orders Ordinance 1968 (Sections 41-47), labour.gov.pk
| Scenario | Notice Period | Severance / Gratuity |
|---|---|---|
| Employee Resigns | 1 month (or per contract) | Gratuity if 5+ years service |
| Employer Terminates (no cause) | 1 month written notice | Gratuity if 5+ years service |
| Misconduct | Immediate (with inquiry) | No gratuity; inquiry required under Section 15 |
| Redundancy / Layoff | 1 month notice | Full severance per provincial labor law |
If an employee is terminated without proper notice or valid cause, they can file a complaint with the Labour Court within 30 days. Remedies include reinstatement, back wages, or compensation.
| Feature | Permanent Employee | Contract Employee |
|---|---|---|
| EOBI | class="text-success">Required | class="text-success">Required (if contract 3+ months) |
| Social Security | class="text-success">Required | class="text-warning">Required if contract 6+ months (varies) |
| Gratuity | class="text-success">After 5 years | class="text-danger">Generally not applicable |
| Notice Period | 1 month | Per contract terms |
| Leave Entitlement | class="text-success">Full (casual, earned, sick, maternity) | class="text-warning">As per contract; provincial law may apply |
| Termination Protection | class="text-success">Full (Labour Court recourse) | class="text-warning">Limited; contract expiry = automatic end |
| Income Tax WHT | class="text-success">Section 149 applies | class="text-success">Section 149 applies (salary income) |
Professional tax is a provincial tax on salaried individuals, collected by the employer through deduction from salary. It's typically minimal.
| Province | Rate | Notes |
|---|---|---|
| Sindh | PKR 200/month (max) | Sindh Workers' Welfare Fund — often collected by employer; rates vary by salary slab |
| Punjab | PKR 200/month (max) | Punjab Labour Welfare Fund → deducted from salary |
| KP | PKR 200/month (max) | Similar structure |
| Balochistan | PKR 200/month (max) | Minimal rates |
Note: Professional tax rates and slabs vary and are subject to change. Verify with your provincial labor department or revenue authority. This is typically a small amount (PKR 50–200/month) and is deducted from employee salary ✓ not an employer cost.
Calculate your true per-employee cost including EOBI, social security, and employer-side contributions.
Disclaimer: Federal EOBI and labor law provisions are verified. Provincial social security rates, professional tax, and some pension provisions are based on training knowledge and should be verified with the relevant provincial authority or a licensed professional.
Social Security (Provincial) Partially VerifiedSOURCE VERIFIED
After the 18th Amendment (2010), social security became a provincial matter. Each province runs its own social security institution covering medical benefits, disability, maternity, and death benefits for industrial/commercial workers.
Basis: Pakistan Constitution, 18th Amendment — Concurrent Legislative List item 16 (social security) moved to Federal Legislative List Part II.