Pakistan has a strategic advantage in Asia and is poised to become a major **, energy, and transportation market. Combined with its liberalization and privatization policies, Pakistan has created a favorable business environment that attracts foreign investment. International companies looking to expand their operations into Pakistan can take advantage of a low-income but skilled workforce. Global employers can develop a compliance strategy for hiring based on the detailed description of Pakistan's employment regulations below.
Pakistan's labor laws enforce 30 International Labour Organization (ILO) conventions to ensure that employers fulfill basic employee rights, such as:
Minimum legal wage (approximately $114 as of July 1, 2022).
Up to 14 days of annual leave.
Maternity leave in Pakistan varies between 180 and 90 days.
During Ramadan, Pakistan's labor laws stipulate that the working day should not exceed six hours.
This is about what Pakistan's employment laws are about to guide businesses and global companies to follow all the necessary labor regulations, including working hours, holidays, vacations, minimum wages, statutory employer contributions, payroll tax obligations, termination provisions, and employee data privacy.
Employment laws in Pakistan mainly regulate the employment conditions and working conditions of blue-collar employees. Pakistan's labor laws can affect the terms and conditions of employment contracts related to hiring white-collar employees.
Any organization, business establishment, industrial enterprise, and factory operating in Pakistan must comply with the following labor laws:
Employees' Old Age Benefits Act, 1976.
Provincial Employees' Social Security Regulations (PESS), 1965.
Industrial and Commercial Employment Act (Employees' Code), 1968.
Punjab Business Establishment Act (the Act), 1969.
Workers' Children (Education) Act, 1972.
Minimum Wage Act, 1961.
Payment of Wages Act, 1936.
Corporate Profits (Workers' Participation) Act, 1968.
The Factories Act of 1934.
Workers' Compensation Act, 1923.
West Pakistan Maternity Benefits Act, 1962.
Apprenticeship Act, 1962.
Persons with Disabilities (Employment and **) Act, 1981.
Workers' Welfare** Act (WWF Act), 1971.
Punjab Industrial Relations Act, 2010.
Industrial Relations Act, 2012.
Ultimately, the enforcement of Pakistan's labor laws depends on the labor departments of the provinces.
Pakistan's labor law stipulates that employers must enter into one of the following six types of employment contracts:
Permanent: The most common employment contract made after a probationary period.
Probationary employees: Provide space for employers and employees to try out and experiment.
Badris (Standby): Appointments to employees who are temporarily absent from positions where permanent or probationary employees are temporarily absent.
Temporary: Usually established when the working period is less than nine months.
Apprenticeship: A contract established for the training of employees.
Contract Workers: Primarily for remote and gig workers or when overtime compensation is not applicable.
Employment regulations in Pakistan require employers to mention the following information in any employment contract:
A full description of the job responsibilities.
Working hours, probationary periods, vacation programs, and other benefits.
Dismissal Termination terms or service transferability.
Salary details, payment schedules, and other relevant details.
Describe the non-disclosure agreement.
Pakistan's labor laws allow employers to extend their probationary period for three months. During this period, the employer can terminate the employment contract with advance notice. However, the employer must issue a written dismissal order to the employee stating the reason for the dismissal.
Any dispute related to the employment of blue-collar employees is resolved in the labor courts, while disputes of white-collar employees are resolved in the civil courts of the appropriate jurisdiction.
In the employment relationship in Pakistan, the rights and obligations of employees and employers are based on the following**::
Constitution of Pakistan, Islamic Republic of Pakistan, 1973.
Federal and provincial employment laws.
Judicial and administrative decisions.
Various regulations (as mentioned earlier) arose from the above-mentioned ** and formed the labor laws of Pakistan and the employment regulations of Pakistan.
Here, we discuss the important provisions of labor regulations in Pakistan's labor law.
Working hours
According to Pakistan's labor laws, the maximum number of working hours per week is 48 hours.
Working hours can be up to nine hours, including a one-hour lunch and prayer break.
During Ramadan, Pakistan's working time law stipulates that employers must reduce working hours to six hours per day.
Pakistan's labor laws require employers to provide rest periods:
1.Work for one hour of rest every six hours.
2.More than five hours of work, 30 minutes off.
3.Over eight and a half hours, with a 30-minute break between each two.
Vacation rights
Pakistan's labour law provides for public holidays to be decided at the beginning of each year by the Islamic Church Home Ministry and the provinces**.
There are nearly 14 public holidays that Pakistani employers should observe that fall into the following two categories:
1.Observances: Kashmir Day (5 February), Pakistan Day (23 March), Labor Day (1 May), Independence Day (14 August), Iqbal Day (9 November), Jouad Aizam Day Christmas Day (25 December).
2.Religious holidays: Vary from year to year depending on the phases of the moon.
Maternity leave
Pakistan provides 80, 120 and 90 days of paid maternity leave for all categories of employees for the first, second and third children respectively.
All benefits during maternity leave in Pakistan apply to female employees who have been employed for at least four months prior to the delivery date.
Paternity leave
Pakistan's labor law stipulates that employers must grant paid paternity leave of up to 30 days.
Employers may grant this leave up to three times throughout the entire period of service.
Paternity leave in Pakistan does not apply to the sharing of any employee category.
Annual leave
Employers can grant employees who have worked for at least one year a minimum of 14 days of paid annual leave.
Pakistan's labor laws stipulate that employers can include weekly or public holidays that coincide with paid annual leave.
Employers must allow the accumulation of paid annual leave, which is stipulated in Pakistan's labor law for a maximum of 14 days. As a result, employers may be required to give eligible employees up to 28 days of paid annual leave.
Sick leave
Pakistan's labor laws stipulate that employers must grant ten days of paid sick leave and an additional 30 days of sick leave in case of hospitalization.
In addition, employers in Pakistan are also required to provide ten days of personal leave with full pay and sixteen days of sick leave with half pay.
Labor laws in Pakistan stipulate that employers must follow the following sick leave program for long-term illnesses due to mental problems or illnesses such as tuberculosis, cancer, leukemia, polio, leprosy, cerebral thrombosis, etc.:
1.Sick leave with full pay is up to three consecutive months.
2.Another three months of half pay.
3.Another three months of unpaid sick leave.
Pilgrimage vacation
Pakistan's labor law requires employers to grant every Muslim employee 30 days of unpaid leave for the pilgrimage.
Employers can only grant it as a lump sum for the duration of employment and cannot be combined with other leave benefits.
Pakistan's employment laws direct provinces** to set minimum wages that apply to blue-collar workers.
The current minimum wage in Pakistan is around $114 per month.
Overtime compensation
According to Pakistan's labor laws, overtime is capped at three hours per day.
For eligible employees who work 12 hours a day, compensation is twice the salary.
Payroll, taxes, and other obligations.
When it comes to payroll, employers in Pakistan must:
1.Obtain a national tax identification number.
2.Registered Employee Aged Welfare Agency (EOBI).
3.Open a local bank account.
Employment regulations in Pakistan require employers to calculate an employee's net salary according to the following formula: [Net Salary = Gross Salary - Income Tax - Social Security Employee Share ]
Tax Deductions and Reporting:
1.Employers must deduct income tax from employees' paychecks each month and file their annual report electronically by September 30 at the latest.
2.Income tax in Pakistan is progressive, with a maximum rate of 35%. The first Rs 600,000 are exempt from income tax.
1.Pakistani labor law provides for statutory deductions such as the Employee Aged Welfare Agency (EOBI) as part of the standard payroll.
2.Employers must contribute 5% to EOBI and deduct 1% from the employee's gross salary.
3.Employers may also be required to make additional contributions to social security** in specific provinces.
Employers must provide pay stubs at the end of each pay cycle, which can be weekly, biweekly, or monthly.
Pakistani labor law stipulates that employees' wages must be paid through bank transfers.
Pakistan's employment laws stipulate that an employee's payroll must include net wages, taxes withheld, bonuses and deductions, and the employer's national tax ID.
Employment laws in Pakistan stipulate that employers must provide a written order when terminating an employee.
Employers must give at least one month's notice before terminating a permanent employee.
Pakistan's employment laws stipulate that it is easier for employers to avoid reporting dismissals to ** authorities or unions unless it is redundant.
However, Pakistan's labor laws prohibit employers from terminating employment contracts for female employees on maternity leave.
Data Protection and Employee Privacy.
As of February 16, 2022, the current state of data protection and employee privacy in Pakistan is unknown. The federal ** has approved the draft Personal Data Protection Act 2022 and is expected to enter into force soon.
However, with the popularity of hybrid workplaces and remote work, employers can ensure data protection and employee privacy in Pakistan with the following recommendations:
Employers must obtain written consent from candidates and employees when accessing or processing employee data for background checks, cross-border data transfers, etc.
Upgrade to more advanced technology to mitigate associated risks, including cybersecurity, confidentiality breaches, and data privacy.
Create an environment conducive to women's economic participation in the workplace.
Although Pakistan's labor laws do not prescribe statutory fines for employers, the management and labor courts determine the amount of fines based on violations of Pakistan's labor laws that come to their attention.
Violations may include failure to meet health and occupational safety requirements, breach of employee leave rights, wrongful dismissal, etc.
Entrepreneurs and multinational companies can hire and manage employees by adhering to Pakistan's labor regulations by following these strategies:
Template-based hiring and employee management.
You can hire white-collar employees by following Pakistan's labor laws based on the employment template.
You can easily draft basic employment documents like an offer letter, employment contract, or termination notice using existing templates.
Hire an in-house HR manager.
It is highly recommended to hire a professional human resources (HR) manager who specializes in Pakistani labor law, especially when hiring both blue-collar and white-collar employees on a large scale.
HR managers are responsible for overseeing employee recruitment, training, appraisals, leave plans, and more.
In-house HR experts are able to handle organizational change and foresee potential responsibilities to the company.
Manage employee payroll with a SaaS-based solution.
Entrepreneurs and multinationals are turning to cloud-based payroll solutions to comply with Pakistan's employment regulations.