The Complete Guide to Employer of Record (EOR) Services in Pakistan

Pakistan's growing economy and skilled workforce make it an attractive destination for businesses looking to hire talent and expand operations. However, navigating labor laws, tax structures, and payroll compliance can be complex, especially for foreign companies.

Cadana’s Employer of Record (EOR) solution simplifies the hiring process in Pakistan, ensuring full compliance while managing payroll, statutory deductions, and employee benefits.

In this guide, we explore how EOR services in Pakistan help businesses hire employees efficiently while maintaining compliance with local regulations.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of businesses, handling all HR responsibilities, including:

Hiring and onboarding employees in compliance with Pakistan’s labor laws.
Managing payroll processing and tax compliance.
Handling employment contracts and statutory contributions.
Ensuring compliance with local labor laws.

With Cadana’s EOR solution, businesses can hire in Pakistan seamlessly without setting up a local entity.

The Risks of Employee Misclassification in Pakistan

Misclassifying workers as independent contractors instead of full-time employees can expose businesses to financial and legal risks, including:

Legal Penalties: Pakistan’s labor authorities impose strict fines for worker misclassification.
Tax Liabilities: Employers may be required to retroactively pay income tax, social security, and workers’ welfare fund contributions.
Employee Claims: Workers may demand unpaid statutory benefits, severance pay, or overtime wages.
Reputational Damage: Non-compliance can damage a company’s credibility and ability to do business in Pakistan.

Cadana ensures proper worker classification, helping businesses hire in Pakistan without legal or financial risks.

Benefits of Using an Employer of Record in Pakistan

Cadana’s EOR services provide several advantages for businesses looking to hire in Pakistan, including:

Compliance with Pakistani Labor Laws: We ensure employment contracts, payroll processes, and benefits meet all legal requirements.
Faster Hiring Process: Hire employees in Pakistan quickly without needing to establish a legal entity.
Cost-Effective Expansion: Save time and money by outsourcing HR, payroll, and compliance functions.
Streamlined Payroll & Tax Administration: Cadana handles salary processing, statutory deductions, and tax remittances.
Improved Employee Experience: Ensure timely payments and statutory benefits, boosting employee satisfaction and retention.

Overview of Hiring in Pakistan

Employment Laws

Pakistan’s labor market is regulated by several key labor laws, including:

Industrial Relations Act (IRA): Governs employer-employee relationships and dispute resolution.
Employment of Children Act: Prohibits child labor and sets employment age limits.
Minimum Wages Ordinance: Regulates minimum wage standards across industries.

Onboarding Process

When hiring in Pakistan, businesses must:

Draft a legally compliant employment contract outlining salary, benefits, and job responsibilities.
Register employees for tax and social security contributions.
Ensure compliance with workers’ welfare funds and health insurance schemes.

Cadana simplifies the hiring process, ensuring a smooth and compliant onboarding experience.

Payroll Management and Tax Compliance in Pakistan

Payroll Frequency

Employees in Pakistan are typically paid monthly, with payroll taxes and statutory deductions processed at source.

Income Tax (Pay-As-You-Earn – PAYE)

Pakistan follows a progressive tax system, with rates as follows (as of 2024):

Up to PKR 600,000 – 0%
PKR 600,001 – 1,200,000 – 2.5%
PKR 1,200,001 – 2,400,000 – 12.5%
PKR 2,400,001 – 3,600,000 – 20%
PKR 3,600,001 – 6,000,000 – 25%
Above PKR 6,000,000 – 35%

Employers must deduct PAYE from employee salaries and remit it to the Federal Board of Revenue (FBR) monthly.

Employer Contributions

Employers in Pakistan must contribute to several statutory funds, including:

Social Security Contributions: Employers contribute 6% of an employee’s salary to the Employees’ Old-Age Benefits Institution (EOBI).
Workers’ Welfare Fund (WWF): Employers must contribute 2% of total income to support worker welfare programs.
Workers’ Profit Participation Fund (WPPF): Employers must distribute 5% of net profits to employees annually.

Cadana ensures compliance with Pakistan’s payroll regulations, handling all deductions and timely remittances.

Overview of Employment Contracts in Pakistan

Employment contracts in Pakistan must outline:

Job Title & Responsibilities.
Salary, Bonuses & Allowances.
Working Hours & Leave Entitlements.
Termination & Notice Periods.
Dispute Resolution Mechanisms.

Types of Employment Contracts

Fixed-Term Contracts: For project-based or temporary work.
Indefinite-Term Contracts: For long-term employment with no predetermined end date.

Probation Periods

Typically three to six months in the private sector and one to two years in the public sector, after which employees transition to permanent roles. Termination during probation requires a written notice as per contract terms.

Cadana ensures all employment contracts comply with Pakistan’s labor laws, reducing legal risks for businesses.

How an EOR in Pakistan Ensures Compliance with Employment Law

Pakistan’s labor laws regulate:

Standard Working Hours: 48 hours per week, with a maximum of 9 hours per day.
Overtime Pay: Paid at 1.5 times the normal rate for work exceeding 48 hours per week.
Termination Process: Employers must provide at least one month’s notice or payment in lieu of notice.

Cadana’s EOR solution ensures businesses hire in Pakistan while remaining fully compliant with labor laws.

Employee Benefits and Compensation in Pakistan

Statutory Benefits

Annual Leave: A minimum of 14 days per year after one year of service.
Maternity Leave: 12 weeks of paid leave for female employees.
Sick Leave: Employees are entitled to 10 days of paid sick leave annually.

Supplemental Benefits

To attract top talent, many employers offer additional benefits such as:

Private health insurance.
Performance bonuses.
Transportation allowances.

Cadana administers employee benefits, ensuring compliance with statutory and supplemental requirements.

How an EOR Can Improve Employee Experience

By partnering with Cadana, businesses can provide:

Timely and accurate payroll processing.
Access to statutory and supplemental benefits.
Efficient HR and compliance support.

A great employee experience enhances productivity, helping businesses hire and retain top talent in Pakistan.

Get Started with an EOR in Pakistan

Expanding into Pakistan is easier with Cadana’s EOR solution. We help businesses:

Hire employees in Pakistan efficiently.
Manage payroll and tax compliance.
Ensure full compliance with Pakistani labor laws.

Why Choose Cadana for Hiring in Pakistan?

Pakistan’s labor market offers significant growth potential, but navigating employment regulations can be complex. Cadana simplifies the hiring process, handling compliance, payroll, and HR functions so businesses can focus on success.

Ready to hire in Pakistan? Connect with Cadana today and start building your workforce with ease!