How to hire employees in Pakistan

Pakistan's economy, marked by its vibrant and youthful demographic with an average age of 22.8 years, is primed for growth and innovation. Facing challenges such as political instability and the need for more foreign investment, the country is actively seeking to diversify and invigorate its economic landscape. Central to its economy are the semi-industrial sectors focusing on chemicals, textiles, leather goods, and sporting commodities, alongside a significant emphasis on trade, services, and agriculture. 

This guide delves into the economic dynamics of hiring in Pakistan, targeting organizations looking to tap into its pool of young, skilled labor. Designed to navigate the complexities of the local job market, it offers strategic insights for seamless integration into Pakistan’s economy, enabling businesses to capitalize on the myriad opportunities for growth and investment. This comprehensive approach aims to harness the full potential of Pakistan's workforce, driving forward both economic development and employment creation.

What you need to know before hiring employees in Pakistan

Job Market in Country 

The job market in Pakistan is currently facing significant headwinds due to economic challenges, including rising inflation, currency depreciation, and increasing unemployment rates. This has led to a notable decline in living standards, with predictions of rising poverty levels. Efforts like the Benazir Income Support Programme aim to alleviate some financial strains, but systemic issues persist. 

The shift towards informal employment is becoming more pronounced, reflecting a longstanding trend in the job market's structure. Despite these challenges, the resilience of Pakistan's workforce suggests potential for future recovery and growth, highlighting the need for strategic economic and social interventions.

Pakistan  hiring trends

In Pakistan's job market, the spotlight shines on sectors such as technology, legal, healthcare, and education, which are experiencing significant growth. Despite a minor uptick in unemployment to 6.42% in 2022, Pakistan's economy has shown robust expansion, with GDP increasing to $376.53 billion. 

This economic upturn is paralleled by a sharp rise in inflation to 19.87%, indicating an increase in living costs. For employers, this scenario presents a valuable opportunity to connect with a workforce that is increasingly adept in specialized fields amidst the economic revival efforts.

This scenario presents a fertile ground for organizations ready to harness the talent in these sought-after fields, marking a pathway towards innovation and growth. The hiring trend in Pakistan, though faced with its own set of obstacles, is active and spirited, providing a diverse talent pool essential for the country's economic development and its alignment with global shifts. 

By tapping into Pakistan's vibrant hiring landscape, businesses gain entry to a wide-ranging, skilled, and ambitious workforce eager to drive the nation towards a prosperous future. This trend underscores the strategic advantage of investing in human capital within the key sectors propelling Pakistan forward.

How to hire employees from Pakistan

1. Set up an entity in the country

Establishing a local entity in Pakistan signifies a firm commitment to the market, granting businesses full authority over their hiring strategies and operational policies. This approach is best suited for organizations that possess the required resources and management capabilities to maintain a substantial workforce within the country. It necessitates investment in local assets and the implementation of a multi-currency payment system to manage payments to offshore employees efficiently. Opting to set up a local entity in Pakistan is a strategic choice for companies with a long-term commitment and a vision to integrate deeply into the Pakistani market.

2. Hire independent contractors

Engaging independent contractors in Pakistan is a flexible and efficient method for companies seeking specialized expertise for project-based work. This approach minimizes legal and compliance obligations, as contractors function as self-employed individuals under specific contract terms. It's an advantageous strategy for businesses aiming for agility in response to project requirements and market fluctuations, providing access to specialized skills without necessitating long-term employment commitments.

3. Partner with an EOR in the country

Partnering with an Employer of Record (EOR) in Pakistan provides a straightforward pathway to accessing the local talent pool, bypassing the challenges associated with creating a legal entity. An EOR serves as your legal representative in Pakistan, handling the complexities of hiring, payroll, and compliance. This allows your business to concentrate on strategic team management. This approach is especially beneficial for companies looking to quickly enter or expand within the Pakistani market, offering immediate compliance and operational effectiveness.

Compliance risk while hiring in Pakistan

Hiring in Pakistan comes with its own set of compliance risks, including strict labor laws, detailed tax regulations, and compulsory social security contributions. The complexity is heightened by frequent changes to the legal framework and variations in regulations across different regions of the country. Employers are required to meticulously adhere to rules regarding contract types, working hours, minimum wage, termination procedures, and employee benefits. Non-compliance can result in hefty penalties, fines, and potential legal disputes. To navigate these challenges effectively, partnering with local experts or utilizing an Employer of Record (EOR) can be a strategic approach, ensuring full compliance with Pakistani employment laws and regulations.

Key Aspects of Pakistan Labor Law

Exploring employment law in Pakistan reveals a structured approach to employment contracts, designed to meet the varied needs of the workforce and employers across different sectors. Here are the types of employment contracts recognized in Pakistan:

• Permanent Contracts: Serving as the foundation of employment relationships, these contracts indicate a long-term engagement, usually established after a probationary period, and are intended for ongoing employment without a specified end date.
• Probationary Contracts: These contracts offer a trial period for both the employer and employee to evaluate suitability before transitioning to a permanent contract, providing an assessment window for both parties.
• Badlis (Alternate) Contracts: Specifically designed for situations requiring a temporary substitute for a permanent or probationary employee, ensuring continuity of work without disrupting the usual workflow.
• Temporary Contracts: Tailored for assignments with a clear end date, typically less than nine months, these contracts are suitable for short-term projects or seasonal demands.
• Apprenticeship Contracts: Focused on the training and development of employees, these contracts are a commitment to enhancing the skillset of the workforce, contributing to their professional growth.
• Contract Worker Agreements: Often utilized for remote or gig workers, or in scenarios where standard overtime compensation rules do not apply, these agreements adapt to the modern employment landscape.

Working Hours:

In Pakistan, a standard workweek consists of 45 hours, spread over 5 days with 9 hours each day.

Overtime: 

Working hours that exceed the standard weekly limit, as outlined in employment contracts or collective agreements, are considered overtime. There are set restrictions on the permissible amount of overtime, including work done beyond regular hours or on holidays. Overtime, identified as work exceeding 9 hours a day, must be compensated at twice (200%) the normal wage rate. For overtime on public holidays, employees must receive triple (300%) their standard pay.

Minimum Wage: 

In 2023, the minimum wage in Pakistan was raised to 32,000 PKR per month, up from 25,000 PKR per month in 2022. Since 2005, the average monthly minimum wage in Pakistan has been 12,515.79 PKR, with the highest recorded wage being 32,000 PKR in 2023 and the lowest being 3,000 PKR in 2005.

Payroll laws in Pakistan

Payroll is processed on a monthly basis.

Employment benefits in Pakistan

Leave Policies in Pakistan

1. Paid Time Off:

In Pakistan, after 12 continuous months of employment, employees are entitled to 14 consecutive days of paid annual leave. This leave must be taken in one block and cannot be split up. Employees are allowed to transfer up to 14 days of unused leave to the next vacation year.

2. Public Holidays:

Pakistan observes around 17 public holidays annually.

3. Sick Days:

Employees are entitled to 10 days of casual leave annually for unforeseen circumstances, including sudden illness or emergencies. This fully paid casual leave is provided in addition to any annual leave. Moreover, employees have the right to an extra 16 days of sick or medical leave each year, which is paid at half their regular salary. A medical certificate is required to avail of sick leave.

4. Maternity Leave:

Female employees qualify for three months of fully paid maternity leave if they have been employed by the same employer for at least four months before giving birth. Additionally, a compulsory six-week post-natal leave is mandated. During their maternity leave, employees are protected against dismissal. Eligibility for these benefits requires the employee to have contributed for a minimum of 180 days in the year leading up to the anticipated birth of the child.

5. Paternity Leave:

Fathers are entitled to a one-month leave following the birth of each of their first three children.

Public Health Insurance 

In 2022, Pakistan launched a health card in Punjab, offering families up to 1 million PKR ($5650) yearly for medical treatments, addressing chronic diseases, maternity services, and more. This initiative, crucial for households with an average income of $587, aims to reduce out-of-pocket health expenses and improve access to healthcare. Over 5000 families benefited in Lahore within two weeks of its launch. Sustainability remains a challenge, necessitating efficient resource management and broader coverage, including outpatient services. Expanding access in remote areas and increasing awareness about the program are vital steps towards achieving Universal Health Coverage in Pakistan.

Filing tax in Pakistan 

Income Tax:

Pakistan's income tax system for employees incorporates a progressive structure to ensure fairness and social responsibility. Tax rates range from 0% for annual incomes up to 600,000 PKR to 35% for incomes over 6,000,001 PKR, ensuring that higher earners contribute more towards national welfare. This approach reflects Pakistan's commitment to equitable financial responsibility and the welfare of its citizens, promoting a stable and supportive economic environment. For further details on navigating Pakistan's income tax system, click here.

Other Tax and Social Security Contributions:

In Pakistan, the payroll tax framework ensures mutual contributions towards social security, with employers and employees both investing in pension funds and healthcare. Employers contribute 5% for pensions, encapsulating their commitment to employee welfare, while employees add 1% plus a nominal 40-rupee monthly for healthcare, fostering a balanced responsibility. This system underlines Pakistan's dedication to a secure social safety net, promoting a collaborative effort for future security. It's a testament to the country's approach to nurturing a trustworthy, transparent work culture. Dive deeper into Pakistan's payroll contributions and their impact on the social fabric by clicking here.

Business culture in Pakistan 

Business culture in Pakistan is deeply influenced by traditional values and practices, reflecting a unique blend of modern and conventional approaches. Key aspects of this culture include:

• Dominance of the "seth" mindset, where businesses are often family-owned and operated, emphasizing ownership and control.
• Hierarchical structures are prevalent, with a clear distinction between management and employees, emphasizing respect for authority.
• Innovation and growth may be constrained by a reluctance to embrace external financing or novel ideas, prioritizing stability and tradition.
• Resource management often leans towards conservatism, with investments in research and development being cautiously approached.
• Human resource practices are characterized by the "owner and worker" model, with limited emphasis on employee empowerment and retention strategies.
• The corporate culture is slowly evolving, with an increasing awareness of the benefits of adopting more inclusive and progressive management styles.
• Relationship building is crucial, with a strong emphasis on loyalty, trust, and personal connections in business dealings.
• There is a noticeable variation in business practices across sectors, with the services sector experiencing a more pronounced "seth" approach compared to the industrial sector.

Top sectors to hire from in Pakistan

Industrial Sector:

Contributing 20.42% to Pakistan's GDP, the industrial sector comprising roughly a quarter of the workforce demonstrates notable growth, particularly in manufacturing. It blends traditional manufacturing with emerging industrial advancements, offering significant recruitment opportunities. This sector's impact on the GDP highlights its critical role in Pakistan's economy, making it a key area for talent acquisition and business growth.

Services Sector:

Employing 37.28% of the workforce, the services sector in Pakistan is a significant GDP contributor, encompassing areas like finance, tourism, and telecommunications. This sector's expansion mirrors Pakistan's gradual shift towards a service-oriented economy and offers diverse hiring prospects.

Technology and Innovation:

Despite Pakistan's historical reliance on agriculture, there's a growing emphasis on technology and innovation, particularly in IT and data analytics. The demand for skilled professionals in these areas is on the rise, reflecting a national push towards digital transformation and technological advancement.

Top cities to hire from Pakistan 

Karachi:
As the largest city and financial capital of Pakistan, Karachi is home to a diverse talent pool, especially in finance, IT, and manufacturing sectors. It hosts several top universities and colleges, making it a prime location for hiring skilled graduates and professionals.

Lahore:
Known for its rich cultural heritage, Lahore is also a significant educational and tech hub in Pakistan. It has a vibrant IT sector, with numerous tech companies and startups. The city boasts several top universities and technical institutes, providing access to a skilled workforce in software development, engineering, and creative industries.

Islamabad:
The capital city of Pakistan is known for its high standard of living and concentration of research institutions and universities. Islamabad has a growing IT sector, with a focus on software development, telecommunications, and technology startups. Its workforce is well-educated, with strong capabilities in research, development, and administration.

Rawalpindi:
Often considered in conjunction with Islamabad due to their close proximity, Rawalpindi has a strong industrial base and offers talent in manufacturing, IT, and services sectors. It's an important logistic and transportation hub, making it attractive for businesses requiring operations and supply chain management skills.

Faisalabad:
As one of Pakistan's major industrial centers, especially in the textiles sector, Faisalabad offers a workforce skilled in manufacturing, trade, and agriculture. The city is also focusing on enhancing its IT and services sector, providing a growing pool of professionals in these areas.

Hire in Pakistan compliantly with Gloroots

Hire in Pakistan compliantly with Gloroots. Gloroots, serving as an Employer of Record (EOR) in Pakistan, simplifies the process of candidate onboarding, facilitating swift initiation of operations while adhering to both local and international compliance standards. Designed to suit businesses of varying sizes, Gloroots offers an efficient solution for managing payroll, administering benefits, and overseeing tax obligations without the need for establishing a local entity. This service empowers companies to focus on effectively assembling a remote team within Pakistan . For further information on how Gloroots can support your hiring needs in Pakistan, please reach out to us.

Frequently Asked Questions 

1. What are the most in-demand sectors for hiring in Pakistan?

The most in-demand sectors include Information Technology, Healthcare, Education, and Legal. These sectors are experiencing growth and offer significant opportunities for skilled professionals.

2. How can international companies legally hire employees in Pakistan?

International companies can legally hire in Pakistan by setting up a local entity, hiring independent contractors, or partnering with an Employer of Record (EOR) to navigate employment laws and manage payroll.

3. What is the minimum wage in Pakistan?

As of 2023, the minimum wage in Pakistan is set at 32,000 PKR per month, a significant increase from the previous year, reflecting the government's efforts to improve living standards.

4. How are employment contracts structured in Pakistan?

Employment contracts in Pakistan can be permanent, probationary, temporary, for apprenticeships, or for contract workers, each serving different employment needs and legal requirements.

5. What is the standard process for payroll in Pakistan?

Payroll in Pakistan is typically processed on a monthly basis, with specific regulations governing tax, social security contributions, and other mandatory deductions as per local employment laws.