What it really costs to employ someone in Pakistan in 2026

1. Gross salary and the employee's income tax

Salaries in Pakistan are quoted gross. The employer withholds income tax every month under section 149 of the Income Tax Ordinance 2001 and deposits it with the Federal Board of Revenue. For tax year 2026-27 the salaried slabs start at zero up to PKR 600,000 a year and rise in steps to 35% on the part above PKR 7,000,000. On a gross of PKR 670,000 a month (PKR 8.04 million a year) the annual tax is about PKR 1.79 million, roughly PKR 149,000 a month, leaving the employee about PKR 521,000 net.

The tax is the employee's; it sits inside the gross figure. It is not an extra cost to the employer, but the employer is liable for withholding and depositing it correctly.

2. EOBI and social security

Every employer registers staff with the Employees' Old-Age Benefits Institution and pays a monthly contribution on a capped statutory wage, with a smaller employee share deducted from salary. Provincial social security (PESSI in Punjab, SESSI in Sindh) adds an employer contribution on a similar capped wage. Because both are calculated on the statutory ceiling rather than the actual salary, the combined employer cost is a few thousand rupees a month regardless of how senior the employee is.

3. Gratuity

Under the Standing Orders Ordinance 1968 and provincial equivalents, an employee who completes a year of service is entitled on leaving to gratuity of thirty days' wages for every completed year, calculated on the last drawn salary. Six months or more counts as a full year. Prudent employers accrue one twelfth of a month's salary every month; on PKR 670,000 that is PKR 55,833 a month. It is a real liability, payable at exit for any reason other than proven misconduct.

4. Leave

Minimum entitlements: 14 days' annual leave after a year of service, 10 days' casual leave, 8 days' sick leave, plus gazetted public holidays. Leave is paid time, so it sits inside the salary rather than adding to it, but unused annual leave is encashed at exit.

5. Medical insurance

Not mandatory for white-collar staff, but expected. A private-room hospitalisation policy with a PKR 1 million limit from a leading insurer costs in the region of PKR 25,000 to 75,000 a year depending on age and insurer. Outpatient cover is rarely included in individual plans; employers usually add a monthly allowance instead.

6. Worked example

At PKR 280 to the dollar that is roughly US$2,600 a month for a senior professional, fully compliant.

7. What an Employer of Record adds

If you have no entity in Pakistan, an EOR carries all of the above as the legal employer and adds a fixed management fee per employee per month. That fee buys the contract, payroll, filings, insurance administration, leave and gratuity ledgers, HR documentation and final settlement, and it removes the need for a branch, subsidiary or Pakistani tax registration on your side.

Compare with the alternatives: a liaison office cannot employ for revenue-generating work and needs Board of Investment permission; a private limited subsidiary needs SECP incorporation, a company secretary, annual audit and tax filings. For fewer than ten employees, the EOR is almost always cheaper and faster.

Budget it in your own currency

Send us the role and gross salary and we return the full monthly cost in GBP, USD, EUR, SAR or AED within one working day. See the Employer of Record service or the guide on contractors versus employees in Pakistan.