Labour law in Pakistan is largely a provincial matter, so rules for leave, minimum wages and social security differ between Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan and Islamabad. Income tax is federal. Here is what employers need to know about leave, pay, tax and ending employment.
Leave rules come from the Factories Act and the provincial shops and establishments laws, so the exact entitlement depends on the province and the type of workplace. The figures below are the common minimums for shops and commercial establishments.
Paid leave after 12 months of continuous service. Unused leave can usually be carried forward within limits.
Paid leave a year for unforeseen needs under the shops and establishments laws. It does not carry over.
A year, commonly on half pay. Workers registered with provincial social security may receive sickness benefit from the institution.
Paid maternity leave is set by provincial maternity benefit laws and is typically 12–16 weeks (16 weeks in Sindh). In Islamabad Capital Territory, the Maternity and Paternity Leave Act 2023 gives 180 days of paid maternity leave for the first child, 150 days for the second and 120 days for the third, and 30 days of paid paternity leave, up to three times. Elsewhere, paternity leave is a matter for company policy.
Set up annual, casual, sick and maternity leave in IceHrm with their own accrual, carry forward and approval rules, and give offices in different provinces their own policies. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
Each province notifies its own minimum wages, usually from 1 July each year. The federal budget for 2026–27 announced a minimum wage of PKR 40,700 a month for unskilled workers; Punjab, Sindh and Khyber Pakhtunkhwa had set PKR 40,000 for 2025–26 and were revising their rates in 2026. Always check the latest notification for the province where the employee works.
And 9 hours a day for adult workers in factories and establishments. Many offices work a 40–45 hour week.
Overtime is paid at twice the ordinary rate of wages under the Factories Act and the shops and establishments laws.
Capture attendance and overtime in IceHrm and feed the hours straight into payroll, so double-time overtime reflects what was actually worked. Time & attendance →
The tax year runs from 1 July to 30 June. Employers withhold tax from salaries every month and file withholding statements with the Federal Board of Revenue (FBR). The Finance Act 2026 lowered several salaried rates and abolished the surcharge on incomes above PKR 10 million.
| Annual taxable income | Rate | Tax on this income |
|---|---|---|
| Up to PKR 600,000 | 0% | Nil |
| PKR 600,001 – 1,200,000 | 1% | 1% of the amount over PKR 600,000 |
| PKR 1,200,001 – 2,200,000 | 11% | PKR 6,000 plus 11% over PKR 1,200,000 |
| PKR 2,200,001 – 3,200,000 | 20% | PKR 116,000 plus 20% over PKR 2,200,000 |
| PKR 3,200,001 – 4,100,000 | 25% | PKR 316,000 plus 25% over PKR 3,200,000 |
| PKR 4,100,001 – 5,600,000 | 29% | PKR 541,000 plus 29% over PKR 4,100,000 |
| PKR 5,600,001 – 7,000,000 | 32% | PKR 976,000 plus 32% over PKR 5,600,000 |
| Over PKR 7,000,000 | 35% | PKR 1,424,000 plus 35% over PKR 7,000,000 |
Statutory contributions in Pakistan are modest and are mostly calculated on the notified minimum wage rather than on actual salary. Retirement benefits such as gratuity or a provident fund are usually the larger cost.
Employees' Old-Age Benefits contribution, calculated on the notified minimum wage. Employees contribute a further 1%.
Paid by the employer to the provincial social security institution for covered workers, generally on wages up to a notified ceiling.
Build Pakistani pay the way you already structure it, with your own salary components, allowances, deductions and formula columns, such as EOBI and provident fund columns. Want to know how well IceHrm handles payroll calculations for Pakistan? Contact us or see Payroll →
For workers covered by the Standing Orders laws (industrial and commercial establishments), the employer must give the reason for termination in writing. Dismissal for misconduct requires a written charge, a chance for the worker to respond and an inquiry. Managerial staff are governed mainly by their contracts.
| Situation | Notice |
|---|---|
| Employer ends a permanent worker's employment (not for misconduct) | 1 month or 1 month's pay |
| Permanent worker resigns | 1 month |
| Dismissal for misconduct | None |
Where no provident fund exists, a permanent worker who leaves after at least a year's service is entitled to a gratuity of 30 days' wages for each completed year of service, or part of a year over 6 months, based on the last wages drawn. Retrenchment follows the "last in, first out" rule within each category of workers.
Final pay should include wages up to the last day, encashment of unused annual leave and any gratuity or provident fund balance due.
The federal government notifies public holidays each year. Islamic holidays follow the lunar calendar and their dates are confirmed by the moon sighting committee, so they move each year. Provinces may add their own holidays.
Additional optional holidays apply to minority communities, such as Easter, Holi and Diwali.
Leave groups give each office its own holiday calendar, so you can add each year's confirmed Eid dates and any provincial holidays once, and every team gets the right days off. Holiday calendars →
Under the Standing Orders laws, every worker must receive a written appointment letter setting out the terms of employment when hired. Written contracts are standard for all staff and are usually in English.
Under the Standing Orders laws, a probationer becomes permanent after 3 months of satisfactory service in the same post. For managerial roles, probation of 3–6 months is common and is set by the contract.
Send appointment letters for e-signing, store them with CNIC copies on the employee's record, and track onboarding with task lists so EOBI and social security registrations are not missed. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for Pakistan, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for Pakistan? Talk to us.
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