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Employ Candidates Compliantly in Pakistan

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  1. Overview: Pakistan
  2. Global PEO and payroll
  3. Global HR Compliance
  4. Expand without a company set up
  5. Contractor vs. employee: which is better?
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Global HR Compliance in Pakistan

If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in Pakistan Guide below will help you understand the nuances of labor legislation in the country.

Companies hire international workforce for various reasons but in most cases they are:

  • entering the foreign markets to sell company products. To do so, the company hires sales representatives who would represent their product and sell it to their local client base.
  • hiring a global talent with unique skills that is unavailable in the local market or costs the company less than the talent with similar skills hired in the home country.

Before entering a certain foreign market or engaging a global talent, it is crucial for the company to understand how it can make local hires and reward its workers on a monthly basis. Growing companies often face a challenge of paying benefits and bonuses to the commission-based independent sales representatives they are working with.

If you intend to hire and pay your foreign workforce in full compliance with labor laws and regulations of Pakistan, then the Global Employer of Record service from Acumen International may be the best way for you to go. We are an International PEO company and we specialize in global employment, meaning we can employ your employees in Pakistan and act as their legal employer on your behalf. We will payroll your foreign workforce monthly and provide benefits to them through our global network so you don’t have to set up your own legal entities there.

We are experts in global workforce employment in , and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Pakistan.

See the guide below for a general overview of labor rules and regulations in Pakistan or contact us if you need to employ workers in Pakistan or would like to get more details.

Hiring and Firing Workforce in Pakistan Guide

Pakistan is still considered one of the uneasy places to start off business owing to the long and complicated protocols involved. To lessen this burden, Acumen International has set up a solution that will help any organization -small, medium, large, that wishes to expand to Pakistan succeed without having to set up their infrastructure in the country. This paper is written to guide you through the fundamental things you must know about operating business in Pakistan.

Employment Agreements

Permanent employment contracts (terms of agreement and time limitations)
The Standing Orders Ordinance1968 requires every employer to provide every worker an employment contract, showing terms and conditions of his/her service. Similar provisions are found in the above referred provincial legislation of Khyber Pakhtunkhwa and Sindh.

Employment contract must state the nature of employment such as permanent or temporary, nature of duties i.e. job description, terms and conditions of service etc.

Employment contract must also clearly indicate whether employment will be governed by general or some specific labor laws like mining labor code, newspaper employees act or road transport employees act.

Casual employment contracts (terms of agreement and time limitations)

Fixed-term contracts (terms of agreement and time limitations)
Pakistani labour Law prohibits hiring fixed term contract workers for tasks of permanent nature. The maximum length of a fixed term contract including renewals is 9 months.

Employment Termination and Severance Pay (Dismissal) It is prohibited to dismiss

Termination of employment. Reasons for termination:

On Employee will. In accordance with Standing Order 12 of the ICEO, 1968, employee may terminate an employment contract after giving notice prior to contract termination.

Employer decision. Standing Orders Ordinance requires a written employment termination letter stating explicitly reasons for termination. This is applicable to both termination simpliciter (under S.O. 12) and dismissal on the ground of misconduct (under S.O. 15). Although above law requires employer to state reasons for termination, it dos not prescribe any reasons for which employment relationship may be rightfully terminated (fair grounds for dismissal). Case law has established some acceptable and valid reasons for employment termination (other than misconduct), which include “serious illness, inefficiency to perform the job, financial and economic needs of establishment”.

Serious misconduct, provided that the employee is given an opportunity to respond to the charges leveled against him, is sufficient enough reason for dismissal. However, not every conduct deserves the dismissal punishment. Standing Order 15 provides a range of punishments (fines) available to an employer depending on severity of omissions. Instances of misconduct include “habitual breach of law, absence without permission, willful disobedience, damage to employer’s property, theft, fraud, illegal strike, go-slow, etc.

Mutual agreement

It is prohibited to dismiss

The law provides protection to employees from dismissal under specified circumstances. For example, under the West Pakistan Maternity Benefits Ordinance, 1958, a woman absent from work on account of her maternity leave cannot be dismissed during such absence. Moreover, a woman cannot be dismissed from service without a sufficient cause within a period of six months prior to the date of her delivery, Employers in contravention of the provisions of the Ordinance can be charged penalties.

The Provincial Employees’ Social Security Ordinance, 1965 also prevents employers from dismissing, discharging, reducing or otherwise punishing an employee during a period in which the employee avails their sickness/ maternity/ injury or medical benefits. Any notice of dismissal or discharge or reduction given to an employee during such period will be invalid.

Notice period

Either party may terminate an employment contract after giving one-month notice prior to contract termination. If one-month notice is not served, a worker must be paid one-month wages in lieu of notice. It is important to remember that only permanent workers are required to give (and be served notice) before terminating employment contract. Temporary workers, badlis (alternate employee working in place of an absent permanent worker or probationer) and probationers are not entitled to any notice (or in pay in lieu thereof) if their services are to be terminated. Similarly, they are not required to serve a notice before leaving employer.

Severance payments

In accordance with the provisions of Standing Orders Ordinance, a worker whose employment has been terminated for any reason other than misconduct is entitled to a “severance pay or gratuity” which is equivalent to 30 days’ wages for every completed year of service or any part thereof in excess of 6 months (e.g., five years and 8 months is counted as 6 years). An employer may substitute a provident fund (type of pension) for gratuity.

Employee Benefits and Contributions

List all mandatory monetary and nonmonetary benefits required by law to be provided by an employer:

  • Annual leave
  • public holiday entitlement
  • sick leave
  • casual leave
  • maternity leave
  • one profit bonus
  • old-age pension and medical benefits through social security schemes.

Probationary period

Employee probation period. Probationary periods are allowed in the private sector but should last no longer than six months.


If a worker works beyond the stipulated working hours, i.e., 9 hours a day and 48 hours a week, he is entitled to an overtime pay that is double the rate of his ordinary pay (200% of the normal wage rate). In seasonal factories, workers may work up to 56 hours a week.

Work hours

No adult worker shall be allowed or required to work in a factory for more than 48 hours a week or 9 hours a day.

Annual Leave

An employee is entitled to 14 calendar days paid annual leave, after completion of 12 months of continuous service.This law does not indicate whether paid annual leave increases with longer service/seniority. A worker is paid his daily wages while he is on annual leave. Factory workers are paid half of the pay due for annual leave before start of the leave. The annual leave has to be consecutive and may not be split however if a worker fails to avail whole leave during the 12 months, it is added to the next year. However, not more than 14 days of leave can be carried forward.

Sick Leave

In addition to the 14 days of annual leave with pay, the Factories Act, provides that every worker is entitled to 10 days casual leave with full pay and further 16 days sick or medical leave on half pay. Casual leave is granted upon contingent situations such as sudden illness or any other urgent purpose. It should be obtained on prior application unless the urgency prevents the making of such application. As a customary practice, causal leave is approved in most cases. Sick leave, on the other hand, may be availed of on support of a medical certificate. Management should not refuse the leave asked for if it is supported by a medical certificate.

Parental Leave

Maternity rights and leaves. The law is applicable to female workers across the board within all establishments and requires the employer to grant mandatory benefits to female workers. Every employer is liable for paying maternity benefits female workers at the rate of their wages last paid prior to taking maternity leave. Such leave shall be paid during the period of six weeks immediately preceding and including the day on which the female worker delivers a child, and for each day of six weeks succeeding the day she gives birth.

Furthermore, the employee is entitled to an additional six weeks of paid leave at her option either before or after delivery.

Acumen International can help you fast-track your possibilities of entering and expanding your business in Pakistan by providing you with our Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any need to set up a legal entity first or afterwards.

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