What Pakistan employee benefits must you provide in 2026?
Pakistan has no statutory sick pay rate and no mandatory occupational pension above EOBI. The law sets a thin floor. Competitive packages for tech and professional roles add private health cover, provident fund contributions, and performance bonuses that make the real difference.
· Pakistan guide
Illustration · Lahore, Pakistan
Pakistan law requires 14 days of paid annual leave after one year of service.
There is no statutory weekly sick pay rate. Employees get 10 days of paid casual leave and 16 days of sick leave at half pay per year.
Old-age pension is through EOBI. You pay 5% of minimum wage. The employee pays 1%.
Competitive packages for tech and professional roles add private health insurance, a voluntary provident fund, and performance bonuses well above the floor.
What benefits must you provide Pakistan employees by law?
The law sets a thin floor. You must provide 14 days of paid annual leave after one year of service, plus 11 gazetted public holidays.
There is no statutory sick pay rate in Pakistan. Casual leave of 10 days at full pay and sick leave of 16 days at half pay apply under the Factories Act. EOBI old-age pension contributions are mandatory for covered establishments.
| Benefit | Minimum (2026) | Source |
|---|---|---|
| Annual leave | 14 days paid (after 12 months service) | Factories Act, 1934, Section 49-B |
| Public holidays | 11 gazetted federal holidays per year | Cabinet Division Notification |
| Casual leave | 10 days paid at full pay per year | Factories Act, 1934 |
| Sick leave | 16 days paid at half pay per year | Factories Act, 1934 |
| Maternity leave | 25.71 weeks (first child, paid); requires 4 months qualifying service | Maternity and Paternity Leave Act, 2023 |
| Paternity leave | 30 days fully paid (first three children) | Maternity and Paternity Leave Act, 2023 |
| EOBI old-age pension | 5% employer + 1% employee (on minimum wage) | Employees Old-Age Benefits Act, 1976 |
| Social security (PESSI/SESSI) | Provincial rate; varies by province (Punjab, Sindh, KPK, Balochistan) | Provincial Social Security Institutions |
Note: Pakistan has no statutory weekly sick pay equivalent to UK SSP. There is no statutory redundancy pay formula separate from the gratuity under the Standing Orders Ordinance. Sick leave entitlements above are the standard under the Factories Act; the West Pakistan Shops and Establishments Ordinance, 1969 applies to commercial establishments with similar provisions.
What does a competitive Pakistan benefits package look like?
For tech, fintech, and professional services roles in Karachi, Lahore, and Islamabad, the competitive benchmark adds: private group health insurance, a voluntary provident fund with employer match, performance bonuses, mobile and internet allowances, and fuel or transport allowances.
The full competitive package typically costs 15 to 25 percent of base salary per employee per year, depending on seniority and the insurance tier.
| Benefit | Typical mid-market benchmark | What it signals |
|---|---|---|
| Group health insurance | PKR 30,000 to 80,000 per year per employee (plus dependants) | Primary retention lever; state health cover is limited |
| Voluntary provident fund (employer match) | 8 to 10% of basic salary; employer matches employee contribution | Long-term savings; not legally required but strongly expected |
| Performance bonus | 1 to 3 months salary per year for target-achievers | Core to tech-sector total compensation |
| Mobile and internet allowance | PKR 2,000 to 6,000 per month | Near-universal in remote and hybrid roles |
| Transport or fuel allowance | PKR 5,000 to 15,000 per month | Expected in major cities due to commute distances |
| Annual increment | 10 to 20% in tech; 8 to 12% in professional services | Inflation-linked expectations are high; missing increments drive turnover |
| Life insurance (group term) | PKR 10,000 to 25,000 per year per employee | Growing in adoption; often bundled with health policy |
Model your loaded benefit cost on the Employer Cost Calculator to see the full picture for a specific salary and package.
What pension or provident fund contribution should you offer?
EOBI is the mandatory floor. You pay 5% of minimum wage per employee per month.
That statutory amount is very low. Tech-sector employers add a voluntary provident fund with an 8 to 10% employer match to compete for talent.
How the EOBI floor works:
- Employer contribution: 5% of the federal minimum wage per covered employee per month. Calculated on the minimum wage, not the employee's actual salary.
- Employee contribution: 1% of minimum wage per month.
- Coverage: Mandatory for establishments with 5 or more employees. Benefits include old-age pension, invalidity pension, survivors' pension, and old-age grant.
Why employers add a voluntary provident fund
Because EOBI contributions are capped at a percentage of the federal minimum wage, the actual pension benefit for a mid-level software engineer or finance professional is very small relative to their salary. Candidates in Lahore's tech corridor and Karachi's financial district factor the voluntary provident fund match directly into their offer comparisons.
Three common provident fund structures in Pakistan:
- Recognised Provident Fund (RPF). Registered with the Federal Board of Revenue (FBR). Employer contributions within limits are tax-deductible. Employee withdrawals receive preferential tax treatment. Most common in formal-sector employers.
- Approved Gratuity Fund. A separate trust fund for the gratuity entitlement (30 days per year of service under the Standing Orders Ordinance, 1968). Avoids large lump-sum liability at termination. Reduces balance-sheet risk for growing teams.
- Both RPF and gratuity fund. Some employers run both, treating the RPF as the voluntary pension layer and the gratuity fund as the statutory severance pre-provision. The two do not offset each other by default under Pakistani law.
EOBI and provincial social security: the Pakistan multi-layer system
Pakistan runs two parallel employer contribution systems. EOBI is the federal old-age benefit. Provincial social security (PESSI in Punjab, SESSI in Sindh, and equivalents in other provinces) covers workers' health and accident benefits.
Both systems apply to covered establishments. You pay both. The provincial rate varies by province and is not fully harmonised.
The two systems in brief:
- EOBI (federal). Employer contributes 5% of minimum wage. Employee contributes 1% of minimum wage. Benefits are old-age pension, invalidity pension, survivors' pension, and old-age grant. Applies to establishments with 5 or more employees.
- Provincial social security (e.g. PESSI in Punjab, SESSI in Sindh). Covers employees earning below a provincial wage ceiling. Benefits include inpatient and outpatient medical care, sickness benefit, maternity benefit (in addition to the statutory maternity leave), injury benefit, and death grant. Employer contribution rates are set provincially; exact current rates and wage ceilings should be confirmed with the relevant provincial institution before payroll setup.
Practical implication for global employers:
If your Pakistan employees earn above the provincial social security wage ceiling (which typically excludes most senior tech and professional hires), they fall out of the provincial scheme and only EOBI applies at the federal level. For those employees, private group health insurance fills the gap that provincial social security would otherwise cover. This is why health insurance is not optional in practice even though it is not a statutory floor for all workers.
Key sources: EOBI contribution rates, PESSI Punjab overview.
The 2023 parental leave reform: what changed and what it means
The Maternity and Paternity Leave Act, 2023 upgraded Pakistan's family leave framework. Paternity leave rose to 30 days fully paid for the first three children.
Maternity leave under the updated federal framework runs to approximately 25.71 weeks. This is a structural change from the older 1958 Ordinance baseline.
What the 2023 Act introduced for fathers:
- 30 days fully paid paternity leave for each of the first three children.
- Applies to covered establishments under the federal jurisdiction.
- Previously paternity leave was minimal or absent in many formal workplaces. The 2023 reform brought Pakistan substantially closer to regional peers.
What the updated framework means for maternity leave:
- Maternity leave of approximately 25.71 weeks (paid) for the first child under the updated federal framework.
- Qualifying service: 4 months of employment before the expected date of confinement.
- Pay during maternity leave is at full wages. The employer bears the cost directly (there is no state reimbursement scheme equivalent to the UK's SMP recovery mechanism).
Competitive employers in 2026 use the 2023 reform as a floor and extend further:
- Enhanced maternity leave of 4 to 6 months for tech-sector candidates, particularly those in senior or principal roles.
- Secondary caregiver (paternity/adoption) leave of 4 to 8 weeks at leading employers.
- Phased return to work arrangements, increasingly cited in candidate interviews as a differentiator in Lahore and Karachi tech hubs.
Note: provincial variation applies. Khyber Pakhtunkhwa (KPK) and Balochistan have their own provincial labour frameworks. Confirm applicable law based on where your employee is located, not where the company is incorporated.
How does Teamed handle Pakistan benefits for you?
Teamed becomes your legal employer of record in Pakistan for from $599 per employee per month, with zero FX mark-up in any currency.
EOBI registration, provincial social security filings, statutory leave tracking, and the full Pakistan labour-law stack run on one platform.
Real HR and legal experts set up and administer your Pakistan benefits, coordinate with EOBI and the relevant provincial social security institution, and manage the broker relationship for group health insurance. An actual person, not a chatbot, handles your Pakistan employment questions. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.
What is included in Teamed's standard EOR fee for Pakistan:
- EOBI registration and monthly contribution filings
- Provincial social security registration and filings (PESSI, SESSI, or equivalent)
- Statutory leave tracking (annual leave, casual leave, sick leave, maternity, paternity)
- Payroll withholding tax (WHT) deduction and FBR remittance by the 15th of each month
- Annual tax reconciliation and employer statements
What clients pass through at cost on the invoice:
- Group health insurance premiums
- Voluntary provident fund contributions above the EOBI floor
- Performance bonuses and annual increments
- Mobile, internet, transport, and fuel allowances
- Any approved gratuity fund contributions
Key sources: EOBI contribution rates, Maternity and Paternity Leave Act, 2023, Standing Orders Ordinance, 1968.
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Confirm your benefit package
Decide which optional benefits to offer on top of the statutory floor. Health insurance and a provident fund match are expected by most professional hires in Pakistan.
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Register for EOBI
Every covered establishment must register with the Employees Old-Age Benefits Institution before the first payroll run. Teamed handles this as part of your Pakistan EOR setup.
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Enrol in provincial social security
Register with the relevant provincial institution (PESSI in Punjab, SESSI in Sindh, or the equivalent in your employee's province). Which institution applies depends on where the employee works.
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Arrange group health insurance
Source and bind a group health policy covering your Pakistan employees. Teamed coordinates the broker relationship and passes the premium through at cost on your invoice.
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Run payroll with benefit deductions
Monthly payroll withholds income tax, deducts EOBI contributions, and processes any provident fund or other benefit deductions. Teamed remits withholding tax to the FBR by the fifteenth of each month.
Frequently asked questions
How many days of annual leave must Pakistan employees receive by law?
Employees covered by the Factories Act, 1934 are entitled to 14 days of paid annual leave after completing one year of service. There are also 11 gazetted federal public holidays. Separate casual leave of 10 days and sick leave of 16 days at half pay apply. Provincial frameworks for shops and commercial establishments follow similar provisions under the West Pakistan Shops and Establishments Ordinance, 1969.
Is there a statutory sick pay rate in Pakistan?
No. Pakistan has no statutory weekly sick pay rate comparable to UK Statutory Sick Pay. Instead, the Factories Act, 1934 provides 10 days of casual leave at full pay and 16 days of sick leave at half pay per year. There is no state-administered wage replacement benefit during illness beyond those leave entitlements. Competitive employers add private group health insurance and may offer additional sick leave on top of the statutory floor.
What are the mandatory pension contributions for Pakistan employees?
Pakistan does not have a mandatory occupational pension scheme in the way the UK or Germany does. The mandatory scheme is EOBI (Employees Old-Age Benefits Institution). Employers covered by the Employees Old-Age Benefits Act, 1976 contribute 5% of the federal minimum wage per employee per month. Employees contribute 1% of minimum wage. Contributions are calculated on the minimum wage, not the employee's actual salary, so the absolute amounts are modest. Most competitive employers add a voluntary recognised provident fund with an employer match of 8 to 10% of basic salary.
How long is maternity leave in Pakistan and who pays for it?
Under the Maternity and Paternity Leave Act, 2023 and the updated federal framework, maternity leave runs to approximately 25.71 weeks for the first child, at full pay. The qualifying service period is 4 months before the expected date of confinement. The employer bears the cost directly. There is no state reimbursement or insurance scheme that offsets the cost, unlike the UK's SMP recovery mechanism. The 2023 Act updated and extended earlier provisions under the 1958 Ordinance.
How much paternity leave do Pakistan employees receive?
Under the Maternity and Paternity Leave Act, 2023, fathers are entitled to 30 days of fully paid paternity leave for each of the first three children. This applies to covered establishments under federal jurisdiction. The 2023 Act was a significant upgrade from previous practice, where paternity leave was either absent or nominal at most employers. Provincial frameworks may differ; confirm the applicable law based on where the employee works.
Pakistan's statutory floor is unusually thin by regional standards. No sick pay rate, no mandatory occupational pension above EOBI, and leave entitlements tied to factory-era legislation. The competitive package is doing the retention work that the law does not.
Pakistan gives employees 14 days of paid leave and a pension capped at the minimum wage. The gap to competitive is where your offer lands or loses.
Group health cover is the first thing candidates in Lahore ask about. It is not in the law.
The 2023 reform gave fathers 30 days paid. Candidates notice.
