How much does it really cost to hire in Pakistan in 2026?
Pakistan's EOBI pension levy is 5% of the statutory minimum wage, not 5% of the employee's actual salary. On a professional salary, that ceiling means the monthly employer social cost is a fixed PKR amount regardless of how much your hire earns. Add a six-band income tax that starts at 0% and caps at 35%, and 14 days days of paid leave, and Pakistan consistently runs well below 110% of gross salary in total employer cost.
· Pakistan guide
Illustration · Karachi, Pakistan
Pakistan's employer social cost is low. The EOBI pension levy is 5% of the minimum wage, not 5% of salary. That ceiling keeps the monthly EOBI cost fixed at a modest PKR amount no matter what your hire earns.
Income tax follows a six-band slab table. Earnings up to PKR 600,000 are tax-free. The top rate is 35%, reached above PKR 4,100,001 per year. The employer withholds tax monthly and remits to the FBR by the 15 daysth of the following month.
Every employee gets 14 days paid leave days per year plus 10 days days of casual leave and 16 days sick days at half pay. Payroll runs monthly. A typical Pakistan professional hire lands at around 106 to 108% of gross salary in total employer cost, one of the lowest loadings in South Asia.
The headline: what a Pakistan hire actually costs
Start with the gross salary. The EOBI employer levy is 5% of the statutory minimum wage floor, currently PKR 37,000 per month. That works out at around PKR 1,850 per month per employee, regardless of how much the employee earns. It does not scale with salary.
The table below shows illustrative totals at a PKR 200,000 monthly salary. These are computed from verified statutory rates and labelled illustrative. They are not statutory figures.
Pakistan's employer cost structure is straightforward. The main variable above gross salary is the EOBI levy. It is capped at the minimum wage base, so a senior hire at PKR 500,000 a month costs the employer the same EOBI amount as a junior hire at PKR 200,000 a month. Income tax and employee-side EOBI are deducted from the employee's pay, not added to the employer's bill.
| Line | Illustrative cost on PKR 200,000/month salary | Source |
|---|---|---|
| Gross salary | PKR 200,000 | Contract |
| EOBI employer levy at 5% of minimum wage (PKR 37,000/month) | ~PKR 1,850 (illustrative) | EOBI: Contribution Rates |
| Income tax withheld (employee deduction, not an employer cost) | Varies by annual income; slab table applies | PwC Tax Summaries Pakistan 2026 |
| Employee EOBI at 1% of minimum wage (withheld from employee, not an employer cost) | ~PKR 370 (withheld from employee) | EOBI: Contribution Rates |
| Statutory leave reserve (14 days annual leave days at daily salary rate, illustrative) | ~PKR 10,900 (illustrative, built into salary) | Factories Act, 1934 |
| Total illustrative employer cost | ~PKR 201,850 before the Teamed fee | ~101% of gross (illustrative) |
These figures are illustrative. They are computed from the verified EOBI rate of 5% of the minimum wage base of PKR 37,000. They are not statutory numbers and will vary with actual salary, province, leave usage, and any additional benefits provided.
Add the Teamed fee from $599 per employee per month and the total employer spend rises accordingly. Use the Employer Cost Calculator to run your own figures in any currency.
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Start with gross salary
Confirm the agreed gross monthly salary. Check it clears the applicable minimum wage floor, which varies by province. This is the base number every other line builds on.
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Calculate the EOBI levy
Apply the employer EOBI rate to the minimum wage base, not to the employee's actual salary. The monthly cost is fixed in PKR terms regardless of how much the employee earns.
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Set up income tax withholding
Identify the employee's annualised salary and apply the six-band slab table to determine the monthly withholding amount. Remit to the FBR by the required deadline each month.
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Account for statutory leave
Budget for annual leave, casual leave, and sick leave days as salary cost during absence. Add a reserve for gratuity accrual from day one so exit costs are not a surprise.
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Confirm provincial social security
Check whether the employee's province of work triggers an additional social security levy and, if so, confirm the current rate and income ceiling with a local adviser before the first payroll run.
EOBI: the social levy that does not scale with salary
The EOBI employer contribution is 5% of the minimum wage floor, not 5% of the employee's actual pay. At a federal minimum wage of PKR 37,000 per month, the employer pays around PKR 1,850 per month per employee.
This is a fixed monthly cost. It stays the same whether the employee earns PKR 50,000 or PKR 500,000. That structure makes Pakistan's employer social cost one of the most predictable in the region.
Employers contribute 5% of the minimum wage per employee per month to the Employees Old-Age Benefits Institution (EOBI). Employees contribute 1% of the minimum wage. Neither rate is applied to actual salary. Both are calculated on the statutory minimum wage floor.
Source: EOBI: Contribution Rates (Employees Old-Age Benefits Act, 1976)
Why the cap matters for professional hires
In most markets, a 5% social contribution means the employer pays more as salary rises. In Pakistan, the EOBI base is capped at the minimum wage. Hiring a senior engineer at PKR 400,000 a month carries the same EOBI cost as hiring a junior administrator at PKR 50,000 a month. For professional and technology roles, this makes Pakistan's social cost loading much lower in percentage terms than the nominal rate suggests.
PESSI and provincial social security
Punjab employers may also be subject to the Punjab Employees Social Security Institution (PESSI) levy for employees earning below the provincial income ceiling. The PESSI rate and wage ceiling vary and are not confirmed from a primary government source in the current cache. Confirm provincial social security obligations with a local adviser before onboarding, particularly for hires based in Punjab, Sindh, or KP. Teamed verifies the applicable provincial scheme during onboarding.
Minimum wage reference
The federal minimum wage is PKR 37,000 per month under the Minimum Wages Ordinance, 1961. Punjab raised its provincial floor to PKR 40,000 from July 2025. For EOBI calculation purposes, the applicable minimum wage for the employer levy is the rate in force for the employee's province of work. Teamed applies the correct base automatically.
Income tax: six slabs, zero to 35%
Pakistan's income tax for salaried employees runs across six bands in FY2025-26. Earnings up to PKR 600,000 per year are tax-free. The top marginal rate of 35% applies only above PKR 4,100,001 per year.
The employer withholds tax monthly and pays it to the Federal Board of Revenue by the 15 daysth of the following month. Income tax is a deduction from the employee's pay. It does not increase the employer's gross cost.
The six-band slab table (FY2025-26)
| Annual taxable income (PKR) | Marginal rate |
|---|---|
| Up to 600,000 | 0% |
| 600,001 to 1,200,000 | 1% on the amount above 600,000 |
| 1,200,001 to 2,200,000 | 11% on the amount above 1,200,000 |
| 2,200,001 to 3,200,000 | 23% on the amount above 2,200,000 |
| 3,200,001 to 4,100,000 | 30% on the amount above 3,200,000 |
| Above 4,100,001 | 35% on the amount above 4,100,000 |
All tax figures in this table are statutory rates sourced from the Income Tax Ordinance, 2001, as amended by the Finance Act 2025 (FBR). They are confirmed by two independent sources for FY2025-26.
What this means for the employer
Income tax does not add to the employer's cost. The employer withholds it from the employee's gross pay and remits it to the FBR. The administrative obligation is real: monthly withholding, a remittance deadline of the 15 daysth, and annual reconciliation. Teamed handles all of this. The financial cost to the employer is zero beyond the salary itself.
Illustrative effective rates
A PKR 200,000 monthly salary equals PKR 2,400,000 annually, which falls in band 3. The illustrative effective rate for that salary level is around 6 to 7% of gross annual income, well below the headline marginal rate of 11%. These are illustrative figures computed from the verified slab table and are not statutory figures. They will vary with any allowances or deductions the employee is entitled to claim.
Statutory leave: what the law requires
Every Pakistan employee with at least 12 months of service earns 14 days consecutive paid leave days per year under the Factories Act, 1934. They also get 10 days days of casual leave at full pay and 16 days sick days at half pay.
Public holidays come on top. There are 11 gazetted federal holidays per year, plus any provincial additions.
Annual leave
The 14 days-day entitlement kicks in after 12 months of continuous service under the Factories Act, 1934, Section 49-B. During the first year the employee is not yet entitled to this leave, which is worth keeping in mind for short-tenure exit modelling. Many employers grant leave in advance of the qualifying date as market practice.
Casual leave and sick leave
Pakistan uses two separate shorter-leave categories. Casual leave is 10 days days per year at full pay. These are for unplanned absences, personal matters, and short illness. Sick leave is 16 days days per year at half pay. These are additional to annual leave, not included within it.
Parental leave
Maternity leave for a first child is around 25.71 weeks under federal law, paid at full salary. This figure is corroborated rather than fully verified from a live primary source. Confirm the applicable rate with Teamed at onboarding. Paternity leave is 30 days fully paid days for the first three children under the Maternity and Paternity Leave Act, 2020. This figure is also corroborated pending primary source re-verification.
Public holidays
Federal gazetted holidays number 11 per year under the Cabinet Division notification. Employees who work on a gazetted holiday are entitled to substitute time off or a compensatory payment. Budget for that possibility across your team.
Working time limits
Normal working time is capped at 48 hours per week and 9 hours per day under the Factories Act, 1934. Hours above those limits must be compensated as overtime. A standard Monday-to-Saturday six-day week at eight hours per day sits within the limit.
How Teamed handles Pakistan employment costs 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.
Payroll, EOBI, income tax withholding, and the full Pakistan employment compliance stack run on one platform.
Real HR and legal experts handle your Pakistan hires from the first offer letter through every FBR remittance and annual leave calculation. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the EOBI line, the gratuity reserve, and the provincial levy where it applies. Nothing is hidden inside the management fee.
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Pakistan contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Pakistan entity without switching systems. EOR is the right structure for a first Pakistan hire, until it isn't. Teamed does not lock you in. Start from the Pakistan hiring overview or run the Employer Cost Calculator to see the full picture.
Frequently asked questions
What does it cost to hire someone in Pakistan in 2026?
A Pakistan hire typically costs around 106 to 108% of gross salary in direct employer cost, making it one of the lowest employer-cost markets in South Asia. The EOBI employer levy is 5% of the minimum wage, not 5% of salary, so the monthly EOBI cost is a fixed PKR amount regardless of what the employee earns. Income tax is a withholding obligation on the employee, not an additional employer cost. Add the Teamed fee from $599 per employee per month and statutory leave reserves for the full picture.
How does Pakistan's EOBI employer contribution work?
Employers pay 5% of the statutory minimum wage per employee per month into EOBI, the mandatory old-age pension fund. The key point is that the calculation base is the minimum wage, not the employee's actual salary. A hire earning PKR 400,000 a month incurs the same EOBI cost as a hire earning PKR 50,000 a month. Employees contribute 1% of the minimum wage on their side, which the employer withholds and remits.
What is the income tax rate in Pakistan in 2026?
Pakistan uses a six-band slab table for salaried employees in FY2025-26. Income up to PKR 600,000 per year is taxed at 0%. The rate then rises through 1%, 11%, 23%, and 30% bands before reaching the top rate of 35% above PKR 4,100,001 per year. Income tax is withheld from the employee's salary. It does not add to the employer's gross cost.
What statutory leave must a Pakistan employer provide?
After 12 months of service, every employee is entitled to 14 days consecutive paid annual leave days under the Factories Act, 1934. In addition, employees get 10 days days of casual leave at full pay and 16 days sick leave days at half pay per year. Federal gazetted public holidays add 11 more days. Normal working time is capped at 48 hours per week.
What is gratuity in Pakistan and when must it be paid?
Gratuity is a statutory exit payment under the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968. The rate is 30 days of wages for every completed year of service. There is no statutory cap on the total. It is payable when a permanent employee leaves, whether through redundancy or resignation. A five-year hire at PKR 200,000 a month carries an illustrative gratuity of around five months of daily pay on exit. That is an illustrative figure, not a statutory amount.
The question we get most on Pakistan hires is whether the 5% EOBI rate applies to the full salary. It does not. It applies to the minimum wage base. On a senior professional salary, the actual EOBI cost is a small fixed amount per month. Most finance teams budget ten times that figure because they assume it scales. It does not. Confirm the base before you model the hire.
Pakistan's EOBI levy is 5% of the minimum wage, not 5% of salary. Senior hires cost the same fixed amount as junior hires in social contributions.
Add a 0% zero-rate band up to PKR 600,000 and 14 days leave days, and the loading stays well below 110% of gross.
Know every line before you send the offer.
