How does Pakistan payroll tax work in 2026?

Why the minimum-wage basis matters

Because EOBI is calculated on the minimum wage rather than on gross salary, the contribution is a fixed rupee amount per month, not a percentage of your payroll bill. A company hiring ten engineers at PKR 150,000 per month each pays the same total EOBI per head as a company hiring ten workers at the minimum wage. This keeps the employer's mandatory social-security cost predictable and low relative to the salary level.

Provincial social security (PESSI and SESSI)

Punjab employers with six or more workers must register with the Punjab Employees Social Security Institution. Sindh employers register with SESSI. Both schemes provide health and occupational-injury cover. The contribution rates and wage ceilings are set at province level and are reviewed periodically. Teamed's in-country partner applies the correct provincial rate for your employees' work location.

What EOBI provides

EOBI pays an old-age pension on retirement, an invalidity pension for permanent disability, and a survivors' pension for dependants. Employees registered with EOBI for at least fifteen years become eligible for the old-age pension at 60 (men) or 55 (women). The pension amount is modest by design; EOBI is a safety net, not a retirement savings vehicle.

No mandatory occupational pension scheme

Pakistan does not have a separate mandatory workplace pension equivalent to the UK's auto-enrolment or Germany's occupational pension. EOBI is the only compulsory old-age scheme. Some employers offer a Provident Fund as a voluntary benefit. Teamed can advise on standard market-practice benefit packages for Pakistan hires if needed.

How the slabs work for salaried workers

Pakistan applies a progressive marginal rate system. The rate in each slab applies only to the portion of income within that band. The FBR (Federal Board of Revenue) publishes the slab table each year in the Finance Act. The slabs shown here are the FY 2025 to 2026 rates under the Finance Act 2025.

The jump at PKR 2.2 million

The rate doubles from 11% to 23% as income crosses PKR 2,200,001. This is the most significant band boundary for salaried professionals. A mid-level manager moving from slab 3 to slab 4 sees their marginal rate more than double. Structuring compensation to account for this boundary is worth reviewing before extending an offer.

Non-salaried income

The six-slab schedule shown applies to salaried persons (employees). Non-salaried individuals (sole traders, freelancers) face a different schedule under the Income Tax Ordinance, 2001. All employee income tax is withheld at source by the employer and remitted to the FBR monthly.

The monthly withholding cycle

At the end of each payroll month the employer calculates the income-tax due for each employee based on their projected annual income and the applicable slab. The withheld tax must be deposited with the Federal Board of Revenue by the 15th of the following calendar month. This deadline applies even if the payroll itself runs on the last working day of the month.

Annual salary certificate

Each employer issues an annual salary certificate to every employee after the close of the tax year (30 June). The certificate shows total salary paid and total tax withheld. Employees use this to file their personal income-tax return by the statutory deadline. The employer's withholding obligation runs throughout the year and is reconciled via the annual return.

FBR registration and challan payments

Employers must be registered with the FBR as withholding agents before hiring. Each monthly tax deposit uses a prescribed challan (payment form) referencing the employer's National Tax Number. Late deposits attract a penalty under the Income Tax Ordinance, 2001.

Payroll frequency

Pakistan law requires wages to be paid at least monthly. The standard market practice is a single monthly payroll run on or before the last working day of each month. Most employers use this cycle, giving a payroll year of 12 pay periods.

1. Collect monthly salary data

   Gather basic salary, allowances, bonuses, and any taxable benefits for each employee before the payroll run closes.

2. Calculate annual projected income

   Annualise the monthly gross to identify which FBR income-tax slab applies and compute the monthly tax withholding amount.

3. Deduct employee income tax and EOBI

   Subtract the monthly tax withholding and the employee EOBI share from gross pay to arrive at net take-home salary.

4. Calculate employer EOBI contribution

   Calculate the employer EOBI contribution at 5% of the minimum wage per employee, a fixed monthly amount.

5. Deposit tax with the FBR

   Remit the withheld income tax to the Federal Board of Revenue by the 15 days-of-month deadline via the prescribed challan.

EOBI contribution mechanics

EOBI contributions are calculated on the minimum wage, not on the actual salary. This means the monthly PKR cost per employee is fixed at a known amount regardless of the salary you pay. Both employer and employee contributions go to EOBI via the employer's monthly remittance. The employer deducts the employee share from net pay and remits the combined total.

Gratuity (end-of-service payment)

Under the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, permanent workers who complete at least one year of service are entitled to gratuity on termination. The accrual rate is 30 days of wages for each completed year of service. This is a separate cost from EOBI and sits outside the monthly payroll run. Teamed accrues gratuity liability throughout the contract and calculates final settlement on departure.

Voluntary Provident Fund

Many Pakistani employers offer a company Provident Fund as a benefit. Typical contribution rates are negotiated between employer and employee, commonly matching contributions at 8 to 10 percent of basic salary. These are not mandated by law; Teamed can advise on standard market practice for the grade and sector you are hiring into.

The federal minimum wage

The federal minimum wage is PKR 37,000 per month as of FY 2025 to 2026. Punjab raised its provincial floor to PKR 40,000 per month from July 2025, which is higher than the federal rate. Employers in Punjab must use the provincial rate where it exceeds the federal floor.

Real HR and legal experts handle your Pakistan hires, from the first offer letter through every FBR remittance and year-end salary certificate. An actual person, not a ticket queue. There is no setup fee and no exit fee. All employer costs passes through at cost, itemised on every invoice.

EOR payroll, contractor onboarding, and entity setup all live on one platform. A Pakistan contractor who converts to a direct employment contract keeps their record intact. That same employee can graduate from EOR to your own Pakistan entity without switching systems, until it isn't the right structure. Run the Employer Cost Calculator to see the full Pakistan cost picture before you extend an offer. Start from the Pakistan hiring overview.

Key sources: EOBI contribution rates, FBR income tax slabs FY 2025 to 2026, and PwC Tax Summaries: Pakistan individual taxes.