Payroll in Pakistan: employer costs, taxes & compliance (2026)

Running payroll in Pakistan means handling a few moving parts each cycle. You calculate gross salary, deduct employee social security contributions and income tax, add your own employer contributions on top, and then send everything to the right place. None of that is unusual, but the specifics, the rates, the thresholds, the timing, are all local and non-negotiable.

This guide walks through what it actually costs to employ someone in Pakistan, how the pay cycle works in practice, what leave and termination rules mean for your payroll runs, and when it makes sense to hand the whole thing to a specialist.

The gap between what an employee takes home and what you actually spend is real in Pakistan. On top of gross salary you carry employer social security contributions, which add a meaningful chunk to your total cost. Think of it as a noticeable premium over gross, and see the table below for the exact rates.

The employee side is comparatively light, with a social security rate well under five percent. That keeps the tax wedge, the difference between what you pay out and what the worker receives, fairly contained. Still, you need to model the employer-side cost properly from the start, because it changes your budget from day one.

Pakistan does not require a thirteenth-month payment, so your annual payroll obligation is twelve months of salary plus the statutory contributions. The minimum wage sits at PKR 37,000 per month, and that is the floor you must clear before any deductions. Pay frequency is monthly in most workplaces, so your cycle is relatively predictable. The key discipline is getting withholdings and employer contributions calculated correctly each month and keeping records tidy for any filings that follow.

Employees are entitled to 14 days of annual leave, and that accrual needs to sit in your payroll model as a real liability. Maternity leave runs to 16 weeks, covered under local rules, so factor that into headcount planning if you have a larger team. There is no statutory paternity leave entitlement right now. On the way out, notice runs to just over four weeks, and severance is the one that deserves attention, at nearly 23 weeks it is a significant line item in any termination calculation. Both of those show up as final-pay obligations, so your offboarding process needs to trigger them cleanly.

If you do not have a registered legal entity in Pakistan, you cannot run payroll there directly, full stop. Even if you do have an entity, keeping up with local rate changes, filing requirements, and leave rule updates takes real effort. A global payroll provider or employer of record handles the entity question, runs the calculations in PKR, and absorbs the compliance overhead. That tends to make sense when you have a small team in-country, when you are moving quickly, or when your internal team simply does not have the capacity for another jurisdiction.