Pakistan is the fifth most populous country in the world and the second-largest in South Asia after its neighbor, India. Since partitioning from India in 1947, Pakistan’s population has grown significantly and is now home to 240.537 million people. Over the past several decades, the country’s economy has also shown impressive growth.

Its GDP has reached a value of $373.08 billion, and 2.6% growth is expected in 2025. With such a large population, Pakistan’s per capita GDP is still low, however, at 1,580 per year, and the World Bank classifies it as a low-middle-income country.

Export Category Export Value (USD)
House Linens $3.52 billion
Rice $2.08 billion
Non-Knit Men’s Suits $1.39 billion
Knit Sweaters $1.32 billion
Refined Petroleum $1.24 billion

Pakistan’s middle class is expanding, but a significant divide remains between urban and rural areas in the country. At roughly 37.4% of Pakistan’s workforce of 83.64 million people, the agricultural sector is still the biggest employer of workers. Industry employs 25.4% of workers, while services employ 37.2%.

Business services, transport, tourism, and travel are all major services in the country, while ICT is fast becoming one of Pakistan’s most important industries. Its biggest exports, largely sold to the US, the UAE, the UK, China, and Germany, include fabric and clothing, rice, and refined petroleum.

Foreign investment in Pakistan is steadily increasing, with new areas such as ICT, renewable energy, and healthcare services attracting new investors. When they partner with Pakistan PEOs, investors find themselves better positioned to achieve success in their enterprises in a shorter time than when they try to manage local workers without these helpful service providers.

What is a Pakistan PEO?

A PEO, or Professional Employment Organization, is a type of service provider that lets clients outsource their HR and compliance functions when they work with employees in other states or countries. The challenges of setting up a business and hiring workers in Pakistan are real. To meet these challenges, you’d normally need to work with experienced HR professionals and tax and legal experts.

Instead, you can choose to partner with a PEO and receive the help and support of a variety of experts through one service provider. Modern PEOs normally provide their services through advanced, cloud-based platforms that are full of tools and functions. These services are backed by expert knowledge of the unique rules and regulations regarding taxes and employment in Pakistan.

With a PEO, you gain a co-employer for your workers and a partner that will take care of their HR needs, including payroll, benefits administration, taxes, and paid time off (PTO) management. You can outsource these difficult functions to your PEO and use the time you save on administration to focus more on your company’s core business activities. Your PEO will also manage compliance for you, ensuring that your Pakistani workers are hired and employed in line with all local laws. 

Another type of service provider that you may have heard of is an EOR, or Employer of Record. Like PEOs, EORs manage HR functions and compliance for their clients. However, while a PEO works with clients that already own entities in Pakistan, EORs help their clients hire from abroad.

An EOR will use its entity to contract workers in Pakistan so that its clients don’t need to establish entities of their own in the country. Otherwise, the services these providers offer are quite similar, and in many cases, the terms PEO and EOR are used synonymously.

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  • Hire employees in Pakistan with a Pakistan EOR
  • No local entity is needed
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Why Hire through a PEO in Pakistan?

Pakistan’s incredibly large workforce, its booming economy, and its new reputation as a center for ICT expertise are some of the main reasons why Pakistani employees are increasingly sought-after. Working in Pakistan can be challenging for foreign investors, however, due to legal, linguistic, and cultural differences that may be hard to deal with.

With a PEO, you receive help and guidance to navigate these challenges and ensure your hiring is compliant with local regulations, such as the following:

  • Regular Hours: Pakistani employees typically work eight or nine hours per day and not more than 48 hours per week. They must receive an hour-long break after working for six hours, though this is normally spread over several short breaks for meals, rest, and prayer.
  • Overtime: Pakistani workers can perform up to three hours of overtime a day, but not more than 12 hours a week. Their shifts cannot exceed 12 hours a day, including breaks, overtime, and regular hours. Most workers must be paid 200% of their normal wages for overtime work.
  • Annual Leave: After working for their employer for a full year, employees are entitled to a minimum of 14 days of annual leave. They may carry over up to 14 days of leave to the next year and accumulate up to 28 days.
  • Maternity and Paternity Leave: Pregnant mothers receive 12 weeks of maternity leave. This leave is fully paid by their employers. Fathers can take paternity leave in some provinces, while others have no mandate for this leave. In Punjab Province, fathers can take up to seven days of paternity leave, but only twice during their time with one employer.

Setting up an entity in Pakistan can also be challenging, but partnering with a PEO can help relieve some of the difficulties involved. Investors generally register LLCs (limited liability companies) or LLPs (limited liability partnerships) when they set up in the country. The World Bank has ranked Pakistan 72nd out of 190 countries for ease of setting up a business because it requires five procedures and at least 16.5 days to complete this task.

It can also be difficult to get access to electricity for a premises, register a property, and pay taxes for your business. PEOs can help with obtaining a national tax number (NTN) from the district Excise & Taxation Department. It can also help you register your employees with the appropriate provincial social security authority, the labor department, and the Employees Old-Age Benefits Institution (EOBI).

In addition, some PEOs provide platform tools to help you manage your recruitment function, while a small number offer active recruitment services from professional recruiters. All PEOs help with contract management, onboarding, payroll, and benefits to keep you fully compliant with all labor laws.

Services Offered by Pakistan PEOs

PEOs can help reduce your risk, costs, and administrative burden when hiring workers in Pakistan. Most provide the following core services:

Payroll Management

To manage payroll effectively and accurately, you need to be an expert in Pakistan’s tax and labor laws or work with an experienced and knowledgeable service provider. When you hire employees with a PEO co-employer, it will create profiles for them on its platform and set up their unique calculations on your payroll.

For each pay period, which can’t be longer than one month, you’ll need to supply the PEO with the time and attendance data you’ve collected as the employees’ worksite employer. With that data, the platform can automatically run its payroll calculations.

It will determine how much each employee earned, the amounts that should be withheld for taxes and deducted for social schemes, and what each person’s net pay will be. The PEO will then pay those salaries to your employees, by either bank transfer or other methods such as prepaid employee cards or even checks.

Employee Benefits Administration

Your Pakistani employees are entitled to a range of benefits that include paid annual leave, sick leave, and public holidays. Your PEO partner will keep track of this PTO for you, usually offering an employee portal to help employees view their entitlements.

Employers must also deduct money from their employees’ paychecks for social security benefits, and need to add employer contributions on top of these, too. Both sides make contributions to the Employees Old-Age Benefits Institution (EOBI) for old age, disability, and survivors’ pensions, based on the minimum wage.

Benefit Employee Contribution Employer Contribution
EOBI 1% of the minimum wage 5% of the minimum wage

Contributions are assessed in Pakistani rupees (PKR). For 2025–26, the monthly minimum wage for unskilled workers ranges from PKR 37,000 to PKR 40,000, depending on the province (approximately $131–$143 USD at 1 USD ≈ 280 PKR).

If you want to offer additional benefits to your employees, many PEOs provide access to pension, private health insurance, life insurance, and equity plans. They normally administer these benefits for you for an additional fee.

Tax Compliance

All employers are obliged to calculate and withhold personal income taxes from their employees’ paychecks. These withholdings must be collected and remitted to the Federal Board of Revenue (FBR) each month.

Workers whose salaries exceed 75% of their taxable income are taxed following this schedule:

Income (PKR) Base Tax (PKR) Tax on Excess
0 – 600,000 0 0%
600,001 – 1,200,000 0 1%
1,200,001 – 2,200,000 6,000 11%
2,200,001 – 3,200,000 116,000 23%
3,200,001 – 4,100,000 346,000 30%
Over 4,100,000 616,00 35%
Workers whose salaries are only 5% or less of their taxable income are taxed according to this schedule:
Income (PKR) Base Tax (PKR) Tax on Excess
0 – 600,000 0 0%
600,000 – 1,200,000 0 15%
1,200,000 – 1,600,000 90,000 20%
1,600,000 – 3,200,000 170,000 30%
3,200,000 – 5,600,000 650,000 40%
Over 5,600,000 1,610,000 45%

Recruitment and Employment Contracts

Some clients come to PEOs with candidates in mind or already hired on as employees. However, if you need help finding skilled talent in Pakistan, different PEOs can help you in different ways. Some provide free or add-on tools on their platforms that help you manage recruitment yourself, including applicant tracking systems (ATSs) or access to their talent pools.

Others employ recruiters who can confer with you to assess your needs, then use their expertise to find the best possible candidates for your openings. Whether you find candidates on your own or with the help of a partner, PEOs normally help you to hire them. They typically recommend salary bands and benefits and help you negotiate terms with your candidates.

They then generate legally compliant contracts and often manage their signing and storage for you. Contracts in Pakistan should be written in Urdu or English. Normally, contracts are permanent, but fixed-term contracts are allowed for non-durable work.

These can only last for a maximum of nine months, however. Probation periods are allowed in Pakistan and may last up to three months, during which time either party may terminate the agreement without notice.

Onboarding

With contracts signed, your new employees need to be onboarded, and this requires some activity from both you and the PEO. You’ll normally need to provide orientations, job training, and access to tools, materials, and data.

The PEO will handle the administrative side of onboarding. It will collect your workers’ personal and banking information, store their important documents, and register them with the labor department and the EOBI.

Terminations

You may eventually need to terminate workers for economic reasons or their individual performance. Your PEO will use its expertise to assess your reasons for terminating workers and will advise you if you need to provide notice periods and severance pay.

In general, Pakistani employees must receive 30 days’ notice of termination if they’re not being dismissed for gross misconduct. You may also need to pay them severance at the rate of 30 days’ pay for each year they worked for you.

Advantages of Using a PEO in Pakistan

Working with a PEO as your co-employer in Pakistan can produce several advantages, including:

  • Speedy Market Entry: Most PEOS can onboard employees in Pakistan in less than a week using their automated onboarding portals. This helps you start working in the local market quickly.
  • Risk Mitigation: PEOs have expert knowledge of the labor and tax laws in Pakistan and use this to shield you from the risks of non-compliance. 
  • Focus on Core Activities: By outsourcing your HR and compliance needs to a PEO, you can reduce the time and effort you spend on administration and focus more on activities that create value.
  • Cost Savings: Hiring a PEO can give you access to a management system, professional support, and HR expertise for a lower cost than hiring an in-house HR team.

How to Engage a Pakistan PEO?

There are lots of PEO providers offering a range of services in Pakistan, and any of them can be engaged in just a few short steps.

  • First, consider your budget and the services you require. Search out a provider that offers everything you require and has a reputation for professionalism and reliability in Pakistan.
  • Next, reach out to the provider for a consultation. You’ll explain your needs and goals, and the PEO will give you a quote for the services it can provide.
  • Finally, if you’re happy with the terms, you can sign a service agreement with the provider and get started onboarding your employees to its platform.

Partner With a PEO in Pakistan To Expand Your Business Successfully

Pakistan offers significant growth potential for international companies, with its large workforce, rising middle class, and expanding tech sector. But navigating complex labor laws, language differences, and bureaucratic hurdles can make local hiring a challenge—especially without local HR expertise. That’s where a PEO comes in.

Looking for a trusted PEO provider in Pakistan? Remote People connects businesses with reliable PEO partners that streamline HR management, ensure tax compliance, and simplify payroll. Contact us today to build your team in Pakistan quickly and compliantly.