HR and Employment Compliance in Pakistan: A Practical Checklist

Employment law in Pakistan is spread across federal and provincial statutes. Since the 18th Amendment in 2010, labour has largely been a provincial subject, so a business in Karachi and one in Lahore can face different rules on the same issue — while federal laws such as the EOBI Act and the Income Tax Ordinance apply everywhere. In Punjab, most labour laws have now been consolidated into the Punjab Labour Code 2026. This checklist sets out what every employer should have in place, and where to look for the detail.

1. Know which laws apply to you

Coverage often depends on headcount, the type of establishment and whether a person is a "worker" or in a managerial role. Map your workforce against each law before assuming it does or does not apply.

2. Written terms from day one

Standing Orders laws require employers to give workers their terms and conditions of service in writing. In practice, that means an appointment letter or employment contract at the time of hiring, setting out:

• job title, department, place of work and reporting line;
• classification — permanent, probationer, temporary and so on — and any probation period;
• wages, allowances and the date of payment;
• working hours, weekly rest day, leave and holidays;
• notice and termination terms, in line with the applicable Standing Orders or, in Punjab, the Labour Code 2026;
• confidentiality, conflicts of interest and the policies the employee must follow.

3. Minimum wages

Minimum wages are set provincially and revised each year, usually from 1 July. In Sindh, the provincial cabinet approved Rs 43,000 a month for unskilled adult workers from 1 July 2026 (up from Rs 40,000), with proportionate increases for other skill categories. Rates in other provinces are notified separately, so check the latest notification for each location where you employ people. The minimum wage also drives the contribution base for EOBI and social security, so a change affects more than payroll.

4. EOBI registration and contributions

The EOBI Act applies to establishments employing five or more people, and continues to apply even if headcount later falls. Employers register the establishment and every insured employee, and pay monthly contributions of 5% by the employer and 1% by the employee, calculated on the minimum wage notified for the purpose. EOBI provides old-age pensions, invalidity and survivors' benefits, so missed registrations eventually surface as employee complaints.

5. Provincial social security: SESSI and PESSI

Employers in Sindh register with the Sindh Employees' Social Security Institution (SESSI) and employers in Punjab with the Punjab Employees Social Security Institution (PESSI). The employer pays a monthly contribution for employees within the wage limit fixed under the law — 6% of wages under the Sindh Act; in Punjab, confirm the current rate and wage limit under the Labour Code 2026 and its transition provisions. In return, covered employees receive medical care and cash benefits for sickness, maternity and work injury. Registration, contribution challans and employee cards should be checked at least once a year.

6. Salary tax withholding

Under section 149 of the Income Tax Ordinance 2001, the employer deducts tax from each month's salary based on the employee's estimated annual taxable salary, deposits it with FBR on time, files the required withholding statements and issues annual tax deduction certificates. Get the slabs right — ours are summarised in Salary income tax slabs for Tax Year 2027 — and recalculate when salaries change or bonuses are paid. Failure to deduct or deposit makes the employer personally liable for the tax, with default surcharge and penalties.

7. Working hours, overtime and leave

• Hours: under the Factories Act 1934, adult workers should not work more than 48 hours a week or 9 hours a day; provincial factories and shops laws set similar limits.
• Overtime: paid at twice the ordinary rate for factory workers.
• Annual leave: 14 days with pay after twelve months' continuous service in a factory, with casual leave, sick leave and festival holidays under the applicable law.
• Maternity: provincial maternity benefit laws protect pregnant employees — reflect them in your leave policy.

In Punjab, hours, overtime and leave are now governed by the Labour Code 2026, so check its provisions for your workforce rather than the older factories and shops laws.

8. Gratuity and provident fund

Standing Orders laws give covered workers a statutory right to gratuity on leaving service. Under the federal Standing Orders it is thirty days' wages for every completed year of service (or part exceeding six months); Sindh and Khyber Pakhtunkhwa apply similar rules, and in Punjab the Labour Code 2026 sets its own gratuity rules — check the Code for your workforce. Many employers instead, or additionally, run a provident fund or a gratuity fund. Whether a contributory provident fund can replace statutory gratuity depends on the law that applies to you, so take advice. Funds that are recognised or approved under the Sixth Schedule to the Income Tax Ordinance carry tax advantages for employer and employee.

9. An HR policy manual

A clear, written manual reduces disputes and makes managers consistent. It should cover recruitment, attendance, leave, conduct, performance, disciplinary and grievance procedures that follow the applicable Standing Orders (or, in Punjab, the Labour Code 2026) on misconduct and inquiries, travel and expenses, and IT and data use. The Protection against Harassment of Women at the Workplace Act 2010 requires organisations to adopt a code of conduct and constitute a three-member inquiry committee that includes at least one woman.

10. Record keeping

Keep personnel files, attendance and overtime registers, wage sheets, leave records, EOBI and social security challans, and salary tax records. Labour inspectors, EOBI and SESSI or PESSI may ask to see them, and income tax records must generally be kept for six years after the end of the tax year to which they relate.

Employer checklist

• Signed appointment letter or contract on file for every employee
• Workforce mapped to the applicable federal and provincial laws, including the Punjab Labour Code 2026 for staff in Punjab
• Wages at or above the latest notified provincial minimum wage
• EOBI registration complete; 5% and 1% contributions paid monthly
• SESSI or PESSI registration and contributions up to date
• Salary tax deducted, deposited and reported; certificates issued
• Hours, overtime and leave tracked and paid correctly
• Gratuity or fund liabilities calculated and provided for in the accounts
• HR policy manual issued, with a harassment code of conduct and inquiry committee
• Personnel, wage and tax records retained and inspection-ready

How Veridian's HR Consulting helps

Our HR Consulting practice drafts appointment letters and HR policy manuals, structures payroll and salary tax, manages EOBI, SESSI and PESSI registrations, and carries out HR compliance reviews of labour law obligations, including the Punjab Labour Code 2026. Our Taxation practice supports salary tax and withholding compliance, and for groups employing people in the UAE, the UK or Saudi Arabia we cover those regimes too — see our jurisdictions page.

Not sure your employment paperwork would survive an inspection? Book a consultation and talk to us.

This checklist reflects our understanding as at October 2026 and is a general guide, not legal advice. Labour laws and minimum wage notifications differ by province and change often — check the latest notifications, or ask us, before acting.