Do I Need a Local Entity to Hire in Pakistan?

In Pakistan, a "local entity" refers to a recognized business presence that can act as the employer, typically a subsidiary or branch office. This setup allows you to be recognized locally as an employer, enabling you to manage payroll and comply with local employment laws.

Without a local entity, you generally can't register as an employer, manage mandatory tax processes, or issue compliant employment contracts. An alternative is using an Employer of Record (EOR), which can handle these responsibilities on your behalf.

What is Required to Employ Someone in Pakistan?

• Local employing entity required to directly employ? Yes (You need a local entity to hire employees directly.)
• Payroll registration required? Yes (You must register with the Federal Board of Revenue for payroll compliance.)
• Withholding/tax remittance required? Yes (Employers must withhold income tax from salaries.)
• Social contributions required? Yes (Employers must contribute to the Employees' Old-Age Benefits Institution.)
• Local employment agreement required? Yes (Written contracts are mandatory under the Employment Ordinance.)
• Mandatory benefits to budget? Yes (Includes annual leave, sick leave, and social security contributions.)
• Works council/collective agreements considerations? Usually (Applicable in certain sectors with collective bargaining agreements.)

Best Options If You're Hiring in Pakistan

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but be cautious about misclassification risks.

While you can hire contractors without establishing a local entity, Pakistan's labor laws are protective of workers. If the contractor's role resembles that of an employee, you might face legal challenges. It's crucial to ensure that contractors operate independently and are not integrated into your business operations.

• Ensure the contractor has multiple clients.
• Avoid controlling their work hours or methods.
• Keep the relationship clearly defined in the contract.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Pakistan, depending on the required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated PKR 20,000–50,000 per month ($70–$175)
• Payroll provider: Estimated PKR 5,000–15,000 per employee per month ($18–$53)
• Employer registrations and recurring compliance: Estimated PKR 10,000–30,000 per year ($35–$105)
• Corporate tax filings and annual reporting: Estimated PKR 30,000–100,000 per year ($105–$350)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions, typically around 6% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Pakistan

Hiring in Pakistan can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Pakistan quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.