How Do You Pay Remote Employees in Pakistan?

Step-by-Step Process for Paying Remote Employees in Pakistan

1. Verify that the worker is correctly classified as an employee under the Employment Ordinance of 1961, not as an independent contractor.
2. Register your company with the Federal Board of Revenue (FBR) to obtain a National Tax Number (NTN) for tax purposes.
3. Open an account with the Employees' Old-Age Benefits Institution (EOBI) for mandatory pension contributions.
4. Collect required documentation, including CNIC copies, employment contracts, and employee banking details.
5. Set a compliant pay schedule based on the Payment of Wages Act 1936, ensuring timely salary disbursements.
6. Process payroll ensuring correct tax withholdings under the Income Tax Ordinance 2001 and contributions to EOBI.
7. Pay employees via compliant methods (local bank transfer or cheque) and issue itemized payslips as required by law.
8. Deposit withheld taxes to the FBR on a monthly basis and file annual tax returns using the prescribed forms.
9. Submit EOBI contributions monthly and file relevant returns with the institution.
10. Ensure compliance with the Workers' Welfare Fund and Workers' Profit Participation Fund requirements where applicable.

What Are The Legal Ways To Pay Pakistan-Based Employees From Another Country?

Local Bank Transfer

• Best for: Employers with a registered entity in Pakistan paying employees via domestic bank transfers in PKR.
• Pros: Cost-effective, fast settlement, and widely accepted by employees and banks in Pakistan.
• Limitations: Requires local bank accounts and tax registrations; cross-border funding may introduce FX costs.
• Compliance note: Payroll must comply with FBR rules and wage payment laws; wages must be paid in Pakistani Rupees and reported under local tax systems.

Direct Payroll Services

• Best for: Companies with a Pakistani entity that want to outsource payroll calculations, filings, and compliance.
• Pros: Ensures accurate tax withholding, automated filings with the FBR and reduces administrative burden.
• Limitations: Still requires entity setup, local registrations, and oversight of compliance.
• Compliance note: Subject to FBR regulations and EOBI contributions; no restrictions on paying in PKR, but strict reporting and deposit schedules apply. Playroll's Global Payroll services manage this end-to-end.

Employer of Record Platform Disbursement

• Best for: Foreign companies hiring Pakistan-based employees without establishing a local entity.
• Pros: The EOR becomes the legal employer, handling payroll, tax filings, benefits, and compliance with FBR and local labor laws.
• Limitations: Higher cost than direct payroll and less direct control over employment contracts.
• Compliance note: EOR providers manage registration, tax remittance, and reporting obligations with the FBR and labor departments. Explore Playroll's Employer of Record services.

Contractor Payment Platforms

• Best for: Paying Pakistan-based independent contractors for project-based or flexible work arrangements.
• Pros: Simplified onboarding, cross-border payments, and reduced administrative overhead.
• Limitations: Does not cover employee benefits, tax withholding, or labor law protections; higher misclassification risk.
• Compliance note: The FBR enforces strict classification rules; contractor platforms do not assume employer obligations. Explore Playroll's Contractor Management Platform.

What Taxes Do I Need To Handle for Pakistan Employees?

• Income Tax (FBR): Withheld from employee wages based on progressive rates ranging from 5% to 35%.
• Social Security Contributions (EOBI): Employer and employee contributions for old-age benefits, typically 5% of the minimum wage.
• Workers' Welfare Fund: Employer-paid levy calculated as a percentage of profits, applicable to certain industries.
• Workers' Profit Participation Fund: Mandatory profit-sharing scheme for employees in eligible companies.

Use Playroll's payroll tax calculator to estimate your total employer costs in Pakistan.

What Are the Biggest Compliance Risks When Paying Employees in Pakistan?

• Worker misclassification (FBR, Labor Courts): Misclassifying employees as contractors can result in back taxes, penalties, and liability for unpaid benefits under local laws.
• Payroll tax deposit failures (FBR): Late or incorrect deposits can incur penalties and interest charges on the unpaid amount.
• Permanent establishment risk (FBR): Employing workers in Pakistan may create taxable presence for foreign companies, triggering corporate tax obligations.
• Late filings and reporting penalties (FBR): Missing deadlines for tax returns or EOBI filings can result in fines per form, escalating with the length of delay.
• Wage law violations (Labor Courts): Non-compliance with minimum wage, overtime, or other labor laws can lead to back pay claims and civil penalties.
• Non-compliance with EOBI contributions: Failure to register or remit contributions can result in penalties and legal action by the EOBI.

Pay Your Remote Employees in Pakistan

Pay your remote employees compliantly in Pakistan, without the heavy lifting. We support local payroll where you have your own entity or for international hires with Playroll’s EOR services.

• Accurate payroll processing: Gross-to-net processing, compliant payslips, and on-time payments — aligned with the Payment of Wages Act and itemized payslip obligations.
• Taxes & contributions covered: Registrations, filings, and remittances to the FBR, EOBI, and other relevant agencies across all applicable jurisdictions.
• Built for local compliance: We handle statutory obligations and year-end reporting, including income tax returns and EOBI filings, ensuring compliance with all local regulations.

Book a demo to run payroll in Pakistan with confidence.