Pakistan holds the fifth largest population in the world. It has a fairly young population consisting of an average of 22.8 years old. Pakistan is a semi-industrial country that focuses its production on chemicals, leather goods, textiles, carpets / rugs, and sports commodities. Trade and services occupy the largest component of their economy while agriculture comes in second.

Major Economic Hubs:

Islamabad, Karachi, Lahore, Faisalabad

Skills in Demand:

Information And Communications Technology Professionals, Legal Professionals, Healthcare Professionals, Teaching Professionals

Resident Tax Information

All residents of Pakistan are taxed on their worldwide income. However, a non-resident individual is taxed only on source income earned in Pakistan, which includes

• Income deemed to be received in Pakistan

• Deemed to accrue or arise in Pakistan

Income tax in Pakistan can be quite progressive. There is a 75% rate for those who earn more than what they're taxed on, and it's applied to both individual citizens as well as corporate firms operating within the country.

The following tax rates apply in other cases (individuals and Association of Persons):

Social Security

To ensure the old-age security of people in Pakistan, social security laws provide for both full and partial or early retirement benefits. The two general social security schemes:

• Provincial Employees Social Security Scheme (PSSS)

• The Employees' Old-Age Benefits Institution (EOBI)

For full pension:

• An employee must have attained 60 years of age for male employees and 55 years for female employee

• At least 15 years of contributions

The social security in Pakistan essentially covers two major elements that include:

Dependent's/Survivor's Benefit

Social Security laws provide for survivor benefits that include dependents, including the widow, widower, and children.

The deceased worker must be a pensioner at the time of death.

If the deceased was married, 100% of their minimum pension is distributed equally among surviving spouses. If there are no living relatives to share it with then this goes towards children’s benefits instead

If a worker has no spouse or children, then their parents receive up to 5 years after they die an amount equal in value of the monthly pension.

The minimum monthly pension from EOBI has been raised from Rs. 3,600 to Rs. 5,250 per month, effective from 01 April 2015.

Invalidity Benefits

The social security laws provide a great benefit in the case of non-occupational accidents,illnesses and disabilities resulting from them.

If a worker's earning capacity has been reduced by 67%, they will be compensated with 2% of their average monthly wages in the last 12 months multiplied across all years covered employment.

67% loss in earning capacity = 2% x (average monthly earnings in the last 12 months) x number of years of employment

Social Security Schemes in PakistanThe table below shows 6 different types of social security schemes made available by the Government of Pakistan.

Provincial Employees Social Security Scheme (PSSS)

Benefits

• Medical care for injured workers and their main dependents

• Cash benefits for loss of earnings through sickness, maternity, and employment injury

Eligibility

• Workers of industrial and commercial establishments with 10 or more employees.

• These employees must be drawing wages up to Rs. 3000 per month

Funding

• Only by employees' contributions at 7% of the wages of secured workers

Comments

• Until 1969, the scheme was only limited to textile workers

• Later, workers of industrial and commercial establishments were included
  

Employees Old-Age Benefits Institution (EOBI)

Statutory Benefits

It is mandatory for an employer to provide the following benefits

• Workers Compensation Fund

• Social security contributions

• Leave for national and religious holidays

• Other leaves mandated by law include vacation leave, casual leave, sick leave, and maternity leave

Workers Compensation Fund

4 months working for a single employer before giving birth. Fathers are eligible for 1 month of leave following the birth of their first three children.

Private Plans

Private plans are a great way to offer your employees the protection they need without breaking any budgets. The most common form of private group Insurance is employer funded, but there's also options that come with additional incentives for both employers and workers alike. For example: some states provide dental or life coverage as part-time pay; others give you cash bonuses when their kids enroll in school - it really depends on which strategy works best according to the needs at hand.

Fringe Benefits

Fringe benefits are considered part of the employees' salary for payroll purposes and as the basis for calculating employees' labor rights.

A great benefits program is crucial when establishing your company internationally, especially in developing countries such as Pakistan. An excellent set-up will make you more attractive to potential employees and boost morale among current staff members which leads towards better retention rates overall.

Fringe benefits commonly provided to employees in Pakistan include

• Reimbursement of the expenses

• Company vehicle

• Office equipment such as laptop and office phones

• Superannuation contribution

Beyond complying with legal responsibilities, a few other fringe benefits also include

• Child care and education assistance

• Employer-sponsored retirement accounts

• Critical illness insurance

• Ongoing education resources

• Mental and physical health services and support

Exempt Benefits

The Pakistani tax scale is progressive based on salary, and therefore withholding taxes will range from no income tax to a 35 percent rate. This means that if you receive any form of payment for your work--whether it's money or goods like housing-you'll need to declare this value when filing annual returns so there aren't penalties at retirement age.

However, exempt benefits include:

• Medical allowance/expenses: Reimbursement of expenses on medical treatment or hospitalization or both received by an employee is exempt from tax.

• Medical allowance of up to 10% of basic salary is exem't if the facility of reimbursement of medical expenses is not available to the employee.

Long-term Incentives

When hiring an employee or a senior executive, employers should have one question on their minds: how do I class them under Pakistani law?

This question will determine the payroll costs and whether a regular employee or an executive will be entitled to mandatory labor rights.?

These long-term incentives also include market practices such as stock options that have been on a rising trend.

Managing an organization is a team effort. For this reason, it's not only common to provide stock options for all employees in your company but also appropriate and legal according with federal law if you do so then there shouldn't be any problems ahead.

Thus they are provided in the form of stocks and equity provided in Pakistan, which include the following:

• Employee Stock Option Plan

• Employee Share Purchase Plan

• Stock Appreciation Rights

• Phantom Options

Long-term incentives are commonly offered for over twelve months. Employers offer long

term incentives as a part of the strategic plan to attract talent.  

Commonly offered long-term incentives in Fiji include –

1. Employee stock options to key employees

2. Private insurance covers that include health insurance and life insurance

3. Dental covers

4. Performance-linked incentives

Termination Process

A written letter should be provided when terminating a contract and reasoning for the termination must be sufficient.

Notice Period

The notice period for employees during probationary period is up to 2 weeks and for permanent employees, it is up to 1 month.

Severance Pay

Severance pay amounts to 30 days’ wages for each completed year of service.