Employee benefitsin Pakistan

Lower-paid employees in Pakistan's four provinces are insured through a provincial employees' social security institution: the Punjab Employees Social Security Institution (PESSI), the Sindh Employees' Social Security Institution (SESSI), the Khyber Pakhtunkhwa Employees Social Security Institution and the Balochistan Employees' Social Security Institution. Each provides free treatment at its hospitals and dispensaries for the insured worker and family members, plus cash benefits for sickness, maternity, work injury, disablement and death.

The employer pays a contribution of 6% and the employee pays nothing. In practice the contribution is calculated on the provincial minimum wage rather than on actual salary: Sindh charges 6% of the minimum wage, Khyber Pakhtunkhwa's 2021 Act caps the 6% charge at the minimum wage and forbids deducting it from pay, and Balochistan's 2022 Act charges 6% at the minimum-wage rate. At the current minimum wages this is about PKR 2,580 a month per worker in Sindh, PKR 2,400 in Punjab and Khyber Pakhtunkhwa, and PKR 2,220 in Balochistan.

Compulsory cover stops at a wage ceiling set by each province, so many salaried professionals earn above it and rely on employer medical insurance instead. Balochistan's ceiling is the minimum wage plus 50% (PKR 55,500 a month at a PKR 37,000 minimum wage). Islamabad Capital Territory is outside these four provincial schemes.

Employers hiring salaried professional and technology staff commonly provide group medical insurance. Policies typically cover hospitalisation (inpatient care) and often outpatient consultations and medicines, and usually extend to the employee's spouse and children; some technology employers also cover employees' parents. Reported costs for outpatient and hospital cover run at about USD 300 to 700 per employee a year, and many employers fund the employee's cover in full and 50% to 100% of dependants' cover.

Employer insurance matters because the provincial employees' social security schemes only insure lower earners below provincial wage ceilings, leaving most salaried professionals without statutory medical cover. Employer reimbursement of medical expenses is tax-free for the employee.

Some employers provide gym memberships, fitness allowances, on-site gyms or wellness programmes; Devsinc offers a gym and fitness allowance, Contour Software a fully equipped gym with trainers, and Arbisoft fitness trainers and a nutritionist.

Some employers offer counselling or an employee assistance programme (EAP), a confidential service providing short-term counselling and legal or financial advice by phone or video.

Employers covered by the Standing Orders law in Islamabad Capital Territory and Punjab must insure every permanent worker against natural death, disability, and death or injury not already covered by workers' compensation or provincial social security. The employer pays the full premium and arranges the policy, either directly or through an insurer.

The sum insured must be at least the compensation set in the fourth schedule of the Workmen's Compensation Act 1923; under that schedule death or permanent total disablement compensation is PKR 200,000 in federal law and PKR 400,000 in Punjab. If an employer fails to insure a worker who then dies or is injured, the employer must pay the heirs or the worker the amount the insurer would have paid.

The obligation sits in Standing Order 10-B of the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, the core employment-terms law, which applies to establishments with 20 or more workers; industrial establishments with 49 or fewer workers are excluded unless the government extends it to them. It covers workmen doing manual, skilled or clerical work rather than managerial staff.

A worker injured at work is protected in one of two ways. Workers insured with a provincial employees' social security institution receive injury benefit of 100% of last wages for up to 180 days, a permanent disablement pension of 75% of last wages for total disablement (100% in Punjab), partial disablement payments, medical care without time limit, and survivors' pensions if the injury is fatal: 60% of the full disablement pension for a widow and 20% for each child (40% for a full orphan), up to 100% in total.

Workers not covered by social security fall under the provincial Workmen's Compensation Acts, where the employer pays compensation directly. For death or permanent total disablement the statutory lump sum is PKR 200,000 under federal law, PKR 300,000 in Khyber Pakhtunkhwa, PKR 400,000 in Punjab and PKR 500,000 in Sindh. Temporary disablement is compensated at 50% of monthly wages for up to one year.

The employer bears the full cost of both systems, through social security contributions or direct liability.

Private-sector employees build a state pension through the Employees' Old-Age Benefits Institution (EOBI), the federal social-insurance scheme for old-age, invalidity and survivors' pensions. Establishments with five or more workers must register and contribute.

Contributions are fixed amounts based on the minimum wage, not on actual salary: the employer pays 5% and the employee 1% of the minimum wage of the province or territory where the employee works. From July 2026 that means PKR 2,035 (employer) and PKR 407 (employee) a month in Islamabad Capital Territory and PKR 2,150 and PKR 430 in Sindh; at the unchanged minimum wages it is PKR 2,000 and PKR 400 in Punjab and Khyber Pakhtunkhwa, and PKR 1,850 and PKR 370 in Balochistan. The employer deducts the employee share from pay and remits both monthly.

A full old-age pension is payable from age 60 for men and 55 for women after at least 15 years of contributions. It equals 2% of average monthly wages over the last 12 months for each contribution year, with a minimum pension of PKR 11,500 a month. Workers with 2 to 15 years of contributions receive a lump-sum old-age grant instead. Invalidity pensions require at least a 67% loss of earning capacity, and survivors' pensions are paid to a spouse, children and, in some cases, parents.

Pakistan has no unemployment insurance scheme for private-sector employees. Income protection on job loss comes from employer-paid termination rights: one month's notice or one month's wages in lieu for permanent workers, payment of earned wages and unused leave, and gratuity of 30 days' wages per year of service where the Standing Orders law applies (or the employer's provident fund where one replaces gratuity). Means-tested federal cash transfers exist for poor households but are not linked to employment.

A worker who resigns, retires, dies in service or is dismissed for any reason other than misconduct receives gratuity of 30 days' wages for every completed year of service, with any final part-year of more than six months counted as a full year. For a fixed-rate worker the calculation uses the wages for the last month of service; for a piece-rated worker it uses the highest monthly pay in the last 12 months. Regular allowances such as house rent and conveyance count as wages; bonuses and one-off payments do not. For example, a worker earning PKR 150,000 a month who leaves after 4 years and 8 months receives five years' gratuity, about PKR 865,000 on a 26-day wage month.

Gratuity is not due for any period in which the employer runs a provident fund to which the worker contributes and the employer contributes at least as much as the worker; where a collective agreement establishes an approved pension fund meeting the legal contribution thresholds, it can also replace gratuity. On a worker's death, the gratuity is deposited with the Workmen's Compensation Commissioner for the dependants.

This rule is Standing Order 12(6) of the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, which applies in Islamabad Capital Territory and, in adapted form, in Punjab to establishments with 20 or more workmen; industrial establishments with 49 or fewer are excluded unless extended by notification. It covers workmen doing manual, skilled or clerical work; managers' termination benefits depend on their contracts.

Many established employers run a provident fund, an employer-sponsored savings fund paid out when the employee leaves, either instead of statutory gratuity or alongside it. Employer and employee each typically contribute 8.33% to 10% of basic salary every month, and the fund is managed by trustees and usually approved (recognised) by the tax authority so that contributions and returns receive concessional tax treatment. On leaving, the employee receives both sets of contributions plus returns, even after resignation or dismissal.

Provident funds interact with gratuity: where the employer contributes at least as much as the employee, the Standing Orders law in Islamabad Capital Territory and Punjab exempts the employer from gratuity for those years, and the Sindh and Khyber Pakhtunkhwa laws require the fund payout to be no less than the gratuity would have been. Technology employers such as VentureDive and Contour Software list a provident fund in their benefits.

Beyond the compulsory group insurance for permanent workers under the Standing Orders law, some employers buy group life cover for all salaried staff, including managers who fall outside that law, often paying a multiple of salary on death or permanent disability. Technology employers such as Contour Software list life insurance in their benefits.

Every employee who completes 12 months of continuous employment is entitled to 14 days of annual leave on full pay in the next 12 months. This minimum comes from the shops and establishments laws (the 1969 Ordinance in Islamabad Capital Territory and Punjab, and provincial Acts in Sindh, Khyber Pakhtunkhwa and Balochistan) and from the Factories Act 1934 and its provincial versions for factory workers. Time on leave counts towards continuous service.

Leave is paid at the average daily earnings of the previous three months; under the shops laws, leave of four days or more is paid before it starts. Unused leave is added to the next year's entitlement until the accumulated total reaches 30 days, and an employee may ask to be paid instead of taking it. Factory workers can carry forward up to 14 unused days. On termination, unused leave must be paid with the final wages.

The law does not provide monthly accrual or additional days for long service; employers commonly set longer entitlements by contract.

Employees in shops, offices and other commercial establishments are entitled to 8 days of sick leave on full pay each year under the shops and establishments laws of every province and Islamabad Capital Territory. Unused sick days carry forward, but the accumulated balance cannot exceed 16 days. Employers normally require a medical certificate.

Factory workers follow the provincial factories laws instead: 16 days a year at half average pay in Punjab and Khyber Pakhtunkhwa, 16 days on full pay in Sindh, and 20 days on full pay in Balochistan.

Longer illness of a worker insured with a provincial social security institution is covered by its sickness benefit of 75% of wages for up to 121 days. Employers may not dismiss or penalise a worker during certified sickness covered by social security.

A worker insured with a provincial employees' social security institution who is certified unfit to work receives sickness benefit from the institution, not the employer: 75% of last wages for up to 121 days in a year for ordinary illness, and 100% for up to 365 days for tuberculosis or cancer. The worker must have at least 90 days of contributions in the six months before the illness. Benefit is not paid for the first two days unless the illness follows a previous claim within 15 days. Medical treatment continues during the illness at the institution's facilities. Because cover depends on the provincial wage ceiling, salaried employees above the ceiling rely on employer sick pay and medical insurance.

Employees are entitled to 10 days of casual leave on full pay each calendar year for urgent personal matters or short illness, in addition to annual and sick leave. Under the shops and establishments laws casual leave is not normally granted for more than three days at a time and cannot be carried into the next year. Factory workers receive 10 days under the provincial factories laws, or 15 days in Balochistan. In Khyber Pakhtunkhwa, commercial establishments with fewer than 10 employees are exempt from the casual and sick leave rules. Pakistani law does not provide separate statutory bereavement, marriage or carer's leave; such leave is taken from casual or annual leave or granted by employer policy.

A woman insured with a provincial employees' social security institution whose husband dies is entitled to Iddat benefit during the iddat, the Islamic mourning period of about 130 days after a husband's death during which a widow does not remarry. In Sindh the institution pays 100% of her last wages for the 130 days; where the husband's death resulted from a work injury, the social security laws provide a lump sum of up to 130 times her daily earnings. The benefit is paid by the institution, not the employer, alongside the death grant payable to the family of a deceased insured worker (30 days of sickness benefit, at least PKR 1,500).

Many employers of salaried staff give more paid leave than the statutory 14 days of annual leave plus 10 days of casual leave and 8 days of sick leave, either through longer annual leave or a combined leave allowance. No survey establishes a typical figure, so entitlements should be compared against the statutory baseline of 32 paid leave days a year under the shops and establishments laws.

Women working in private establishments in Punjab, Khyber Pakhtunkhwa and Balochistan are entitled to 12 weeks of fully paid maternity leave: six weeks before and six weeks after the expected birth. The six weeks after birth are compulsory, and an employer may not dismiss a woman during her maternity leave or to avoid paying the benefit.

Who pays depends on social security status. A woman insured with the provincial employees' social security institution, with contributions paid for at least 180 days in the 12 months before the expected birth, receives maternity benefit of 100% of her last wages from the institution for the 12 weeks, plus prenatal and postnatal care. Other employees receive maternity pay from the employer at their last wage rate under the provincial maternity benefit laws, which require at least four months of service before the expected delivery. The employee notifies the employer in writing or orally about six weeks before the expected date.

Women employed by public or private establishments under the administrative control of the federal government, which in practice covers employers in Islamabad Capital Territory, are entitled to fully paid maternity leave of up to 180 days for a first birth, 120 days for a second and 90 days for a third. The leave is paid by the employer at full pay, does not count against annual or other leave, and is granted at the employee's option from the date she chooses to start it. It can be taken on full pay outside the leave account no more than three times in a career; leave for later births comes from the employee's own leave balance or is unpaid.

The Maternity and Paternity Leave Act 2023 overrides other laws in its scope. An employer that breaches it commits an offence punishable by up to six months' imprisonment, a fine of up to PKR 100,000, or both.

Men employed by public or private establishments under the administrative control of the federal government, which in practice covers employers in Islamabad Capital Territory, may take up to 30 days of paternity leave on full pay when their wife gives birth, outside their normal leave account. Paid paternity leave of this kind can be taken no more than three times in a career; further leave comes from the employee's own leave balance or is unpaid. Breaches are an offence under the Maternity and Paternity Leave Act 2023 (up to six months' imprisonment or a fine of up to PKR 100,000).

Outside this federal scope, private-sector employment laws in Punjab, Khyber Pakhtunkhwa and Balochistan provide no general paternity leave; short paternity leave in those provinces exists mainly for civil servants or through employer policy.

Pakistani private-sector law has no general parental, shared parental, adoption or surrogacy leave. Family-related leave consists of maternity leave (12 weeks in Punjab, Khyber Pakhtunkhwa and Balochistan, 16 weeks in Sindh, and 180, 120 or 90 days in federally controlled establishments) and, within the federal scope, 30 days of paternity leave. Any additional parental or adoption leave depends on employer policy.

Outside the federal scope of the 2023 maternity and paternity law, private employers in Punjab, Khyber Pakhtunkhwa and Balochistan are not required to give paternity leave, so paid leave for new fathers depends on company policy. Some technology employers advertise paid parental, maternity and paternity leave as part of their package, for example Devsinc and VentureDive.

Some larger employers provide an on-site day-care centre or childcare support, particularly technology firms in Karachi and Lahore; VentureDive advertises in-house day care and Contour Software a child-care facility. Sindh's maternity law also requires establishments with more than ten workers to provide day care, and factories employing more than 50 women must provide a room for young children.

Pakistani law does not require a 13th-month salary or an Eid (festival) bonus. It does require a profit-linked bonus from employers covered by the Standing Orders law in Islamabad Capital Territory and Punjab. An employer that makes a profit in a year must pay every workman employed continuously for at least 90 days in that year a bonus within three months of the year's end.

If the year's net profit is at least equal to one month's total wages of the workforce, the bonus pool must be at least that month's wage bill, subject to a maximum of 30% of the profit; if the profit is smaller, the pool must be at least 15% of the profit. Each worker's share is proportionate to monthly wages, and the worker can choose cash or units of the National Investment Trust, a state-sponsored mutual fund. For example, a company with PKR 12 million profit and a monthly wage bill of PKR 3 million owes a bonus pool of at least PKR 3 million.

This bonus comes from Standing Order 10-C of the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, which applies to establishments with 20 or more workmen. It is separate from the workers' profit participation fund contribution that qualifying companies must make.

Many employers pay a festival bonus around Eid-ul-Fitr or Eid-ul-Azha, Pakistan's main religious festivals, typically worth half to one month's salary. The bonus is customary rather than legally required: Pakistani law sets no 13th-month salary, and the only statutory bonus is the profit-linked bonus for workers in larger profitable establishments. Bonuses are taxable salary.

Annual performance bonuses are a common part of pay for salaried staff in Pakistan. Reported typical amounts are half to one month's salary a year. Technology employers such as Contour Software and VentureDive describe performance-based bonuses, and some also run profit-sharing plans. These bonuses are discretionary and separate from the statutory profit bonus and the workers' profit participation fund.

Some Pakistani technology companies and start-ups grant equity, such as stock options or share ownership plans; for example Devsinc lists equity and Contour Software lists stock ownership among their benefits. Shares received under an employee share scheme are taxed as salary at market value when issued (or when transfer restrictions end), while the grant of an option itself is not taxed. Phantom or cash-settled equity was not found in Pakistani benefit sources.

Some employers provide free lunch or dinner at the office, especially technology companies; Arbisoft offers free lunch and Contour Software company-provided lunch and dinner. Meals are an employer choice with no statutory requirement, and their value can count as a taxable perquisite.

Beyond the conveyance allowance built into many salary packages, some employers give a separate fuel allowance or run car-support schemes. Technology employers such as Arbisoft (fuel allowance), Devsinc (fuel and commute allowance) and VentureDive (car support programme) publish such benefits.

Some employers pay a monthly stipend towards home internet and power backup for staff who work remotely or in hybrid arrangements; reported amounts are about USD 20 to 50 a month. Contour Software, for example, lists a home internet subsidy. These allowances are taxable salary unless structured as reimbursement of business expenses.

Flexible working is concentrated in the technology sector, where some employers offer flexible hours, hybrid schedules or fully remote roles; VentureDive describes itself as remote by default with flexible working hours and Devsinc offers hybrid work and remote-friendly roles. A 45-hour Monday-to-Saturday week is still described as a standard schedule for many employers. Pakistani law gives no general right to request flexible work; arrangements depend on employer policy and the employment contract.

Technology employers commonly advertise learning support such as paid certifications, conference sponsorship and dedicated training budgets: Devsinc reimburses certifications and sponsors conferences, VentureDive and Contour Software provide professional development budgets, and Arbisoft funds training and certifications. Budgets are set per employer and are not published.

Employers supply the hardware needed for the job; for software developers this typically costs about USD 1,500 to 2,500 per person. Funding for home-office furniture or power backup for remote staff is set by individual employer policy.

Pakistani employment law classifies workers covered by the Standing Orders law (the core law on employment terms) as permanent, probationers, badlis (substitutes covering an absent permanent worker), temporary workers, apprentices and contract workers. A permanent worker is engaged on work likely to last more than nine months and has completed a three-month probation; a temporary worker is engaged on work expected to end within nine months, so temporary contracts cannot be used for permanent roles. These protections apply to 'workmen', meaning people employed to do skilled or unskilled manual or clerical work; employees in managerial roles are governed mainly by their contracts.

Employees receive statutory social security and pension registration, paid leave, notice and gratuity; independent contractors engaged under commercial contracts do not. Labour courts look at the substance of the relationship, and long-term contract workers doing the same work as permanent staff have been reclassified as permanent.

Every workman covered by the Standing Orders law must receive a written order setting out the terms and conditions of service at appointment, transfer or promotion, and a written service certificate when employment ends. Employers usually issue a written contract in English or Urdu stating the job, place of work, wages and allowances, working hours, probation, leave, notice and termination terms. The employer must also post the standing orders, working hours, holidays, pay days and wage rates on notice boards in English and Urdu. Fixed-term (temporary) contracts may not exceed nine months for work of a permanent nature; Sindh and Khyber Pakhtunkhwa laws also recognise contract workers engaged for a period stated in the contract.

Salaries are normally paid monthly in Pakistani rupees by bank transfer, and the law does not allow a wage period longer than one month. Wages must be paid within a few days after the wage period ends: under the Standing Orders law, before the seventh day for establishments with up to 1,000 workers. When employment ends, earned wages and other dues, including pay for unused leave, must be paid before the end of the second working day after termination. The employer withholds income tax and the employee's pension contribution each month and gives a payslip.

The minimum wage for unskilled adult workers in Islamabad Capital Territory is PKR 40,700 a month from 1 July 2026, up from PKR 37,000. Minimum wages in Pakistan are set on a 26-working-day month, so the equivalent daily rate is about PKR 1,565. The federal government notified the rate on 19 August 2026 with effect from 1 July, so employers owe arrears for July and August 2026, and pension contributions based on the minimum wage rose from the July pay period. Separate higher rates apply to semi-skilled and skilled categories. The same PKR 40,700 figure is the minimum gross salary for federal government employees.

Adults may work up to 9 hours a day and 48 hours a week under the shops and establishments laws and the factories laws; Khyber Pakhtunkhwa's shops law sets 8 hours a day within the same 48-hour week. Employees are entitled to one weekly rest day, normally Sunday, and a rest or meal break after about six hours of work.

Overtime is paid at double the ordinary rate of wages. In shops and offices overtime is allowed only for business needs such as stock-taking or closing accounts and is capped at 150 hours a year in Islamabad Capital Territory, Punjab and Balochistan, or 24 hours a week in Khyber Pakhtunkhwa. The total working day including breaks (the spread-over) may not exceed 10 hours in winter and 11 in summer under the 1969 shops law, or 12 hours in Khyber Pakhtunkhwa. A worker required to work on a public holiday receives a substitute paid holiday as well as pay for the day. Managerial staff are generally outside these hour limits by contract.

Under the Standing Orders law a probationer is a worker provisionally employed in a permanent post who has not yet completed three months of service; on completing three months satisfactorily the worker becomes permanent. During probation either side can end the employment without notice, although termination must still be by written order. The law does not provide for extending probation for workmen. Employers commonly set three to six months' probation for managerial and professional staff by contract, as these roles fall outside the workman definition.

A permanent worker's employment can be ended for reasons other than misconduct with one month's written notice by either side, or by paying one month's wages, calculated on average earnings over the last three months, in lieu of notice. Temporary workers, probationers and badlis (substitute workers) are not entitled to notice. Every termination, dismissal or retrenchment must be by written order stating the reason, and the worker can challenge it through the grievance procedure under the industrial relations law. Dismissal for misconduct requires a written charge and an inquiry under the Standing Orders procedure; a worker dismissed for misconduct loses notice and gratuity.

Earned wages, pay for unused leave and other dues must be paid by the second working day after termination, with gratuity where it applies. Employers cannot dismiss workers during maternity leave or during sickness or injury covered by social security. The same one-month notice applies to permanent employees under the shops and establishments laws. Managers outside the workman definition follow their contract terms.

Employers register with the Federal Board of Revenue (FBR), the national tax authority, for a National Tax Number (NTN), with the Employees' Old-Age Benefits Institution (EOBI), the federal pension scheme, and with the social security institution of the province where staff work. The recurring employer costs per employee are: EOBI pension at 5% of the minimum wage of the place of work (PKR 2,035 a month in Islamabad Capital Territory and PKR 2,150 in Sindh from July 2026; PKR 2,000 in Punjab and Khyber Pakhtunkhwa and PKR 1,850 in Balochistan at current rates), plus the employee's 1% deducted from pay; and provincial social security at 6% of the minimum wage (employer only) for employees below the wage ceiling. In Sindh, the social security institution also collects an education cess of PKR 100 per worker a year for the provincial workers' welfare board.

Because both main contributions are tied to the minimum wage, statutory payroll costs are small fixed amounts for professional salaries. Larger costs come from gratuity accruals or provident fund contributions, employer-provided medical insurance and, at company level, the workers' welfare fund levy (2% of income) and workers' profit participation fund (5% of profits) for qualifying companies. Employers also withhold employees' income tax monthly.

Employers withhold income tax from salaries every month and remit it to the Federal Board of Revenue (FBR), the national tax authority. Pakistan's tax year runs from 1 July to 30 June. For tax year 2027 (July 2026 to June 2027), the Finance Act 2026 sets these annual rates for salaried individuals: no tax up to PKR 600,000; 1% of income above PKR 600,000 up to PKR 1.2 million; PKR 6,000 plus 11% above PKR 1.2 million up to PKR 2.2 million; PKR 116,000 plus 20% above PKR 2.2 million up to PKR 3.2 million; PKR 316,000 plus 25% above PKR 3.2 million up to PKR 4.1 million; PKR 541,000 plus 29% above PKR 4.1 million up to PKR 5.6 million; PKR 976,000 plus 32% above PKR 5.6 million up to PKR 7 million; and PKR 1,424,000 plus 35% above PKR 7 million.

The Finance Act 2026 also abolished the 9% surcharge previously charged on salaried income above PKR 10 million. Salaried rates apply where salary is more than 75% of taxable income. Employees file an annual return by 30 September.

Taxable salary includes allowances and benefits in cash or in kind, such as house rent, conveyance and utilities allowances, bonuses, leave encashment and perquisites provided by the employer. Key exemptions: reimbursement of medical or hospital expenses by the employer is tax-free, and where no reimbursement facility is provided, a medical allowance of up to 10% of basic salary is exempt.

Shares received under an employee share scheme are taxed as salary on their market value when issued, less any amount paid; if the shares cannot be transferred, tax is deferred until the transfer restriction ends or the shares are sold. The grant of an option is not taxed. Payouts from life insurance policies are taxable to the extent they exceed premiums paid. Employee contributions to EOBI (the Employees' Old-Age Benefits Institution pension scheme) are deducted from pay, and contributions to a provident fund approved by the tax authority receive concessional treatment within limits.

Since the 18th Amendment to the Constitution in 2010, most labour law is provincial: Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan each have their own laws on employment terms, minimum wages, shops, factories, social security and industrial relations, while federal laws apply in Islamabad Capital Territory and to establishments operating in more than one province (for example the Industrial Relations Act 2012). Federal schemes that remain national include the old-age pension scheme and income tax.

Workers have the right to form trade unions and bargain collectively. The standing orders on employment terms can be modified only by a collective agreement, and an agreement can improve but never reduce the statutory rights; agreements commonly raise gratuity or provide provident or pension funds. Collective bargaining is concentrated in manufacturing, banking and public-sector enterprises rather than technology firms.

Pakistani salary packages are commonly split into basic salary plus fixed allowances, typically house rent, utilities, conveyance (transport) and medical allowances, with the total quoted as gross monthly salary. The split matters because some payments are calculated on basic salary only, for example provident fund contributions and the tax-free medical allowance, while gratuity uses gross wages including regular allowances. All allowances are taxable except that a medical allowance of up to 10% of basic salary is exempt where the employer does not reimburse medical expenses. Mobile phone allowances are also common for staff who use their phones for work.