Hire in Pakistan

The Labour Law requires every employer to provide every employee with an employment contract, showing the terms and conditions of their service. The employer is responsible to provide this contract at the time of appointment, transfer or promotion.

Every employee is entitled to a written certificate of service at the time of dismissal, discharge, retrenchment or retirement from service.

Sindh legislation however defines a contract employee as “an employee who works on contract basis for a specific period mentioned in the contract, in any establishment but does not include the third-party employment.

Khyber Pakhtunkhwa legislation also defines a contract employee as an employee who works on contract basis for a specific period mentioned in the Letter of Contract. The legislation requires an employer to obtain a No Objection Certificate (NOC) from the Labour Department to contract jobs. Such NOC is issued only for a period of six months at a time and contains certain conditions related to the job and employment of contract employees.

There is no specific law governing background checks and any check may be carried out, especially once the consent of the applicant has been obtained.

However, the Constitution of Pakistan prohibits discrimination on the basis of union affiliations and also political views. These checks should therefore be avoided. However, the check is mandatory for any employment for BFSI (Banking Financial Services & Insurance).

The duration of the probation period can be up to 3 months. This period allows both the employer and employee the flexibility to assess the suitability of their professional relationship. Importantly, during this probationary timeframe, either party has the right to terminate the employment contract without notice.

Employees’ normal working time must not generally exceed 48 hours per week in any week, or, where the factory is a seasonal one, for more than fifty hours in any week.

The employee is obligated to work overtime whenever the employer requires them to do so. If the employee cannot perform overtime work, they have to provide supporting reasons as to why they are unable to do so.

Bonus is paid to employees in recognition of good services rendered. This is conditional on the profitability of a company. If no profit is made, there is no bonus payable. This is also termed as Statutory or Profit Bonus as it is regulated by law.

Bonus is a statutory right for workers who have worked at least 90 days in an organization in the preceding year. Statutory or Profit Bonus is different from other bonuses that workers may receive on the basis of production, attendance, or Eid.

Termination of an employment contract may be either termination on grounds with a notice, or termination on account of misconduct.

Termination can also be categorized in the following three categories.

• “Automatic termination” where an employment contract is terminated automatically in circumstances such as the death of an employee or completion of the project/ contract for which an employee was hired.
• An employee may resign from employment to avail some better work opportunity or when the work circumstances are not supportive and there is a material breach of contract on the part of the employer.
• Termination initiated by an employer, which may be based on fair or unfair grounds.

The Labour Law requires a written employment termination letter stating the specific reasons for termination. This applies to both termination with a notice period and dismissal on the grounds of misconduct.

Other valid reasons for employment termination other than misconduct include serious illness, inability to perform the job to the required standards, and financial and economic changes impacting the organisation.

Serious misconduct suffices as reason for dismissal, but the employee must be given an opportunity to respond to the charges.

The employer may terminate an employment contract by giving a required notice and paying severance.

However, if the employer dismisses an employee with notice for “arbitrary” reasons, the employee may claim compensation.

In compliance with Labour Law, employees with a minimum of one year’s service (excluding any days of unpaid absence) are entitled to receive a statutory ‘End-of-Service Gratuity/Indemnity’ upon termination of their employment.

Gratuity serves as a benefit for services rendered in the past, mandated by Labour Laws as a legal obligation. It becomes a statutory right for employees who have completed a minimum of 12 months of service in an organization. The pertinent laws governing gratuity in the private sector include.

Every establishment is mandated to provide gratuity once an employee once the employee meets the minimum criteria. The Khyber Pakhtunkhwa Act and the Sindh Terms of Employment Act, 2015 reduced the minimum number of employee requirement to 10 for commercial establishments and 20 for industrial establishments.

An employee is eligible for gratuity if the following conditions are met:

• The establishment has the minimum number of employees.
• An employee is defined as “any person employed in any industrial or commercial establishment to do any skilled or unskilled, manual or clerical work for hire or reward”.
• The employee must be permanent status. If an employee is temporary, badli, probationer or a contracted, the employee will not be eligible for gratuity under the law.
• Voluntary retirement or voluntary redundancy in exchange for financial benefits.
• Entitlements to gratuity include voluntary retirement or voluntary redundancy with financial benefits, termination by the organization for reasons other than misconduct, death of the employee while in service, and retirement of the employee.

Either party may terminate an employment contract giving one month’s notice. If one month’s notice is not served, an employee must be paid one month’s wages in lieu of notice. Only permanent workers are required to give (and be served notice) before terminating an employment contract.

In the case of an employee terminating the contract, the notice period is 30 days or paying of 30 days’ pay.

The notice of termination shall be given in writing by the employer, including the reason for termination which must be specified.

An employee whose employment has been terminated for any reason other than misconduct is entitled to a “severance pay or gratuity” which is equivalent to 30 days’ wages for every completed year of service, or any part thereof in excess of six months. Employers have the option to replace gratuity with a provident fund (a type of pension). Nevertheless, if an employee’s services are terminated due to misconduct, a gratuity would not be applicable.

The gratuity rate is 30 days’ wages for every completed year of service, or any period in excess of six months. Following the completion of one year of service, any duration exceeding six months is considered equivalent to a year (e.g., 1.6 years of service is treated as two complete years for gratuity processing, making the employee eligible for two gratuities after 1.6 years).”The wage calculation is based on ‘wages admissible to a fixed-rate worker in the last month of service’ or ‘the highest drawn pay by a piece-rate worker during the preceding 12 months.

According to Section 27 of the Contract Act, 1872, any agreement that restricts a person from exercising a lawful profession, trade or business is not valid. However, the courts of Pakistan have made decisions in the past in favor of such restrictive clauses, given that the restrictions are “reasonable.” The definition of “reasonable” will depend on the time period, geographic scope and the designation of the employee.

The Labor Law prohibits hiring fixed-term contract employees for tasks of permanent nature. The maximum length of a fixed-term contract in Pakistan is nine months (includes renewals).

An employee will become permanent if the employee has been working for the last nine months and has satisfactorily completed the probationary period.

Khyber Pakhtunkhwa and Sindh legislation allows hiring employees on contract where the term of the contract is specified by the contract itself.

• Employees whose pay is calculated based on an annual or monthly sum must be paid at least once per month.
• An establishment with less than 1000 employees must pay its employees before the seventh day from the last day of wage period. Establishments employing more than 1000 employees have until the 10th day from the last day of wage period to disburse pay. The law also requires that wages are to be paid on a working day and in current coin or currency notes only.
• Wage payments through check are not permitted under the law.

PIFRA monthly payslip is a project that is designed by the government of Pakistan. All employees can download their slips directly from their email inboxes by registering with PIFRA online. The monthly payment slip is the payment record of a 30-day cycle.

• Employers must maintain a payroll record stating for all employees the date employment started and ended, the days worked, the amount of daily, weekly or monthly wages paid, fringe benefits as well as any piecework or commission payments.
• Employers must keep a file for each employee stating their name, occupation, age, nationality, address, marital status, date of employment, wages (and any adjustments to them), any disciplinary sanctions penalties imposed, occupational injuries, diseases sustained and the date of and reasons for termination of employment. The file must include a leave card, recording annual leave, sick leave and other leave taken.

• Employees are entitled to paid annual leave after they have completed one year’s service with an employer under Khyber Pakhtunkhwa Factories Act 2013 and Factories Act 1934 as adopted by Punjab through the Factories (amendment) Act 2012 and Sindh Factories Act 2015.
• Employees who have completed a period of 12 months’ continuous service in a factory shall be allowed, during the subsequent period of 12 months, holidays for a period of 14 consecutive days.
• If these leaves are not availed by the worker then can be carried forward but up to fourteen days only.
• Annual leaves can be encashed only in case of separation from employment.
• Under the Khyber Pakhtunkhwa Shops and Establishment Act 2015, Sindh Shops and Commercial Establishment Act 201, and Punjab Shops and Establishments Ordinance 1969, every employee is entitled to fourteen days of annual leave upon completion of twelve months of continuous employment.
• These annual leaves can be accumulated up to thirty days and not availed leaves can be encashed on request of an employee.

Employees are entitled to 10 days’ casual leave with full pay and a further 16 days’ sick or medical leave on half pay.

Casual leave is granted upon contingent situations such as sudden illness, unavoidable situations or any other urgent purpose. It should be obtained on prior application unless the urgency prevents the making of such application.

All employees are entitled to the following maximum paid sick leave supported by a medical report:

• 121 days (in a calendar year) in case of ordinary illnesses
• 365 days (in a calendar year) in case of cancer or tuberculosis

Sick leave might be extended on an unpaid basis.

Bereavement Leave

Employees are granted paid leave of one day with full pay in the event of the death of a first level relative (father, mother, spouse, child, sister or brother). A proof of document (obituary papers) should be provided.

Marriage Leave for Employees

Employees are granted two days’ paid leave for their marriage. This is only for “one time” during their employment with the company.

Private and public sector employers, overseen by the federal government, are now obligated to offer paid maternity and paternity leave to their employees, aiming to improve the balance between work and family life. This is made possible by the recently passed Maternity and Paternity Leave Act, 2020, which came into effect immediately.

For female employees:

• Maternity leave is fully paid and can be availed for up to 180 days for the first child, 120 days for the second child, and 90 days for the third child.
• Unpaid leave may be granted for additional children.

For male employees:

• Paternity leave is fully paid and can be taken for up to 30 days for the first three separate births.
• Unpaid leave may be granted for additional children.

It’s important to note that according to Clause 3 (2), such maternity leave may not be granted more than three times throughout the entire service of the female employee.

Pakistan holidays are a combination of Islamic, national and other religious holidays.

Religious festivals like Eid are celebrated according to the Islamic calendar whereas other national holidays (such as International Labor Day, Pakistan Day and Quaid-i-Azam Day) are celebrated according to the Gregorian calendar.