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With the deepening of globalization, when enterprises expand their business in multiple countries, cross-border labor compliance has become one of the most complex and severe challenges. To help enterprises systematically address this issue, we have collaborated with top labor lawyers from over 50 major jurisdictions worldwide (all recommended by Chambers, The Legal 500, or equivalent institutions) to jointly compile a Chinese-English labor & employment compliance guide exceeding 1 million words, and we will continuously update relevant key points.

This article publishes the key points of labor & employment compliance by September 2025 in Pakistan. 

01 Overview of the Labor Law System

1.Legal System

Pakistan’s legal system is a common law system, not consolidated in one statute, and is in different legislations addressing various aspects of the relationship between the employer and employee.

2.Resources and Agencies

After the promulgation of the 18th Amendment to the Constitution of Pakistan, 1973 “18th Amendment”, labour law is a devolved matter existing within constitutional provisions, federal statutes, as well as the legislative jurisdiction of each provincial assembly. Each province has its own statutes and the Constitution of Pakistan also contain some provisions to safeguard labour rights.

Shops and Establishment Laws govern employment contracts unless one of the Provincial or Federal Standing Orders apply. If Standing Orders are silent on any topic, relevant provision(s) of Shops and Establishment Laws will apply by default. The number of workers in a specific Province or Federation determines whether one of the provincial or Federal Standing Orders applies.

02 Employment Qualifications and Classification

1.Employment Age

In Pakistan, employment ages for establishing and maintaining an employment relationship are governed by the applicable labour law. By way of example, the Khyber Pakhtunkhwa Prohibition of Employment of Children Act 2015 puts forth that a “child” who has not completed his fourteenth year of age is not permitted to work, and will only be permitted if they are below the age of twelve, engaged in light work alongside his family member, for a maximum period of two hours daily, for the purpose of acquiring skills. The Balochistan Employment of Children (Prohibition and Regulation) Act 2021 states that no “child” i.e not completed fourteenth year of age and no “adolescent” i.e attained fourteenth year but below eighteen years, shall be allowed to work for more than three hours in any given shift.

2.Qualifications for Employment

Subject to tax advice, a foreign business can hire locally without permanent establishment.

3.Classification of Employment

? Permanent workman

? Probationer

? Badli

? Temporary worker

? Apprentice

? Contract worker

In ascertaining the status of a worker, the Courts in Pakistan look at the substance and not the form of the terms of engagement, i.e. the classification of whether a person is an employee or an outsourced worker is ultimately a question of fact based on a number of factors which the Court will take into account.

4.Foreign Workers

There is generally no limitations for foreign workers, and no formal ratio requirement exists, however, companies may enforce their own ratio requirements and certain statutes governing specific industry sectors impose ratio requirement. The visas that may be applied through the Ministry of Interior via recommendation of the Board of Investment (BOI) may be a work visa (multiple entry), business visa for investors or short-term assignments.

03 Recruitment and Employment Contracts

1.Background Examination

Screening for any possible criminal records, drug testing, etc are permitted after obtaining candidates consent, as per the Draft Pakistan Data Protection Bill 2023.

2.Probationary Period

The standard probation period is three months which may be extended up to nine months.

04 Working Standards

1.Remuneration and Statutory Benefits

Pursuant to the Shops and Establishment Legislation the wages of every employee in any establishment shall be paid on a working day before the expiry of the seventh day of the last day of the wage period in respect of which the wages are payable.

When any employee is required to work over-time in any establishment the wages payable to such employee in respect of such over-time work shall be calculated at double the ordinary rate of wages payable to him.

2.Social Security and Employment Taxes

Under the Social Security Legislation, the employer shall, in respect of every employee, whether employed by him directly or through any other person, pay to the relevant institution a contribution at such times, at such rate and subject to such conditions as may be prescribed: Under the Social Security Legislation, the employer shall not be entitled to deduct his own share of contribution from the employee’s wages or otherwise to recover from him any portion of the contribution, notwithstanding any agreement to the contrary.

3.Working Hours

Per the Shops and Establishment Laws, a worker’s total daily hours, including lunch and prayer time breaks and overtime hours, cannot exceed 8 hours for KPK and 9 hours for the other provinces and Islamabad.

4.Rest and Leave

Per the Shops and Establishment Laws, every employee is entitled to 8 sick days per year and can accumulate up to 16 sick leave days.

Per the Shops and Establishment Laws, every worker is entitled to 10 days of paid casual leave per year, but workers are not entitled to carry over unused casual leave to the next year or payout for unused casual leave at separation of employment. Similar position under the Standing Orders, except that Balochistan allows 15 days of casual leaves.

05 Occupational Health and Special Protection

1.Occupational Health and Security

There are several statutory requirements for occupational health and safety under national as well as provincial laws that employers must abide by.

2.Special Protection

Government of Pakistan has enacted a law in order to provide for employment, rehabilitation and welfare of disabled persons in the country. The "Disabled Persons (Employment and Rehabilitation) Ordinance" was enacted in 1981 as a presidential ordinance to provide support to the disabled persons in finding employment in government as well as commercial and industrial establishments. 

06 Personal Information and Privacy

1.General Rules

Whilst there is still currently a lack of a comprehensive data protection law, upholding and maintaining employee privacy and handling personal information are addressed through articles in the Constitution.

2.Transnational Transfer

The Draft Personal Data Protection Bill 2023 governs the transnational transfer of employees personal information, stating that the personal data may only be transferred across cross-border jurisdictions if the receiving country has either the same level of data protection as Pakistan, or better than. However, before the transnational transfer occurs, the data set must provide explicit consent unless in special circumstances are exempt by the law. 

07 Anti-Discrimination and Anti-Harassment

1.General Rules

Employers are required to treat each individual equally, as per the Articles of the Constitution, particularly in similar roles undertaken in work (Minimum Wages Ordinance 1961). Article 25 lays down the right to equality before the law and prohibition of discrimination on the grounds of sex alone. Article 37(e) makes provision for securing just and humane conditions of work, ensuring that children and women are not employed in vocations unsuited to their age or sex, and for maternity benefits for women in employment.

08 Internal Policies

1.Applicability

Any category of worker can be managed through internal contractual policies, subject to mandatory statutory laws.

2.Validity

The Standing Orders may be modified by means of a collective agreement and not otherwise: Provided that no such agreement shall have the effect of taking away or diminishing any right or benefit available to the workmen.

3.Whistleblowing

Pakistan does not have any particular standalone law for whistleblowers, however, there are provincial and sector-specific laws which are available.

09 Transactions

1.Employment Relationship

If the employer remains the same, the contract will continuously perform in the ordinary course unless specifically terminated. If the employer changes, then the existing contract will terminate and a fresh contract with the new employer will need to be executed.

2.Compensation

No statutory compensation.

10 Termination of Employment

1.Termination Grounds

An employer may dismiss an employee for any reason specifically during their probationary period. For terminating employment of a permanent workman, for any reason other than misconduct, one month's notice (or three months in Balochistan) shall be given either by the employer or the workman or one month's wages (or three months in Balochistan) calculated on the basis of average wages earned by the workman during the last three months shall be paid in lieu of notice.

2.Termination Procedure

No order of dismissal shall be made unless the worker concerned is informed in writing of the alleged misconduct within one month of the date of such misconduct or of the date on which the alleged misconduct comes to the notice of the employer and is given an opportunity to explain the circumstances alleged against him.

Under the Standing Orders, where any worker is to be retrenched and he belongs to a particular category of workers, the employer shall retrench the worker, who is the last person employed in that category.

3.Termination Protection

Employees are protected from dismissal under circumstances such as maternity leave, lawful union activities, disabled persons or during medical treatment.

4.Wrongful Termination

Labour courts in Pakistan typically tend to favour workers in wrongful termination cases and they may order reinstatement of the workers with back benefits as well as payment of salary for the length of the unemployment period as well as damages in connection with wrongful termination.

11 Confidentiality, Non-Compete, and Non-Solicitation

1.Confidentiality

There is no mandatory requirement but it is common to contractually do so as a matter of market practice to protect trade secrets, handle business sensitive information etc. depending on the nature of the job, usually for executive and managerial roles, and employees with access to such data, R&D departments, HR, legal, etc.

2.Non-Compete and Non-Solicitation

Unless the contract is submitted to the Competition Commission of Pakistan for approval, otherwise including such clauses render the entire contract void. The general rule is reasonableness.

12 Work Representation and Trade Unions

1.Work Representation

The Industrial Relations Act, 2012 and the equivalent provincial laws set out the laws relating to, inter alia, formation of trade unions, regulations of relations between employers and workmen, and the avoidance and settlement of any differences or disputes arising between them or matters connected therewith.

2.Trade Unions

As per the Industrial Relations Legislation, trade unions have the right to register with the Registrar of trade unions, along with the right of collective bargaining (if recognised), right to represent other members in disputes arising before the labour courts, the right to negotiate collective agreements on aspects such as wages and working hours, and the right to strike as well (if legally allowed).

13 Dispute Resolution

1.Procedures & Enforcement

Under the Industrial Relations Legislation, a worker may bring his grievance in respect of any right guaranteed or secured to him by or under any law or any award or settlement to the notice of his employer in writing, either himself or through his shop steward or collective bargaining agent within three months of the day on which the cause of such grievance arises.

2.Waiver & Enforcement

Except perhaps on public policy grounds which are very narrowly and very strictly construed.an employee cannot agree to waive statutory and contractual rights to potential employment claims.

14 Others

1.Latest Development & Trends

Emerging Trends:

? The Personal Data Protection Bill 2023

? Stricter enforcement of the Protection Against Harassment of Women at the Workplace Act 2010

2.Cultural and Religious Considerations

Every Friday for prayer, work schedules must accommodate extended breaks, specially in larger cities and factories. Ramadan requires reduced working hours, where altered business hours for the month are common/standard practice.

* To avoid ambiguity, this article should not be regarded as legal advice.

Authors

Sahar Iqbal, Partner at Akhund Forbes since 2013, is a Barrister of England & Wales and an Advocate of the High Courts in Pakistan. Consistently recognized as a "Leading Partner" by Legal500 and ranked by Chambers and Partners, she has advised on complex, multi-hundred-million-dollar transactions across Corporate and Employment Law. Beyond her practice, Sahar serves as an officer of the International Bar Association and is a member of the Women’s Standing Committee of the Federation of Pakistan Chambers of Commerce & Industry.

Translator

Zhou Hao, Master of Laws, Associate at Anli Partners. Areas of expertise: Labor Law, Dispute Resolution, ESG Compliance.