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Payroll Compliance for Employers in Pakistan

2026-02-17

Running payroll in Pakistan involves more than transferring salaries. Employers act as withholding agents for income tax and are responsible for several statutory contributions on behalf of employees.

Income tax must be deducted monthly from each employee's salary based on the projected annual taxable income and the applicable slab rates, then deposited with the FBR by the prescribed date.

Employers must file periodic withholding statements listing each employee, the salary paid and the tax deducted. These statements are matched against employee returns, so accuracy protects both sides.

Depending on the province and headcount, contributions may also be due to the Employees Old Age Benefits Institution and the provincial social security institution. Registration thresholds and rates vary between provinces.

Provide every employee with a salary certificate after the tax year ends. Employees need it to file their returns, and a missing certificate is a common cause of filing errors.

Maintain payroll records including appointment letters, salary structures, attendance data and proof of payments. In a labour or tax dispute, contemporaneous records are the decisive evidence.

Automating payroll calculations reduces error dramatically. A simple payroll tool that applies current slab rates and generates payslips pays for itself in avoided penalties and saved administrative time.

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