Payroll in Pakistan 2026: salary tax, EOBI and minimum wage

In Pakistan the employer withholds income tax from each salary under section 149 of the Income Tax Ordinance, 2001, at the salaried slabs of the July-to-June tax year, and deducts the employee's 1% EOBI contribution. The employer adds 5% to EOBI, both based on the minimum wage rather than the salary, plus provincial social security for covered workers.

Pakistani payroll at a glance

Social security: EOBI and provincial schemes

EOBI. The Employees' Old-Age Benefits Institution runs the pension scheme of the Employees' Old-Age Benefits Act, 1976. EOBI receives no government funding: employers of industrial and commercial organisations covered by the Act pay 5% of minimum wages for each insured employee, and the employees pay 1% of minimum wages. Because the base is the minimum wage, the contribution is the same flat amount for a clerk and for a senior manager. In return insured persons earn an old-age, invalidity or survivors' pension; the minimum EOBI pension has been Rs 11,500 a month since January 2025.

Provincial social security. Each province runs its own employees' social security institution, which provides medical care and cash benefits to covered workers and collects a contribution from the employer. Coverage limits and rates are set provincially, so check the rules of the province where each employee works.

Income tax on salaries

The Finance Act 2026 restructured the salaried slabs for tax year 2027: it added intermediate bands and raised the threshold for the top rate of 35% from Rs 4.1 million to Rs 7 million. The FBR's withholding tax rate card gives the annual slabs for section 149:

How withholding works. The employer works out the tax on the employee's expected taxable salary for the tax year and deducts it in monthly instalments, recalculating when pay changes or a bonus is paid. Salary income is taxed at these slabs only; there is no personal allowance on top of the 0% band.

No surcharge on salary. Section 4AB of the Ordinance charges a 10% surcharge on individuals with taxable income above Rs 10 million, but its proviso, as amended up to 30 June 2026, states that no surcharge is payable by an individual deriving income chargeable under the head "Salary".

Minimum wage, working time and mandatory pay

Minimum wages in Pakistan are set by the provinces, through their labour departments and minimum wage boards, and by the federal government for Islamabad; they are usually revised from 1 July. For example, the Labour and Human Resources Department of Sindh fixed these monthly minimum wages from 1 July 2026:

Check the current notification of the province where each employee works, because the rates and skill categories differ. EOBI contributions follow the minimum wage that applies for EOBI purposes, so update the EOBI base whenever it changes.

Monthly payroll calendar and filings

Before the first payroll: register the business with the FBR, register with EOBI and with the social security institution of each province where you employ covered workers, and collect each employee's CNIC and tax details.

The quarterly statement must be filed even when no tax was withheld in the quarter. If you find an error, a revised statement can be filed within 60 days of the original.

Worked example: Rs 200,000 a month

An employee in Karachi earns a gross salary of Rs 200,000 a month, or Rs 2,400,000 for tax year 2027, with no other income.

Tax for the year: Rs 2,400,000 falls in the Rs 2,200,001 to Rs 3,200,000 band, so the tax is Rs 116,000 + 20% × (2,400,000 − 2,200,000) = 116,000 + 40,000 = Rs 156,000, or Rs 13,000 a month, an effective rate of 6.5%.

EOBI is a flat amount that does not grow with salary: deduct the employee's 1% from the net figure above and add the employer's 5% to the cost of employment.

Common mistakes

1. 1Using last year's slabs for salaries paid from 1 July 2026 instead of the Finance Act 2026 slabs.
2. 2Adding the 10% surcharge to salaried employees above Rs 10 million, which the Ordinance now excludes for salary income.
3. 3Calculating EOBI on the actual salary instead of on the minimum wage.
4. 4Depositing tax once a month when private employers must deposit within seven days after each week ending on Sunday.
5. 5Skipping the quarterly statement for a quarter with no withholding.
6. 6Paying below the provincial minimum wage, or using another province's rate.

For a smooth month-end, see our month-end close checklist.

How Clientlly helps

Clientlly ships a built-in payroll profile for Pakistan: the salaried slabs for tax year 2027 converted to monthly bands, EOBI at 1% for the employee and 5% for the employer on the minimum wage as contribution base, and the minimum wage, checked against official sources on 1 October 2026. It calculates gross to net and the employer contributions, produces payslips, supports recurring payroll adjustments, and imports employees and payroll data; an administrator can adjust the rates in the payroll tax settings. The profile models one employee in a primary job, single, without dependants, at federal level, so provincial social security, provincial minimum wages and personal circumstances must be checked.

The Clientlly HR module also handles leave requests and approvals with a leave calendar and keeps HR documents in one place, and attendance and time tracking records hours and overtime for you to review before payroll.