Pakistan — Payroll (Salary Tax + EOBI + Provincial Social Security) — Skill v1.0

Scope note: This skill is the end-to-end monthly payroll orchestrator for Pakistan. It does NOT redefine the salary tax brackets — those live in pk-income-tax and are applied here for monthly withholding under Section 149 of the Income Tax Ordinance 2001 (ITO 2001). This skill defines the sequence, the EOBI computation, the provincial social security routing, the WWF/WPPF treatment, the remittance calendar, and the year-end reconciliation workflow.

Tax year 2025-26 note: Pakistan's tax year runs 1 July – 30 June. References to "2025-26" mean the year ending 30 June 2026. Salary tax brackets are set annually by the Finance Act and are applied via pk-income-tax. EOBI rates have remained 5% employer / 1% employee on the federal minimum wage base for an extended period; provincial social security thresholds vary by province and are tracked here as ranges, not point estimates, because they are revised by provincial notification.

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Section 1 — Quick reference: contribution table

The order matters because only employee EOBI is deductible from salary, and none of the provincial social security contributions reduce the employee's chargeable salary for Section 149 purposes unless paid by the employee (provincial social security is typically employer-only).

Component	Rate	Base	Paid by	Effect on salary tax base
Salary tax (Sec 149 ITO 2001)	Slab rates — see pk-income-tax	Annualised taxable salary	Employee (withheld at source)	—
EOBI — Employee	1%	Federal minimum wage (currently PKR 37,000/month – verify current notification)	Employee	No reduction of Section 149 base (statutory deduction, not allowed against salary income)
EOBI — Employer	5%	Federal minimum wage	Employer	Employer cost only
SESSI (Sindh)	6%	Wage of insured worker (workers earning ≤ provincial threshold)	Employer-only	Employer cost only
PESSI (Punjab)	6%	Wage of insured worker (subject to Punjab ESSI Ordinance threshold)	Employer-only	Employer cost only
KPESSI (Khyber Pakhtunkhwa)	6% (verify current notification)	Wage of insured worker	Employer-only	Employer cost only
BESSI (Balochistan)	6% (verify current notification)	Wage of insured worker	Employer-only	Employer cost only
WWF (Workers Welfare Fund)	2%	Taxable profit of company	Employer-only	Corporate-tax-side; not a payroll deduction
WPPF (Workers Profit Participation Fund)	5%	Profit before tax (companies with 50+ employees, or threshold under provincial law)	Employer-only	Distributed to workers; not a salary-tax-side deduction

Conservative default: When in doubt whether a provincial social security scheme applies (because the employee's wage hovers around the provincial threshold), include the contribution and flag for reviewer. Under-contribution triggers provincial inspector recovery + penalty; over-contribution is harmless and can be reclaimed on later reconciliation.

Provincial routing rule of thumb: the provincial social security institution of the province where the establishment is located / where the worker is employed receives the contribution — not the province of the worker's domicile.

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Section 2 — Required inputs & refusal catalogue

2.1 Inputs required to run a Pakistan payroll

Input	Source	Notes
NTN (National Tax Number) — employer	FBR	Required on every Section 149 statement
CNIC of each employee	Employee record	Used as the FBR identifier where no NTN is held
NTN of each employee (if held)	Employee record	Required for higher earners
Province where the establishment is registered	Employer record	Determines SESSI / PESSI / KPESSI / BESSI routing
EOBI registration number	EOBI portal	Required if establishment has ≥ 5 employees (lower in some sectors)
Provincial social security registration	Provincial portal	Separate registration per province
Gross monthly emolument breakdown	HR / contract	Basic + allowances + perquisites
Perquisites in cash and kind	Accounts payable	Must be valued under Section 13 ITO 2001
Federal minimum wage in force (for EOBI)	Federal notification	Verify current value — track Finance Act and notifications
Provincial wage threshold for ESSI coverage	Provincial notification	Determines whether the worker is "insured"
Whether employer has ≥ 50 employees (for WPPF)	HR headcount	WPPF applies only above the threshold
Whether employer is a company subject to WWF	Corporate tax status	WWF is corporate-side, computed in the tax return

2.2 Refusal catalogue — out of scope

Scenario	Action
Non-resident employees / split-pay / treaty relief	Refer to a qualified Pakistan tax consultant — treaty analysis required
Expatriates on Pakistan assignment with home-country payroll continuation	Out of scope; bespoke
Employee stock options, RSUs, share-based payments	Out of scope — Section 14 ITO valuation required by specialist
Termination payments, golden handshake, gratuity above statutory exemption	Flag — Section 12(6) and Sixth Schedule exemptions need legal review
Backdated salary spanning two tax years (Pakistan tax year ends 30 June)	Refer to specialist — re-opening of prior-year Section 165 statement may be needed
Provident Fund (recognised vs unrecognised) treatment	Out of scope here — refer to specialist; the Sixth Schedule rules on PF contributions and accumulated balances are complex
Directors' fees not run through payroll	Out of scope — covered by separate withholding under ITO Part III
Casual / piece-rate workers under the Industrial Relations Acts	Flag for reviewer — provincial coverage differs

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Section 3 — Salary tax (Section 149 ITO 2001) — monthly withholding

3.1 Statutory basis

Section 149 of the Income Tax Ordinance 2001 requires every employer paying salary to deduct tax at the time of payment, on the basis of the estimated annual salary for the tax year (1 July – 30 June). The bracket rates are set in the First Schedule, Part I, Division I of the ITO 2001, updated each year by the Finance Act. Do not embed the rates here — pull them from pk-income-tax, which is the canonical source.

3.2 Monthly withholding mechanic

1.  Estimate annual taxable salary:
       AnnualTaxable = (Gross monthly × number of months remaining)
                       + perquisites for the year
                       + bonuses expected in the year
                       − exemptions (Sixth Schedule items, e.g. some allowances)
                       − allowable deductions for salaried persons (see pk-income-tax)

2.  Apply the First Schedule salary brackets (from pk-income-tax) to AnnualTaxable
       → AnnualTax

3.  Subtract any tax credits the employee has notified to the employer
       (Section 60 to 65 credits — e.g. donations under Sec 61, investment in
        approved pension fund under Sec 63, etc.; only those notified in writing)
       → AnnualTaxNet

4.  MonthlyWithholding = AnnualTaxNet / 12
       (or / remaining months for a mid-year joiner)

5.  Adjust for under/over-withholding from earlier months
       in the same tax year — Section 149(3) permits this.

Note on bonuses and arrears: Lump-sum bonuses, arrears and one-off payments must be annualised into the estimated annual salary and reflected in the recalculated monthly withholding from the month of payment forward — not taxed at marginal rate in a single month. This avoids over-withholding spikes.

3.3 Section 165 monthly statement

Every employer must file a monthly statement of tax withheld under Section 165 (and the related Income Tax Rules) by the 15th of the following month, via the FBR IRIS portal. The statement covers all withholding categories, including Section 149 salary tax.

Field	Content
Employer NTN	Withholding agent identifier
Employee details	Name, CNIC, NTN (if any), gross salary, tax withheld
Payment date	For each salary payment
Tax challan / CPR number	Proof of deposit with FBR

3.4 Annual employer certificate

By 31 July following the close of the tax year (30 June), every employer must:

1. File the annual Section 149 / 165 reconciliation on IRIS.
2. Issue each employee a Certificate of Tax Collected/Deducted (Form prescribed under Rule 42 of the Income Tax Rules 2002) showing gross salary, tax deducted by month, and CPR references — the employee uses this to file their own annual return.

3.5 Late-payment / late-statement penalties (summary)

Default	Consequence
Late deposit of withheld tax	Default surcharge under Sec 205 (KIBOR + 3%) + recovery
Late filing of Section 165 statement	Penalty under Sec 182 — PKR 5,000 per day of default, subject to maxima
Failure to deduct	Employer personally liable for the tax + default surcharge (Sec 161)

Full detail in pk-income-tax.

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Section 4 — EOBI — federal pension scheme

4.1 Statutory basis

Employees' Old-Age Benefits Act 1976 (federal). Administered by the Employees' Old-Age Benefits Institution (EOBI), an autonomous federal body. After the 18th Constitutional Amendment, social security was devolved to the provinces, but EOBI continues to operate federally pending substitute provincial pension legislation; courts have repeatedly upheld this. Treat EOBI as federal and mandatory in all four provinces and Islamabad Capital Territory.

4.2 Coverage threshold

Establishment size	EOBI applicability
≥ 5 employees	Mandatory registration and contribution
< 5 employees in some specified industries (e.g. shops & establishments under provincial law)	May still be covered — verify under the EOBI Act and current notifications
Once covered, always covered	Even if headcount later falls below 5, registration is retained

4.3 Contribution rates and base

Party	Rate	Base
Employer	5%	Federal minimum wage (notified periodically — verify current notification each cycle)
Employee	1%	Federal minimum wage

Important — the base is the minimum wage, not the actual salary. EOBI contributions are computed on the prevailing federal minimum wage (as notified), capped at that figure regardless of how much the employee actually earns. Track the current notification: at recent notifications the minimum wage figure was PKR 32,000 → PKR 37,000 (and may be revised again). Confirm the figure in force in the month of the contribution.

4.4 Computation

EOBI Employer monthly  = 5% × MinimumWage
EOBI Employee monthly  = 1% × MinimumWage  (deducted from employee's salary)
Total EOBI monthly     = 6% × MinimumWage  per insured employee

4.5 Filing and payment

Item	Recipient	Deadline	Channel
Monthly EOBI contribution (PR-03 challan + PR-04 schedule of insured persons)	EOBI via designated banks	15th of the following month	EOBI online portal eobi.gov.pk + bank challan

4.6 Penalty

Late payment attracts a monthly default surcharge under the EOBI Act + recovery as arrears of land revenue. Long-running default also exposes directors personally under Section 12 EOBI Act.

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Section 5 — Provincial social security schemes

Each province operates its own Employees Social Security Institution under provincial law (post-18th Amendment). The schemes provide medical care, sickness benefits, maternity, injury, and death benefits to "insured" workers — i.e. workers whose monthly wage is at or below a provincial threshold.

5.1 The four provincial institutions

Province	Institution	Statute	Threshold (verify current notification)	Rate (employer-only)
Sindh	SESSI (Sindh Employees Social Security Institution)	Provincial Employees' Social Security Ordinance 1965 as adapted by Sindh	Wage threshold commonly in the PKR 30,000 – 50,000/month band — track current SESSI notification	6% of wage of insured employee
Punjab	PESSI (Punjab Employees Social Security Institution)	Provincial Employees Social Security Ordinance 1965 (Punjab Adapted)	Punjab-notified threshold — track current PESSI notification	6% of wage of insured employee
Khyber Pakhtunkhwa	KPESSI	KP adaptation of the 1965 Ordinance	KP-notified threshold	6% (verify)
Balochistan	BESSI	Balochistan adaptation of the 1965 Ordinance	Balochistan-notified threshold	6% (verify)

Threshold caveat: the wage threshold for "insured person" status is revised by provincial notification. The rule is: if the employee's gross wage ≤ threshold in force, the worker is an "insured person" and the employer must contribute 6% of that worker's actual wage to the provincial institution. Workers above the threshold are typically excluded (but check the latest notification — some provinces have extended coverage to all workers).

5.2 Computation

ProvincialSS_monthly = 6% × Wage(insured employee)
                     (per worker, for each insured worker)

• Employer-only — there is no employee share.
• Does NOT reduce the employee's salary tax base because it is not deducted from the employee.
• Routed to the province where the establishment is located — i.e. the place of employment, not the worker's domicile.

5.3 Filing and payment

Item	Deadline	Channel
Monthly contribution + return of insured persons	Typically by the 15th of the following month (verify per-province)	Provincial ESSI portal + designated banks
Annual reconciliation	Per provincial rules — typically by 31 July	Provincial ESSI portal

5.4 Penalty

Each province has its own penalty regime, typically:

• Default surcharge at a notified monthly rate.
• Recovery by the provincial Social Security Department as arrears of land revenue.
• Criminal liability of directors / partners under the 1965 Ordinance for sustained default.

5.5 Inter-province workers

If an establishment has branches in more than one province, contributions are made to each provincial institution for the workers employed at the establishment in that province. There is no cross-province credit — each province collects on its own workers.

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Section 6 — Other employer-side deductions: WWF and WPPF

These are corporate-side levies, not strictly payroll, but they are commonly run through the HR / finance interface because the WPPF distribution flows to the workers.

6.1 Workers Welfare Fund (WWF)

Element	Detail
Statute	Workers Welfare Fund Ordinance 1971 (federal; provincial variants also enacted post-18th Amendment — see caveat)
Rate	2% of taxable profit (companies)
Base	Total income / taxable income of the establishment under the ITO 2001
Paid by	Employer only — not deducted from employee
Routed to	Federal WWF or provincial WWF, depending on the establishment's jurisdiction and current case law
Frequency	Annual — assessed via the corporate tax return

Jurisdictional caveat: Post-18th Amendment, Sindh, Punjab, KP and Balochistan enacted their own Provincial Workers Welfare Fund statutes. Supreme Court of Pakistan judgments (notably Workers Welfare Funds v Various line of cases) have produced complex routing rules between the federal and provincial WWFs depending on the period and the entity. Defer the WWF jurisdiction question to the corporate tax skill / a qualified Pakistani tax consultant — flag any direct WWF computation request to a reviewer.

6.2 Workers Profit Participation Fund (WPPF)

Element	Detail
Statute	Companies Profits (Workers' Participation) Act 1968
Threshold	Companies with 50+ employees (or qualifying establishment criteria)
Rate	5% of profit before tax
Distribution	Distributed to eligible workers in accordance with the Act + Scheme (subject to per-worker ceiling)
Residual	Any undistributed balance is transferred to the WWF
Paid by	Employer only
Frequency	Annual — within nine months of close of accounting year (per the Act and Scheme)

Workers profit participation interacts with WWF — undistributed WPPF flows to WWF. This linkage is corporate-tax-side and is handled in the corporate compliance skill, not here.

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Section 7 — Worked example

Scenario: Software developer, Karachi (Sindh) resident, employed at a Karachi-based fintech with 35 employees. Gross monthly emolument PKR 250,000. Pakistani citizen, CNIC and NTN held. Employer is EOBI-registered. Tax year 2025-26.

Assumed inputs (verify each from current notifications and pk-income-tax):

• Federal minimum wage in force for EOBI: PKR 37,000/month (placeholder — verify current notification)
• SESSI wage threshold for "insured person": PKR 50,000/month (placeholder — verify Sindh notification). At PKR 250,000/month the employee is above the threshold → not an insured person → no SESSI contribution payable.
• Salary tax brackets: pulled from pk-income-tax (do not rely on the numbers below for any other purpose).
• No bonus or perquisites in this month.

A — Salary tax (Section 149) — illustration only

Annual taxable salary = 250,000 × 12         = 3,000,000

Apply 2025-26 First Schedule salary brackets (from pk-income-tax).
For illustration only (DO NOT use as authoritative — pk-income-tax governs):

   Slice 1:   0 –   600,000        @  0%     =        0
   Slice 2:   600,001 – 1,200,000  @  5%     =   30,000
   Slice 3:   1,200,001 – 2,200,000 @ 15%    =  150,000
   Slice 4:   2,200,001 – 3,000,000 @ 25%    =  200,000
   Annual tax (illustrative)                  =  380,000
   Monthly withholding (illustrative)         =   31,667

The bracket numbers above are illustrative placeholders — the real computation MUST be done by pk-income-tax, which carries the Finance Act 2025 rates.

B — EOBI

EOBI Employee (1% × 37,000)        =   370
EOBI Employer (5% × 37,000)        = 1,850

C — SESSI (Sindh)

Employee's wage PKR 250,000 > assumed threshold PKR 50,000 → not insured → no SESSI contribution.

If the same employee earned PKR 40,000:

SESSI Employer (6% × 40,000)       = 2,400      (employer-only)

D — WWF / WPPF

Not run through this payslip — computed annually on profit-before-tax in the corporate tax return.

E — Payslip summary (illustrative)

Item	PKR
Gross monthly emolument	250,000
− Salary tax withheld (Sec 149)	(31,667) illustrative — pk-income-tax governs
− EOBI employee	(370)
Net pay	217,963

Employer cost (parallel)	PKR
Gross emolument	250,000
EOBI employer (5% × 37,000)	1,850
SESSI (not applicable — wage above threshold)	0
Total employer cost	251,850

F — Remittances arising from this payslip

Recipient	Amount PKR	Deadline
FBR (Section 149 salary tax)	31,667	Deposit by 15th of following month via challan; Section 165 statement by 15th of following month on IRIS
EOBI (employee 370 + employer 1,850)	2,220	15th of following month — PR-03 / PR-04 via EOBI portal and bank
SESSI	n/a	—

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Section 8 — Filing and payment calendar

8.1 Monthly cycle

Item	Recipient	Deadline	Channel
Salary tax deposit	FBR	At time of payment (challan deposited promptly — typically within 7 days of withholding; verify current rule)	Bank challan (CPR)
Section 165 monthly statement	FBR	15th of the following month	FBR IRIS portal
EOBI contribution + PR-04 schedule	EOBI	15th of the following month	EOBI portal + designated bank
Provincial ESSI contribution	SESSI / PESSI / KPESSI / BESSI	Typically 15th of the following month (verify per-province)	Provincial ESSI portal + designated bank

8.2 Annual cycle

Item	Deadline	Notes
Annual Section 149 / 165 reconciliation	31 July following tax-year-end 30 June	Filed on IRIS — must reconcile sum of monthly statements to annual withholding
Employee tax deduction certificate (Rule 42)	By the time of the annual statement	Issued to each employee for use in their own return
EOBI annual reconciliation	Per EOBI rules	Reconcile sum of monthly PR-04 schedules to insured headcount × 12
Provincial ESSI annual reconciliation	Per provincial notification	Typically by 31 July
WWF (corporate)	With corporate tax return	Out of scope here
WPPF distribution	Within 9 months of accounting-year-end	Out of scope here; residual to WWF

8.3 Penalty summary

Default	Consequence
Late salary tax deposit	Default surcharge under Sec 205 ITO 2001 (KIBOR + 3%)
Late Section 165 statement	Sec 182 penalty — PKR 5,000/day, subject to caps
Failure to deduct salary tax	Employer personally liable (Sec 161) + surcharge
Late EOBI	Default surcharge per EOBI Act + recovery as arrears of land revenue
Late provincial ESSI	Per provincial regime — surcharge + recovery

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Section 9 — Conservative defaults

Situation	Conservative position
EOBI coverage uncertain (establishment hovering around 5 employees)	Treat as covered; register on EOBI portal; under-contribution risk outweighs the small monthly cost
Provincial ESSI threshold ambiguous	Treat employee as insured if wage near threshold; contribute and reclaim later if unnecessary
Minimum wage notification updated mid-month	Apply the higher rate from the date of notification; do not back-spread
Bonus or arrears paid in one month	Annualise into the Sec 149 estimated annual salary and recompute monthly withholding from that month forward — do not apply marginal rate to the lump sum in a single month
Employee CNIC missing	Withhold normally but flag immediately — Section 165 statement will reject without CNIC
Employee NTN missing (high earner)	Compute tax normally; flag to HR to enrol the employee on IRIS — required for higher-earner statements
Mid-year joiner	Estimate the annual salary on a pro-rata basis (months remaining × monthly gross + expected perquisites) and divide the tax by the remaining months
Mid-year leaver	Issue interim Rule 42 certificate covering the period of employment, reconcile via Section 149(3) adjustment in the leaver's final month
Worker in Punjab establishment but resident in Sindh	Contribute to PESSI (province of employment), not SESSI
Multi-province establishment	Contribute to each provincial ESSI for the workers physically employed there
WWF / WPPF computation request	Refer to corporate tax skill / reviewer — jurisdictional routing is complex post-18th Amendment
Provident Fund deduction	Refer to specialist — Sixth Schedule treatment depends on recognition status
Salary paid in foreign currency	Convert to PKR at the SBP rate on payment date; document the rate

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Section 10 — Sources

Source	Reference
Income Tax Ordinance 2001 — Section 149 (deduction of tax from salary)	FBR
Income Tax Ordinance 2001 — Section 165 (statement of tax collected or deducted)	FBR
Income Tax Ordinance 2001 — First Schedule Part I (salary brackets)	FBR — applied via pk-income-tax
Income Tax Rules 2002 — Rule 42 (employee tax deduction certificate)	FBR
Employees' Old-Age Benefits Act 1976	EOBI
EOBI portal	https://eobi.gov.pk
Provincial Employees' Social Security Ordinance 1965 (as adapted by Sindh, Punjab, KP, Balochistan)	Provincial gazettes
Sindh Employees Social Security Institution (SESSI)	https://sessi.gos.pk
Punjab Employees Social Security Institution (PESSI)	https://pessi.punjab.gov.pk
Khyber Pakhtunkhwa Employees Social Security Institution (KPESSI)	KP provincial portal
Balochistan Employees Social Security Institution (BESSI)	Balochistan provincial portal
Workers Welfare Fund Ordinance 1971 + provincial WWF statutes	Federal / provincial gazettes
Companies Profits (Workers' Participation) Act 1968 (WPPF)	Federal gazette
FBR IRIS portal	https://iris.fbr.gov.pk
Companion skill — Pakistan income tax (salary brackets, slabs, tax credits)	pk-income-tax
Companion skill — Pakistan sales tax	pakistan-sales-tax
Foundation skill — global workflow base	foundation

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OpenAccountants — open-source accounting skills for AI This is not tax advice. All outputs must be reviewed by a qualified Pakistani payroll professional or tax consultant before any payslip is issued or any remittance is made.

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