Route one: incorporate a subsidiary

A Pakistani private limited company can employ staff directly. This is the right answer when headcount is large, permanent, or when the business needs to contract, invoice and hold assets locally. It brings incorporation cost, statutory audit, annual SECP filings, corporate tax returns and State Bank reporting on inbound investment.

Route two: Employer of Record

An Employer of Record already holds a Pakistani entity and employs the worker on your behalf. The worker signs a compliant local contract with the EOR, the EOR runs payroll and withholding, and you direct the day-to-day work under a service agreement. This is the fastest route and the usual answer below roughly ten to fifteen staff.

Route three: engage a contractor

Genuine independent contractors are lawful and common, particularly for project work. The risk is misclassification: a person who works fixed hours, uses your systems, reports to your manager and has no other clients looks like an employee regardless of the contract label. Reclassification exposes you to back social security contributions, gratuity, notice and tax.

What compliant employment requires

Intellectual property is the clause foreign employers miss

Do not assume work product vests in the company automatically. Include an express present assignment of all intellectual property created in the course of employment, a waiver of moral rights so far as permitted, and a further assurance clause. For contractors this is even more important, because the default position on ownership of commissioned work is less favourable to the client than most foreign counsel expect.

Currency and payment

Salaries are paid in Pakistani rupees into local accounts. Funding an EOR is a straightforward inbound service payment. If you set up your own entity, plan the capital injection and its State Bank documentation before you need to pay your first payroll, since repatriation later depends on the inbound paperwork being correct.