Running payroll in Pakistan means handling three separate sets of obligations at once, and it is easy to treat them as one. They are not. EOBI is calculated on the minimum wage; provincial social security is an employer-only charge; salary tax is withheld from the employee on a graduated scale. Get the base wrong on any of them and the numbers quietly go off.
This guide sets out what each one is, what it is calculated on, and when it is due — using the rates in force for the 2025-26 tax year.
The facts, in short
- EOBI: 5% employer + 1% employee, on the minimum wage — Rs 40,000, so Rs 2,000 + Rs 400.
- Social security (SESSI/PESSI): 6%, employer-only, on the insured worker's wage.
- Salary tax: withheld under Section 149 on the annualised slab.
- Deadline: the 15th of the following month for salary tax and EOBI.
EOBI: five plus one, on the minimum wage
The Employees' Old-Age Benefits Institution provides a pension and old-age benefit scheme for workers. It applies to establishments once they reach the size threshold, and the contribution has one feature that trips people up: it is calculated on the notified minimum wage, not the employee's actual salary.
With the minimum wage at Rs 40,000 a month for 2025-26, that means:
| EOBI | Rate | Per employee / month | Paid by |
|---|---|---|---|
| Employer's share | 5% of minimum wage | Rs 2,000 | Employer |
| Employee's share | 1% of minimum wage | Rs 400 | Deducted from salary |
| Total | 6% of minimum wage | Rs 2,400 | — |
Because the base is the minimum wage, the amount is fixed per employee regardless of pay. An executive on Rs 300,000 a month still attracts the same Rs 2,400 as someone on Rs 40,000. Contributions for a month are due by the 15th of the following month, and late payment attracts an increase of 2% per month, capped at 50% of the contribution.
Provincial social security: six percent, employer-only
Social security (medical care and related benefits) is administered by the provinces, so the institution depends on where the establishment sits: SESSI in Sindh, PESSI in Punjab, and their counterparts in Khyber Pakhtunkhwa and Balochistan. The rate is uniform: 6% of the insured worker's wage, applied on the prevailing minimum wage, and it is an employer-only cost — nothing is deducted from the employee.
Which employees are covered depends on a wage threshold notified by the province: workers at or below it are "insured persons" who attract the contribution, while higher earners typically fall outside the scheme. Those thresholds are revised from time to time, so it is worth confirming the current position for your province.
| Province | Institution | Contribution | Paid by |
|---|---|---|---|
| Sindh | SESSI | 6% of the insured worker's wage | Employer |
| Punjab | PESSI | 6% of the insured worker's wage | Employer |
| Khyber Pakhtunkhwa | KPESSI | 6% of the insured worker's wage | Employer |
| Balochistan | BESSI | 6% of the insured worker's wage | Employer |
Salary tax: withholding under Section 149
Income tax on salary is collected at source. Under Section 149 of the Income Tax Ordinance, 2001, the employer works out each employee's estimated annual tax, divides it across the year, and deducts a monthly amount before paying the salary. The tax belongs to the employee — the employer's job is to calculate it correctly and deposit it on time.
For the 2025-26 tax year, the salaried slabs are:
| Annual taxable income | Tax |
|---|---|
| Up to Rs 600,000 | 0% |
| Rs 600,001 – 1,200,000 | 1% of the amount exceeding Rs 600,000 |
| Rs 1,200,001 – 2,200,000 | Rs 6,000 + 11% of the amount exceeding Rs 1,200,000 |
| Rs 2,200,001 – 3,200,000 | Rs 116,000 + 23% of the amount exceeding Rs 2,200,000 |
| Rs 3,200,001 – 4,100,000 | Rs 346,000 + 30% of the amount exceeding Rs 3,200,000 |
| Above Rs 4,100,000 | Rs 616,000 + 35% of the amount exceeding Rs 4,100,000 |
A surcharge of 9% applies to the tax where taxable income exceeds Rs 10 million. The tax withheld for a month is deposited with FBR by the 15th of the following month, alongside the monthly withholding statement.
What a month of payroll actually costs
Put together, an employee on a Rs 100,000 monthly salary looks like this to the employer:
| Component | Amount | Borne by |
|---|---|---|
| Gross salary | Rs 100,000 | Employer pays; employee receives |
| EOBI (employer 5%) | Rs 2,000 | Employer |
| Social security (6%) | Rs 2,400 | Employer |
| Total employer cost | Rs 104,400 | — |
| Less: EOBI employee share (1%) | Rs 400 | Deducted from salary |
| Less: income tax withheld (Section 149) | Per slab | Deducted from salary |
So the headline salary understates the real cost by roughly 4–5% in statutory contributions alone — before any benefits, and before the administrative cost of getting it right.
The mistakes we see most often
- Using actual salary as the EOBI base. It should be the minimum wage.
- Forgetting provincial social security for lower-paid staff who fall inside the insured threshold.
- Applying the wrong slabs, or using a flat percentage instead of the graduated calculation.
- Not annualising correctly, especially when someone joins mid-year or gets a mid-year raise.
- Missing the 15th deadline — for salary tax, EOBI and the monthly statement alike.
- Ignoring taxable allowances, which can push an employee into a higher slab without anyone noticing.
Payroll is one of those areas where being slightly wrong is worse than being obviously wrong — the errors are small, repeated every month, and surface at the least convenient time. Our accounting team runs payroll and the related filings for businesses across Karachi, keeping EOBI, social security and salary withholding correct and on time, and the records that back them in order.
Get payroll right, every month.
Tell us how many staff you have and how you run payroll today. We will take the calculations and deadlines off your desk.
Frequently asked questions
What is EOBI calculated on?
The notified minimum wage — currently Rs 40,000 a month — not the employee's actual salary. The employer pays 5% and the employee contributes 1%.
Does social security come out of the employee's pay?
No. Provincial social security is an employer-only contribution of 6% of the insured worker's wage.
When is salary tax due?
By the 15th of the month following the month in which the salary was paid, together with the monthly withholding statement.
Can employees earning well above minimum wage still attract EOBI?
EOBI applies based on the establishment and the employee's insurable employment, and the contribution is a fixed amount tied to the minimum wage — so it does not fall away simply because someone is well paid.