Payroll in Pakistan is more than paying salaries. Each month an employer typically has to calculate salary income tax, withhold and deposit it, account for EOBI and other statutory contributions, issue payslips, and keep records that stand up to scrutiny. Getting any of these wrong creates liabilities that surface later. Here is a practical overview.
Salary income tax and withholding
Employers are responsible for deducting income tax from employees' salaries and depositing it with the tax authority, then reporting it. The amount depends on the employee's taxable income across the year, so a good payroll process spreads the liability evenly rather than creating surprises. Because slabs and rates are set each year in the Finance Act, confirm the current figures on the FBR website or with your advisor before each tax year.
EOBI and other contributions
Registered employers contribute to the Employees' Old-Age Benefits Institution (EOBI) for eligible employees, usually alongside an employee share. Depending on province and sector, other contributions (such as social security) may also apply. These need to be calculated, deducted where relevant, and paid on time.
Payslips and records
Employees should receive a clear payslip showing gross pay, deductions and net pay. Employers should retain payroll records — earnings, tax deducted, contributions and payment dates — because these underpin annual statements and any future audit.
Why spreadsheets struggle at scale
- Tax calculations change with each year's slabs, so formulas have to be rebuilt and re-checked.
- Manual entry introduces rounding and transcription errors that compound over months.
- Producing payslips and statutory reports by hand is slow and easy to get wrong.
What good payroll software does
Dedicated payroll software automates the monthly cycle: it applies current tax rules, calculates withholding and EOBI, generates payslips, and produces the statutory reports employers need — with an audit trail of every change. Pay Time is built for payroll in Pakistan, handling salary tax, WHT, EOBI and payslips so the run is accurate and repeatable each month.
The practical test of a payroll process is simple: can you reproduce any past payslip and explain every figure on it? If the answer is no, it is time to move off spreadsheets.
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