Payroll processing in Pakistan: EOBI, income tax, and salary slips explained

EOBI: what employers must contribute

The Employees' Old-Age Benefits Institution (EOBI) requires all registered employers to contribute 5% of the minimum wage per employee per month. Employees contribute 1% of their wages. Contributions are due by the 15th of each month. Failure to register or pay EOBI results in penalties and legal liability.

Income tax deductions from salaries

Employers are required to deduct income tax at source from every employee whose monthly salary exceeds the taxable threshold. The tax slab rates change each year in the federal budget. For the 2024-25 tax year, the basic exemption is ₨600,000 per annum. Above this, tax is calculated on a progressive slab structure published by FBR.

What a payslip must contain

A legally compliant Pakistani payslip must show: employee name and CNIC, basic salary, all allowances (house rent, medical, conveyance), gross salary, each deduction (income tax, EOBI, loan repayments, absences), net salary payable, and the month/year. It should be signed or stamped by management.

Provincial vs federal EOBI obligations

EOBI is a federal scheme applicable nationwide. However, Sindh and Punjab have separate Social Security (SESSI/PESSI) schemes for industrial workers. If your business employs industrial workers in these provinces, both EOBI and provincial social security contributions are mandatory.

Payroll with FinanceOS

FinanceOS calculates income tax automatically using the current FBR tax slabs, computes EOBI contributions for every employee, and generates individual payslips as PDFs that can be emailed directly to staff. Bank transfer files in HBL, MCB, UBL, and Meezan formats are generated with one click.