Employer of Record or Branch Office in Pakistan: The Legal Comparison
Four ways a foreign company can lawfully have people working for it in Pakistan. Only one needs no registration here. When it is the right choice, and when it is not.
The four structures
Employer of Record. A Pakistani company employs the individual under a Pakistani-law contract and places them at the foreign client's disposal under a service agreement. The foreign company registers nothing in Pakistan.
Liaison office. Permitted by the Board of Investment for promotion and liaison only; it may not earn revenue or sign commercial contracts. Expenses funded by inward remittance.
Branch office. BOI permission tied to a specific contract or project; taxed as a non-resident on Pakistan-source income; parent fully liable.
Private limited subsidiary. Incorporated with the SECP under the Companies Act 2017; full legal personality, limited liability, annual audit and returns, ongoing FBR and provincial filings.
Comparison
| EOR | Liaison office | Branch | Subsidiary | |
|---|---|---|---|---|
| Registration in Pakistan | None | BOI permission | BOI permission | SECP incorporation |
| Time to first employee | 1–2 weeks | 2–4 months | 2–4 months | 4–8 weeks after incorporation |
| Can earn revenue in Pakistan | Not relevant (client earns abroad) | No | Project only | Yes |
| Permanent establishment risk | Low if structured correctly | Low | Is a PE by definition | Separate entity |
| Employer liability sits with | EOR company | Parent | Parent | Subsidiary |
| Ongoing compliance | Service agreement only | Annual BOI renewal, remittance records | Tax returns, BOI renewal | Audit, SECP returns, tax returns, provincial filings |
| Exit | 60 days' notice; employees transferable | Deregistration | Deregistration, tax clearance | Winding up or sale |
Where the EOR route needs care
- Two contracts must fit. The employment contract (EOR–employee) and the service agreement (client–EOR) must align on notice, IP, confidentiality and termination funding, or one party is left exposed.
- Intellectual property. Section 13 of the Copyright Ordinance 1962 vests works made in the course of employment in the employer, which is the EOR. An express present assignment to the client is required in both documents.
- Permanent establishment. If the employee habitually concludes contracts in the foreign company's name, the FBR may argue a dependent-agent PE under section 2(41) of the Income Tax Ordinance 2001 and the relevant treaty. The service agreement should prohibit it and the facts should match.
- Restraint of trade. Covenants restraining an employee after the employment ends are, as a rule, void under section 27 of the Contract Act 1872. Protect the client with confidentiality, non-solicitation and garden-leave drafting instead.
Our recommendation by headcount
One to ten employees, no Pakistani revenue: Employer of Record. Ten to twenty-five, or any local customers: begin planning a subsidiary while employees sit on the EOR, then transfer them. Project work for a Pakistani principal with local billing: branch. Pure market research with no hiring beyond a representative: liaison office. We draft and review EOR service agreements and employment contracts and advise on the transition to a subsidiary when the time comes. See our Employer of Record & Employment Law practice and the earlier note on branch office versus subsidiary.