Legal Basis for Employee Leave in Pakistan
Employee leave entitlements in Pakistan are governed by several key statutes. The primary legislation includes the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance 1968, the Factories Act 1934, and the Maternity Benefit Ordinance 1958. Since the 18th Constitutional Amendment in 2010, labour became a concurrent subject, meaning provinces can legislate independently. Sindh, Punjab, Khyber Pakhtunkhwa and Balochistan have each enacted their own standing orders and factories acts that may differ from federal minimums.
Employers must comply with whichever legislation provides the greater benefit to the employee. This guide covers federal minimums and key provincial variations relevant for 2025.
Annual Leave
Under the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance 1968, every worker who has completed one year of continuous service is entitled to annual leave with full pay. The entitlement is:
- 14 calendar days of annual leave per completed year of service
- Leave must be granted at a time convenient to the employer but must not be unreasonably withheld
- Workers must apply for leave in advance except in emergencies
Under the Factories Act 1934, the entitlement is one day of earned leave for every 20 days worked, which translates to approximately 18 days for full-year workers, providing a slightly higher floor for factory workers specifically.
Casual Leave
Casual leave covers unplanned, short-duration absences such as personal errands, minor illness not requiring a medical certificate, or urgent personal matters. Key rules are:
- 10 days per calendar year for most workers under the Standing Orders Ordinance
- Cannot be accumulated or carried forward to the next year
- Not encashable: unused casual leave lapses at year-end
- Typically limited to a maximum of 3 consecutive days per occasion
- Generally cannot be combined with annual leave
Because casual leave lapses at year end, HR teams must remind employees to use remaining casual leave before December 31 each year to avoid forfeiture.
Sick Leave
Sick leave entitlements differ between the Standing Orders Ordinance and the Factories Act:
| Legislation | Full-Pay Sick Leave | Half-Pay Sick Leave | Total |
|---|---|---|---|
| Standing Orders Ordinance 1968 | 8 days | 8 days | 16 days |
| Factories Act 1934 | 16 days | 0 days | 16 days |
A medical certificate from a registered medical practitioner is generally required for sick leave beyond two consecutive days. Sick leave cannot be accumulated and does not carry forward to the following year under federal law, though some provincial amendments allow limited carry-forward.
Maternity Leave
Pakistan has progressively strengthened maternity protections over the years:
- Maternity Benefit Ordinance 1958 (federal): Originally provided 6 weeks before and 6 weeks after delivery. Subsequent amendments extended this to 180 days (approximately 26 weeks) at full pay for qualifying female workers.
- Sindh Maternity Benefit Act 2018: Sindh introduced 16 weeks of maternity leave with full pay, applicable to all establishments with one or more female employees.
- Maternity and Paternity Leave Act 2023 (federal): The federal government passed updated legislation in 2023 reaffirming maternity leave protections and aligning federal provisions more closely with ILO Convention 183 standards.
Maternity leave is available to female workers who have completed at least four months of continuous service with the employer. The leave can be taken partly before and partly after the expected date of delivery, subject to a medical certificate.
Paternity Leave
The Maternity and Paternity Leave Act 2023 introduced formal paternity leave at the federal level for the first time:
- 30 days of paternity leave for male employees on the birth of a child
- Applicable to federal government employees and establishments covered by federal labour law
- Not all provinces have adopted equivalent legislation: Punjab and Khyber Pakhtunkhwa have separate provisions, while Sindh and Balochistan are still updating their frameworks
- Private sector employers covered by the act must provide paternity leave to male workers
Employers should check which provincial legislation governs their establishment and apply the more generous standard where both federal and provincial laws apply.
Festival and Public Holidays
Under the Factories Act 1934 and related legislation, workers are entitled to at least 10 paid public holidays per year. The federal government notifies public holidays annually, typically including:
- Pakistan Day (23 March)
- Labour Day (1 May)
- Independence Day (14 August)
- Eid ul Fitr (3 days)
- Eid ul Azha (3 days)
- Quaid-e-Azam Day (25 December)
- Ashura and other religious observances
If an employee is required to work on a public holiday, they must receive compensatory leave or double pay, depending on their contract and applicable standing orders.
Carry-Forward Rules for Annual Leave
Annual leave not taken within the year may be carried forward, subject to limits:
- In most provinces, annual leave can be carried forward for up to 2 years
- Accumulated leave beyond the carry-forward cap lapses unless the employer has a more generous policy
- Employees going on extended leave (for example, maternity or sick leave) may have carry-forward limits relaxed by mutual agreement
- Employers should document carry-forward balances in their leave management system at each year-end
Leave Encashment Rules
Leave encashment converts accrued, unused leave into a cash payment. The rules are:
- On termination or resignation: Accumulated annual leave must be encashed at the employee's current basic salary rate. This is a statutory right and cannot be waived by contract.
- At year-end: Encashment of unused annual leave during employment is only required if the employer's policy permits it. Many Pakistani companies include a year-end encashment clause in their HR policies to reduce accumulated liabilities.
- Casual and sick leave are not encashable under any circumstances.
- The encashment formula is: (Basic Daily Rate) x (Number of Leave Days)
Sample Leave Policy Text
The following is a sample clause that can be incorporated into an employee handbook or appointment letter:
"Employees who have completed one year of continuous service are entitled to 14 days of annual leave, 10 days of casual leave and 8 days of sick leave with full pay per calendar year, in accordance with the applicable Standing Orders Ordinance. Annual leave may be carried forward for up to two years. Unused casual leave and sick leave will lapse at year-end and are not encashable. Accrued annual leave will be encashed upon separation at the employee's last drawn basic salary rate."
How Peoplifi Enforces Leave Rules Automatically
Managing leave compliance manually across dozens or hundreds of employees is error-prone. Peoplifi's HR and payroll platform automates leave management so you stay compliant without the administrative burden:
- Pre-configured leave types aligned with Pakistan labour law: annual, casual, sick, maternity and paternity leave
- Automatic accrual calculations based on service duration and applicable ordinance
- Year-end carry-forward rules applied automatically, with alerts when balances approach the cap
- Leave encashment calculated and included in final settlement payslips
- Employee self-service portal for leave applications and balance visibility
- Manager approval workflows with audit trail for compliance documentation
If your team is still tracking leave in spreadsheets, now is a good time to upgrade. Sign up for Peoplifi and get your leave management compliant from day one.
Frequently Asked Questions
Can an employer refuse to grant annual leave?
An employer can defer annual leave to a time that suits operational needs, but cannot permanently deny it. Leave must be granted within the year it is earned, or carried forward with the employee's consent. Persistent refusal to grant leave is a violation of the applicable Standing Orders Ordinance.
Is sick leave encashable in Pakistan?
No. Sick leave is not encashable under any provincial or federal labour law in Pakistan. The same applies to casual leave. Only annual (earned) leave carries an encashment entitlement upon separation.
What happens to maternity leave if the employee resigns shortly after?
The employee retains the right to maternity benefit for leave already taken. However, if the employee resigns before returning from maternity leave, the employer may require repayment of maternity pay for the period not worked, depending on the employment contract and applicable provincial law. Legal advice is recommended in such cases.
Do part-time employees get the same leave entitlements?
Part-time employees are generally entitled to leave on a pro-rata basis. The exact calculation depends on whether they are classified as workers under the applicable ordinance. Fixed-term contractors may have different arrangements specified in their contracts, but statutory minimum entitlements cannot be contracted out.
How should a company handle leave during probation?
During the probation period, employees typically do not accrue annual leave under most standing orders, as the one-year continuous service requirement has not been met. However, many employers grant casual and sick leave from the first day of employment as a matter of company policy. Employers should specify probation-period leave rules clearly in the appointment letter to avoid disputes.
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