Termination and Severance Under Pakistani Employment Law

Employers operating in Pakistan must navigate a patchwork of federal and provincial legislation when terminating an employee, and getting the process wrong can expose a company to significant litigation risk. This overview highlights the areas that most frequently trip up employers.

Grounds for Dismissal

Termination for cause requires a documented, defensible basis, typically established through a fair inquiry process where misconduct is alleged. Employers who skip proper procedure, even where the underlying misconduct is genuine, often find their termination challenged successfully before a labour court.

Notice Requirements

Notice periods vary depending on the applicable legislation, the employee's category, and the terms of the individual employment contract. Payment in lieu of notice is common but must be calculated correctly to avoid future claims.

Severance and Final Settlement

Severance obligations depend on the length of service and the nature of the termination, and employers should ensure gratuity, provident fund, and any other statutory or contractual entitlements are settled promptly and accurately.

Reducing Litigation Risk

We recommend that employers document performance and conduct issues contemporaneously, obtain legal review of any termination involving a senior employee, and ensure final settlement calculations are independently verified before release.