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Pakistan country pack — this guide covers Pakistan-specific statutory rules. Octal HR is configurable for other regions too.

Overview

A provident fund (PF) is a savings scheme where both the employee and employer contribute a fixed percentage of salary each month. The accumulated fund is paid out at retirement, resignation after qualifying period, or death. Private companies in Pakistan can operate a recognised provident fund approved by FBR, which confers tax benefits.

Recognised vs unrecognised: FBR recognition grants tax exemption on the employer's contribution (up to one-tenth of salary) and on interest (up to the SBP deposit rate). Without recognition, all employer contributions are taxable in the employee's hands. Octal HR supports both modes — set under Settings → Payroll → Provident Fund → Fund Type.

Common contribution rates

There is no single statutory rate for private-sector PF in Pakistan. Common practice is:

  • Employee contribution: 8–12% of basic salary (most commonly 8.33% ≈ one month's salary per year)
  • Employer contribution: Equal to employee contribution (matching)
Example — 10% PF on basic: Basic salary = PKR 60,000 Employee PF (10%) = PKR 6,000 / month Employer PF (10%) = PKR 6,000 / month Monthly PF deposit = PKR 12,000 into the trust

Setting up the provident fund

1
Go to Settings → Payroll → Provident Fund and click Enable Provident Fund.
2
Set the Fund Name (e.g., "Acme Corp Employee Provident Fund"), Fund Type (Recognised / Unrecognised), and Trust Account Number.
3
Set the Employee Contribution Rate and Employer Contribution Rate as a percentage of basic salary (or gross).
4
Set the minimum qualifying service for employer share vesting (e.g., employer contribution vests after 5 years).
5
Click Save. PF contributions will now appear on every payslip as a deduction (employee share) and be tracked as an employer liability.
6
Assign PF eligibility to individual employees under Employee → Compensation → Provident Fund. You can override the default rate per employee if needed.

Viewing PF balances

Go to Payroll → Provident Fund → Fund Ledger to see each employee's accumulated PF balance — employee contribution, employer contribution, and interest (if applicable) — month by month. The ledger is available for download as Excel or PDF.

PF withdrawal at separation

When an employee leaves, the PF settlement is included in the final settlement run:

  • Full employee contribution is always refunded
  • Employer share is refunded based on the vesting schedule (full if qualifying period met; partial or nil otherwise)
  • Tax implications depend on fund recognition status and duration — Octal HR applies the correct WHT
Annual PF statement: Octal HR generates individual PF statements for employees each financial year under Payroll → Provident Fund → Annual Statements. Send these to employees by email from the same screen.

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