Introduction
This report provides a formal, analytical comparison of the payroll regulations for Pakistan, India, Canada, the United States of America, and Saudi Arabia, based on 2025 data. In an increasingly globalized business environment, understanding the nuances of international payroll is not merely an administrative task but a strategic imperative. The strategic importance of this document lies in equipping payroll managers and compliance officers with the foundational knowledge required to navigate the distinct and complex regulatory landscapes of these key international jurisdictions.
The report begins by establishing the universal fundamentals of payroll calculation, providing a common framework for understanding gross pay, deductions, and net pay. It then proceeds to a direct, high-level comparison of the core regulatory pillars across the five nations—highlighting crucial differences in income tax, social security, minimum wage, and paystub requirements. The analysis concludes with detailed, country-specific breakdowns that present the specific data, rates, and rules essential for compliant payroll operations.
This structured approach ensures that readers first grasp the foundational concepts that underpin all payroll systems before delving into the specific legislative and financial details that make each country’s framework unique.
1. Foundational Principles of Employee Paystub Calculation
A clear grasp of the universal components of a paystub is strategically important for ensuring compliance and transparency, regardless of the country of operation. The fundamental concepts of Gross Pay, Deductions, and Net Pay form the basis of all payroll calculations. Mastering their definitions is the first step toward navigating the complexities of international payroll.
1.1 Gross Pay Components
Gross Pay represents the total compensation an employee earns before any deductions are made. It is the primary figure from which all subsequent calculations are derived. Its common elements include:
- Basic Salary/Wages: The fixed, core component of an employee’s compensation, forming the foundation of their earnings.
- Overtime Pay: Additional compensation paid for hours worked beyond the standard workweek, typically calculated at a premium rate (e.g., 1.5x or 2x the regular rate) as mandated by local labor laws.
- Allowances: Payments provided for specific purposes, such as a House Rent Allowance (HRA) to cover accommodation costs or a Dearness Allowance (DA) to offset inflation.
- Bonuses and Commissions: Performance-based or incentive payments that are added to an employee’s base pay.
- Paid Time Off (PTO) Compensation: Remuneration for utilized vacation days, sick leave, or other forms of paid absence.
- Expense Reimbursements: Repayment for business-related expenses incurred by the employee. These are sometimes processed separately from payroll to avoid tax implications.
1.2 Categorizing Payroll Deductions
Deductions are amounts subtracted from Gross Pay and are broadly classified into two primary categories.
Mandatory Deductions These are withholdings required by law, which employers are legally obligated to calculate, withhold, and remit to the appropriate government authorities. Key examples include:
- Income Taxes: Withholdings for federal, state, provincial, or local government income taxes.
- Social Security Contributions: Payments to national or regional social insurance programs. Prominent examples include FICA in the USA, CPP/EI in Canada, EPF/ESI in India, EOBI/Provincial SS in Pakistan, and GOSI in Saudi Arabia.
- Other Statutory Deductions: Levies specific to certain jurisdictions, such as the Professional Tax in certain Indian states or unemployment taxes (FUTA/SUTA) in the USA.
- Wage Garnishments: Court-ordered deductions to satisfy debts, such as child support or unpaid taxes.
Voluntary Deductions These are withholdings authorized by the employee, typically through a written agreement. Examples include:
- Retirement Plans: Contributions to employer-sponsored plans like a 401(k) in the USA.
- Insurance Premiums: The employee’s share of costs for health, dental, or life insurance coverage.
- Union Dues: Fees paid to a labor union as a condition of membership.
1.3 Net Pay Calculation
Net Pay, or “take-home pay,” is the final amount an employee receives after all deductions have been subtracted from their Gross Pay. The fundamental formula is:
Net Pay = Gross Pay – Total Deductions
While the formula is simple, the accuracy of the Net Pay figure is entirely dependent on the correct calculation of all preceding components. Because the rules governing earnings and deductions vary significantly by jurisdiction, meticulous adherence to local regulations is paramount to ensure the final Net Pay is correct.
1.4 The Importance of Accurate Paystubs
Issuing accurate and detailed paystubs is a foundational requirement for compliant and transparent payroll management.
- For Employees: Paystubs provide a clear and detailed record of earnings and deductions, which is vital for personal financial management, verifying pay accuracy, and applying for loans or credit. They serve as a transparent breakdown of how their net pay was calculated.
- For Employers: Paystubs act as legal proof of payment and demonstrate compliance with labor laws governing wages, overtime, and statutory contributions. They reduce pay-related disputes, foster employee trust, and provide essential records for audits.
- Legal & Format Requirements: Many jurisdictions legally mandate not only the issuance of paystubs but also the specific information they must contain. While digital payslips are increasingly permitted, they must meet legal standards for confidential access and the employee’s ability to print a copy.
From these universal principles, we can now turn to a comparative analysis of how these concepts are applied differently across Pakistan, India, Canada, the USA, and Saudi Arabia.
2. Comparative Analysis of Core Regulatory Frameworks
This section provides a high-level comparison of the most critical payroll components across the five target nations to immediately reveal the core architectural differences between these payroll systems, from the multi-layered federalism of North America to the state-driven complexities of India and the unique centralized model of Saudi Arabia. The following table highlights their fundamental structural differences, offering a clear snapshot of the diverse regulatory environments that payroll professionals must navigate.
Table 1: Overview of Key Payroll Regulations by Country
| Regulatory Area | Pakistan | India | Canada | USA | Saudi Arabia |
| Income Tax System | Progressive, federal system with defined slabs. | Dual Regime (Old vs. New), Central system with state-level levies. | Progressive, dual system with Federal & Provincial/Territorial taxes. | Progressive, multi-level system with Federal, State, & sometimes Local taxes. | No Personal Income Tax for employees (Zakat for nationals). |
| Primary Social Security Schemes | EOBI (Federal), PESSI/SESSI (Provincial). | EPF (Provident Fund), ESI (State Insurance). | CPP (Pension), EI (Employment Insurance). | FICA (Social Security & Medicare), FUTA/SUTA (Unemployment). | GOSI (General Organization for Social Insurance). |
| Minimum Wage Structure | Federal benchmark with Provincial autonomy and skill-based tiers. | Fragmented structure with separate rates set by Central & State governments. | Provincial/Territorial jurisdiction with varying rates. | Multi-level structure with Federal, State, & Local minimums (highest applies). | No single national minimum wage; rates tied to “Saudization” programs. |
| Overtime Pay Standard | Typically 2x the regular rate of pay. | Varies by state; typically 2x the regular rate. | Varies by province; typically 1.5x the regular rate. | 1.5x the regular rate for hours over 40/week (Federal standard). | 1.5x the regular rate of pay. |
| Unique Regulatory Features | Ambiguity in the EOBI wage base due to conflicting legal precedents. | Dual Tax Regime (Old/New), State-level Professional Tax (PT) & Labour Welfare Fund (LWF). | Enhanced, two-tiered CPP system (CPP2) fully phased in by 2025. | Complex multi-level (State/Local) tax withholding and reporting. | Mandatory Wage Protection System (WPS) for salary payments & End-of-Service Benefits (EOSB). |
This overview illustrates the significant divergence in payroll frameworks. The following sections will provide the specific data and rules that underpin this comparative summary.
3. Detailed Country-Specific Payroll Regulations (2025 Focus)
The following subsections provide a detailed analysis of the payroll regulations for each target country. This analysis presents the specific tax slabs, contribution rates, and administrative rules that payroll professionals must manage to ensure compliance.
3.1 Pakistan
Payroll in Pakistan is governed by a federal income tax structure and a combination of federal and provincial social security schemes.
3.1.1 Income Tax System
Pakistan utilizes a progressive income tax system with different schedules for salaried individuals. Employers are legally required to deduct the applicable income tax at source (TDS) from monthly salary payments.
Table 2: Pakistan Income Tax Slabs (Salaried) – FY 2024-2025
| Taxable Income (PKR) | Tax Rate |
| Up to 600,000 | 0% |
| 600,001 to 1,200,000 | 5% of the amount exceeding 600,000 |
| 1,200,001 to 2,200,000 | PKR 30,000 + 15% of the amount exceeding 1,200,000 |
| 2,200,001 to 3,200,000 | PKR 180,000 + 25% of the amount exceeding 2,200,000 |
| 3,200,001 to 4,100,000 | PKR 430,000 + 30% of the amount exceeding 3,200,000 |
| Above 4,100,000 | PKR 700,000 + 35% of the amount exceeding 4,100,000 |
3.1.2 Employees’ Old-Age Benefits Institution (EOBI)
EOBI is a federal social security program that provides benefits such as old-age pensions, survivor pensions, and invalidity grants to insured employees.
Table 3: EOBI Contributions – Effective July 1, 2024
| Component | Rate | Base Wage (Min. Wage) | Monthly Amount (PKR) |
| Employer Share | 5% | PKR 37,000 | 1,850 |
| Employee Share | 1% | PKR 37,000 | 370 |
| Total EOBI | 6% | PKR 37,000 | 2,220 |
3.1.3 Provincial Social Security Contributions
In addition to federal EOBI, each province manages its own social security institution (e.g., PESSI in Punjab, SESSI in Sindh) focused on providing healthcare and cash benefits. These schemes are funded almost entirely by employer contributions, typically at a rate of 6% of the employee’s wages. A significant compliance challenge is that the wage ceilings for these contributions vary by province and are not consistently published. This lack of centralized, up-to-date data presents a significant compliance risk for multi-province employers, making direct and regular verification with provincial authorities a non-negotiable part of the payroll process.
3.1.4 Minimum Wage and Overtime Rules
Pakistan has a dual federal/provincial minimum wage system. Effective July 1, 2024, the federal minimum wage for unskilled workers is PKR 37,000 per month. Provinces like Sindh have also established higher, skill-based tiers for semi-skilled and skilled workers. The standard overtime rate for work performed beyond normal hours is typically double (2x) the employee’s regular rate of pay.
3.1.5 Mandatory Paystub Information
A Pakistani payslip must provide a clear and itemized breakdown of an employee’s compensation for the pay period. Required components include:
- Gross Pay components (Basic Salary, Allowances, etc.)
- Itemized deductions, including:
- Income Tax Withheld (TDS)
- Employee EOBI Contribution
- Net Salary (Take-home pay)
3.2 India
India’s payroll system is highly complex, featuring a dual income tax regime, multiple social security schemes, and several state-specific statutory deductions.
3.2.1 Dual Income Tax Regime
India’s payroll framework is uniquely characterized by a dual income tax system, obligating employers to manage employee choices between the “Old Tax Regime,” which allows for various deductions and exemptions, and the “New Tax Regime,” which offers lower tax rates but disallows most deductions. The New Regime is the default option unless an employee explicitly opts for the Old Regime. Significant changes to the New Regime are anticipated for the Financial Year 2025-26.
Table 4: India Income Tax Slabs – New Regime (Proposed FY 2025-26 / AY 2026-27)
| Taxable Income (INR) | Tax Rate |
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% of amount exceeding 4,00,000 |
| 8,00,001 to 12,00,000 | INR 20,000 + 10% of amount exceeding 8,00,000 |
| 12,00,001 to 16,00,000 | INR 60,000 + 15% of amount exceeding 12,00,000 |
| 16,00,001 to 20,00,000 | INR 120,000 + 20% of amount exceeding 16,00,000 |
| 20,00,001 to 24,00,000 | INR 200,000 + 25% of amount exceeding 20,00,000 |
| Above 24,00,000 | INR 300,000 + 30% of amount exceeding 24,00,000 |
Table 5: India Income Tax Slabs – Old Regime (FY 2024-25 / AY 2025-26)
| Taxable Income (INR) | Tax Rate |
| Up to 2,50,000 | Nil |
| 2,50,001 to 5,00,000 | 5% of amount exceeding 2,50,000 |
| 5,00,001 to 10,00,000 | INR 12,500 + 20% of amount exceeding 5,00,000 |
| Above 10,00,000 | INR 1,12,500 + 30% of amount exceeding 10,00,000 |
3.2.2 Standard Deduction
Salaried individuals are entitled to a standard deduction that reduces their taxable income. For FY 2024-25, the amounts are:
- Old Tax Regime: INR 50,000
- New Tax Regime: INR 75,000
3.2.3 Employees’ Provident Fund (EPF)
EPF is India’s primary retirement savings scheme. The contribution rate is 12% of (Basic Salary + Dearness Allowance) for both the employee and the employer. The employer’s 12% contribution is allocated between the Employees’ Pension Scheme (EPS) and the EPF account. The EPS portion is capped at 8.33% of a statutory wage ceiling of INR 15,000 per month (i.e., a maximum of INR 1,250). The remainder of the employer’s contribution is credited to the employee’s EPF account.
3.2.4 Employees’ State Insurance (ESI)
The ESI scheme provides healthcare and other benefits to employees with a gross monthly salary of up to INR 21,000. A higher threshold of INR 25,000 applies for employees with disabilities. The contribution rates are 3.25% for employers and 0.75% for employees, calculated on gross wages. A critical rule is that if an employee’s salary exceeds the threshold mid-way through a contribution period (Apr-Sep or Oct-Mar), contributions must continue until the end of that period.
3.2.5 Professional Tax (PT) and Labour Welfare Fund (LWF)
Both PT and LWF are state-level statutory deductions. Their applicability, rates, and payment frequency vary significantly by state, requiring localized compliance checks. Professional Tax is constitutionally capped at a maximum of INR 2,500 per person per year.
3.2.6 Gratuity
Gratuity is a statutory end-of-service benefit paid by the employer to an employee upon separation after at least five years of service. It is an employer liability and is not a monthly deduction from the employee’s salary. Payroll managers must ensure that Cost-to-Company (CTC) breakdowns on payslips do not misleadingly represent gratuity accruals as a deduction from monthly net pay.
3.2.7 Mandatory Paystub Components
An Indian payslip must be comprehensive to account for the numerous statutory requirements. Key components include:
- Detailed earnings breakdown (Basic, DA, HRA, etc.)
- Itemized statutory deductions (TDS, EPF, ESI, PT, LWF)
- Key identifiers such as Permanent Account Number (PAN) and Universal Account Number (UAN)
- Gross Earnings and Net Pay
3.3 Canada
Canadian payroll is administered through a dual system of federal and provincial/territorial legislation, creating a complex but structured environment.
3.3.1 Income Tax System
Employers must withhold both federal and provincial/territorial income taxes. The amount of tax withheld is determined by the employee’s gross pay and the tax credits claimed on their federal and provincial Form TD1. The province of Quebec administers its own income tax and pension system separately.
Table 6: Canada Federal & Sample Provincial Income Tax Brackets (2025)
| Jurisdiction | Taxable Income ($) | Tax Rate |
| Federal | 0 – 57,375 | 15.00% |
| 57,375.01 – 114,750 | 20.50% | |
| 114,750.01 – 177,882 | 26.00% | |
| 177,882.01 – 253,414 | 29.00% | |
| Over 253,414 | 33.00% | |
| Ontario | 0 – 52,886 | 5.05% |
| 52,886.01 – 105,775 | 9.15% | |
| 105,775.01 – 150,000 | 11.16% | |
| 150,000.01 – 220,000 | 12.16% | |
| Over 220,000 | 13.16% | |
| British Columbia | 0 – 49,279 | 5.06% |
| 49,279.01 – 98,560 | 7.70% | |
| 98,560.01 – 113,506 | 10.50% | |
| 113,506.01 – 137,896 | 12.29% | |
| 137,896.01 – 181,232 | 14.70% | |
| 181,232.01 – 259,829 | 16.80% | |
| Over 259,829 | 20.50% | |
| Alberta | 0 – 148,269 | 10.00% |
| 148,269.01 – 177,922 | 12.00% | |
| 177,922.01 – 237,230 | 13.00% | |
| 237,230.01 – 355,845 | 14.00% | |
| Over 355,845 | 15.00% |
3.3.2 Canada Pension Plan (CPP & CPP2)
For 2025, the CPP operates on a two-tiered system. The first tier applies to earnings up to the Year’s Maximum Pensionable Earnings (YMPE). The second tier (CPP2) applies to earnings between the YMPE and the Year’s Additional Maximum Pensionable Earnings (YAMPE).
Table 7: Canada Pension Plan (CPP) Contributions – 2025
| Parameter | Value ($) | Rate (Employee & Employer) | Maximum Annual Contribution (Each) ($) |
| Basic Exemption | 3,500 | N/A | N/A |
| Year’s Maximum Pensionable Earnings (YMPE) | 71,300 | N/A | N/A |
| Year’s Additional Max Pensionable Earnings (YAMPE) | 81,200 | N/A | N/A |
| Tier 1 (on earnings up to YMPE) | 5.95% | 4,034.10 | |
| Tier 2 (on earnings between YMPE & YAMPE) | 4.00% | 396.00 | |
| Total Maximum Contribution | 4,430.10 |
3.3.3 Employment Insurance (EI)
EI provides temporary income support and other benefits. For 2025, premiums are calculated on earnings up to the Maximum Insurable Earnings (MIE) of $65,700. Rates differ for Quebec due to its separate parental insurance plan.
Table 8: Employment Insurance (EI) Premiums – 2025
| Jurisdiction | Employee Rate | Employer Rate (1.4x Employee) | Max Annual Employee Premium ($) |
| Canada (excl. QC) | 1.64% | 2.296% | 1,077.48 |
| Quebec (QC) | 1.31% | 1.834% | 860.67 |
3.3.4 Minimum Wage and Overtime Rules
Minimum wage and overtime rules are governed by provincial and territorial law. Overtime is generally paid at 1.5 times the regular rate, but the threshold at which it applies varies.
| Province/Jurisdiction | General Overtime Threshold (Hours/Week) |
| Federal | 40 |
| Ontario | 44 |
| British Columbia | 40 |
| Alberta | 44 |
| Quebec | 40 |
3.3.5 Pay Statement Requirements
Employers must provide detailed pay statements each pay period. While core information is standard across the country, some provinces have unique requirements. For instance:
- Alberta requires a separate listing of different earnings types (e.g., wages, vacation pay).
- Manitoba requires the reason for each deduction to be stated.
- British Columbia requires details on vacation pay accrual and banked overtime.
3.4 United States (USA)
The US payroll system is highly complex due to its multi-layered tax structure, with regulations at the federal, state, and often local levels.
3.4.1 Multi-Layered Income Tax System
Employers may be required to withhold income taxes at three levels:
- Federal: Based on employee declarations on Form W-4.
- State: Requirements vary dramatically, with some states levying a progressive or flat tax, while others (e.g., Texas, Florida) have no state income tax.
- Local: Some cities, counties, or school districts impose their own income taxes.
Table 9: USA Federal Income Tax Brackets – 2025 (Single Filers)
| Tax Rate | Taxable Income ($) |
| 10% | Up to 11,925 |
| 12% | 11,925 to 48,475 |
| 22% | 48,475 to 103,350 |
| 24% | 103,350 to 197,300 |
| 32% | 197,300 to 250,525 |
| 35% | 250,525 to 626,350 |
| 37% | Over 626,350 |
3.4.2 FICA Taxes (Social Security & Medicare)
FICA tax is a mandatory federal payroll tax shared equally by employees and employers to fund Social Security and Medicare.
Table 10: USA FICA Tax Rates & Limits – 2025
| Tax Component | Employee Rate | Employer Rate | Wage Base Limit ($) | Additional Employee Rate |
| Social Security | 6.20% | 6.20% | 176,100 | N/A |
| Medicare | 1.45% | 1.45% | None | 0.90% (on wages over $200k)* |
*The 0.9% Additional Medicare Tax is an employee-only tax and is not matched by the employer.
3.4.3 Unemployment Taxes (FUTA & SUTA)
These are primarily employer-paid taxes that fund unemployment benefits.
- FUTA (Federal): The rate is 6.0% on the first $7,000 of an employee’s annual wages. However, employers typically receive a credit of up to 5.4% if they pay their state unemployment taxes on time, reducing the effective FUTA rate to 0.6%. This credit can be reduced in certain “credit reduction states.”
- SUTA (State): Each state has its own wage base and tax rate structure, which is often experience-rated. In most states, SUTA is an employer-only tax, but employee contributions are also required in Alaska, New Jersey, and Pennsylvania.
3.4.4 Minimum Wage and Overtime Rules
The federal minimum wage is $7.25 per hour, but many states and local municipalities have set higher rates. Where federal, state, and local laws differ, the higher rate applies. The federal Fair Labor Standards Act (FLSA) mandates overtime pay at 1.5 times an employee’s regular rate for all hours worked over 40 in a workweek.
3.4.5 Pay Statement Requirements
Paystub requirements are governed by state law and vary widely. While there is no federal law mandating paystubs, most states require them. Commonly required items include gross wages, hours worked, pay rate, and an itemized list of all deductions. Some states, however, have no statutory paystub requirements.
3.5 Saudi Arabia (KSA)
The source material provides a high-level overview of Saudi Arabian payroll regulations rather than a detailed breakdown of rates and slabs. The system is distinct from the others in this analysis, primarily due to its tax structure and unique social and labor mandates. There is no personal income tax for employees in Saudi Arabia, though a Zakat contribution applies to Saudi nationals and corporate taxes apply to foreign business owners. The primary social security system is the General Organization for Social Insurance (GOSI), which requires contributions from both employers and employees. Minimum wage regulations are not structured as a universal floor but are instead tied to “Saudization” programs designed to promote the employment of Saudi nationals. The framework also includes two unique mandates: the Wage Protection System (WPS), a compulsory system that ensures salary payments are made through approved banks, and the End-of-Service Benefits (EOSB), a statutory lump-sum payment provided to employees upon termination of their employment contract.
4. Conclusion
This comparative analysis demonstrates that while foundational payroll concepts like gross-to-net calculation are universal, their practical application across Pakistan, India, Canada, the USA, and Saudi Arabia is profoundly different and governed by complex, multi-layered legislation. The principal findings reveal significant points of divergence that demand specialized attention.
The most striking contrasts include the progressive, multi-level tax systems of Canada and the USA versus the no-personal-income-tax model of Saudi Arabia. Furthermore, the regulatory fragmentation within federal systems presents a major compliance challenge, evident in the state-specific levies in India (Professional Tax, Labour Welfare Fund) and the provincial/state/local tax and labor laws in Canada and the USA. Each country also possesses unique statutory schemes that require distinct administrative handling, such as Canada’s two-tiered CPP enhancement, Saudi Arabia’s mandatory Wage Protection System, and India’s complex dual tax regime.
Therefore, for any organization operating across these jurisdictions, a compliance strategy reliant on anything less than jurisdiction-specific legal counsel and dynamically updated payroll software is operationally untenable and exposes the enterprise to significant legal and financial risk.