The loss-making carrier has been looking to reduce costs, particularly since the impact of the pandemic, as well as the fallout from a fake pilot credentials scandal.
PIA is aiming to cut roughly one-third of its workforce, a document seen by Reuters showed, which would reduce the airline's headcount to roughly 7,000-7,500 employees from the around 11,000 staff PIA said it employed in its 2019 annual report.
The government has approved 12.87 billion Pakistani rupees ($81.46 million) in funding for the airline to move forward on the voluntary retirement scheme, the document also showed.
The Pakistan government said in a statement on Tuesday: "After ... discussion, it was decided to approve, in principal, the voluntary separation from service scheme for PIA." In the document seen by Reuters, PIA said it was looking to reduce its aircraft to employee ratio to 250 employees per aircraft.
PIA spokesman Abdullah H. Khan said the scheme was part of the airline's plan to restructure and bring employee numbers closer to industry standards.
"Employees will be offered an attractive voluntary separation scheme and people would have 14 days to avail (themselves of) the offer," Khan told Reuters.
The targeted staff ratio is high compared with neighbouring India, where Air India has roughly 130 employees per aircraft, based on Indian government data.
In a business plan submitted to the government last year, PIA said it was looking to have fewer than 5,500 people working on 45 aircraft - or fewer than 125 employees per aircraft - by 2021.
The government statement on Tuesday gave no further details on the redundancy scheme or how many pilots or other categories of staff would be affected.
Earlier this year, the government said PIA had a total of 434 pilots. Some of their jobs have been terminated in an ongoing process of investigating their credentials.
The pilot scandal has tainted Pakistan's aviation industry and stung PIA, which has been barred from flying to Europe and the United States after dozens of its pilots were named by the country's own civil aviation regulator for holding allegedly "dubious" licences.
Pakistan's pilots union, which raised questions on the investigation, cast doubts over the voluntary redundancy scheme.
"I think this scheme will fail as it would take two and half years to complete," Captain Salman Riaz, president of the Pakistan Airline Pilots Association, told Reuters in a message.
PIA's move comes as other airlines globally cut costs sharply amid travel restrictions and a collapse in global air travel during the pandemic.
Lufthansa, along with its subsidiaries, for example, had outlined plans to cut 22,000 full-time jobs, while Etihad Airways this month informed staff that it was downsizing with an aim to becoming a mid-sized carrier.