Gratuity Calculator — Pakistan 2026
Calculate end-of-service gratuity in Pakistan at 30 days' last-drawn wages for every completed year of service, with the six-month rounding rule.
| Service | — |
|---|---|
| Years counted (6+ months rounds up) | — |
| Daily wage (÷ 30) | — |
| Per year of service | — |
| Tax treatment | — |
In short
Gratuity in Pakistan is 30 days' last-drawn wages for every completed year of service (a part-year of six months or more counts as a full year) under the Standing Orders Ordinance, payable on resignation, termination or retirement unless a provident fund is provided instead; gratuity from an approved fund is tax-exempt.
Who this is for: Employees leaving a job in Pakistan and HR teams preparing a final settlement with gratuity.
Gratuity under Pakistan's Standing Orders
Standing Order 12(6) of the Industrial and Commercial Employment (Standing Orders) Ordinance 1968 — and the parallel Sindh (2015) and KP (2016) acts — entitles a workman to gratuity of 30 days' wages for every completed year of service, or for any part of a year exceeding six months, on termination, resignation or retirement, unless the employer has set up a provident fund (in which case the contract decides whether one or both apply).
- Wages means the last drawn wages. Courts have generally read this as gross wages including regular allowances; many employers pay on basic — the contract or policy governs where it is more favourable.
- Daily wage = monthly wages ÷ 30; one year's gratuity is therefore one month's wages.
- Rounding: 6 months or more counts as a full year; less is ignored.
- Coverage: applies to establishments with 20+ workers (50+ in some provinces) and to "workmen"; many employers extend it to all staff by policy. Government servants have separate pension/gratuity rules.
- Tax: gratuity from an approved gratuity fund is exempt; otherwise PKR 75,000 or 50% of the amount, whichever is lower, is exempt and the balance is taxed as salary.
See also: EOBI Pension Calculator — Pakistan, Pakistan Income Tax Calculator (Salary).
Assumptions
- Years = completed years, plus one if the remaining fraction is 6 months or more; nothing under 12 months.
- Gratuity = wage ÷ 30 × days per year (default 30) × years counted.
- Tax note only; the provident-fund alternative is flagged, not computed.
Worked example
Service rounds up to 8 years (8 months > 6). One year's gratuity = 80,000 ÷ 30 × 30 = PKR 80,000.
Gratuity = 8 × 80,000 = PKR 640,000.
Frequently asked questions
Is gratuity paid on resignation in Pakistan?
Yes — the Standing Orders cover termination, resignation and retirement alike; only dismissal for proven misconduct can forfeit it.
Is gratuity calculated on basic or gross salary?
The law says 'wages', which includes regular allowances; several Supreme Court and High Court judgments support gross. Many companies pay on basic by policy — the higher of law and contract applies.
Can an employer give provident fund instead of gratuity?
Yes, if a provident fund with employer contributions is maintained, the employer may provide one or the other, unless the contract promises both.
Is gratuity tax-free?
From an FBR-approved fund, fully exempt. Otherwise the lower of PKR 75,000 or 50% is exempt and the balance is added to salary income for tax.
How is gratuity calculated in Pakistan?
Last monthly wages ÷ 30 × 30 days × completed years of service — one month's wages per year, with six months or more rounding up.
Is gratuity mandatory in Pakistan?
For workmen in establishments covered by the Standing Orders, yes, unless the employer provides a provident fund; many employers extend it to all staff by policy.
Related calculators
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