Online Gratuity Calculator & Pakistan Labour Law Guide
Pakistan Labor Law Compliant (Standing Orders 1968)
Gratuity Calculator Online Pakistan
Gratuity is the lump sum amount paid by an organization to its employee as a token of appreciation. To become eligible for gratuity, an employee must have worked there for at least five years.
This article will explain more about gratuity, including the calculation formula and the laws governing it in Pakistan.
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Gratuity by Provinces
The amount of gratuity is based on the gross salary for each completed year of service, with the rates varying slightly by region:
- Punjab: 30 days on gross salary for each completed year
- Sindh: 30 days on gross salary for each completed year
- KPK: 30 days on gross salary for each completed year
- Balochistan: 60 days on gross salary for each completed year
- Islamabad: 30 days on gross salary for each completed year
Gratuity Calculator Formula
The formula used to calculate gratuity is:
Gratuity = (Last Drawn Gross Salary / 26) × 30 × Number of Completed Years of Service
- Gross Salary: This is the amount you receive before any deductions like taxes, EOBI, or other withholdings. It must not be confused with basic salary.
- 26 Factor: This represents the 26 working days in a month.
- 30 Days Wages: This means the employee is eligible for one month's gratuity for every completed year of service.
- Number of Completed Years of Service: This is the total number of years the employee has worked for the organization. A minimum of five years of service is mandatory to be eligible for gratuity.
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Gratuity Law in Pakistan
According to the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, it is mandatory for an organization to pay gratuity to its employees.
18th Amendment
Before April 19, 2019, the mandatory retirement benefits in Pakistan were governed by the West Pakistan Industrial & Commercial Employment (Standing Orders) Ordinance, 1968, Standing Order 12(6). This law obligated commercial establishments with 20 or more workers or industrial establishments with 49 or more workers to offer at least one retirement benefit: Gratuity, a Provident Fund, or an Approved Pension Fund. Following the 18th Amendment, Pakistan's provinces enacted their own, updated legislation, which largely mirrored the former law. The current laws are:
- Sindh: Sindh Terms of Employment (Standing Orders) Act, 2015
- Khyber Pakhtunkhwa: Khyber Pakhtunkhwa Industrial and Commercial Employment (Standing Orders) Act, 2015
- Balochistan: Balochistan Industrial and Commercial Employment (Standing Orders) Act, 2021
- Punjab & Islamabad Capital Territory: Industrial & Commercial (Standing Orders) Ordinance, 1968.
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Key Points to Remember
- Gross Salary: Gratuity is calculated based on the last drawn gross salary, not basic salary.
- Payment Timeframe: Gratuity must be paid within two days of retirement, termination, or layoff.
- Legal Action: If an organization fails to make payment within this two-day period, the employee has the legal right to file a case with the authorities under the Payment of Wages Act.
Why Use This Gratuity Calculator?
Using an automated tool ensures you get the exact figures you are legally entitled to without the headache of manual math. Here are the top benefits:
Legally Accurate Calculations
This calculator is specifically programmed with the Pakistan Standing Orders Ordinance (1968). It correctly applies the "26-day working month" rule to determine your daily wage, ensuring you don't lose money by simply dividing your salary by 30.
Updated for 2026 Labor Standards
Labor laws and rounding conventions can change. This tool remains updated with the current fiscal year’s standards, including the mandatory rounding rule where service over six months is counted as a full year.
Instant & Error Free Results
Manual calculations for "Completed Years" and "Additional Months" often lead to human error, especially when determining the final settlement. This tool provides a precise, error free breakdown in seconds, helping you plan your financial future or retirement with total confidence.
