Work out end-of-service gratuity for any employee using last drawn basic × years of continuous service. Supports both the 1/12 and 1/26 formulas used in Pakistani employment contracts — plus the edge cases HR teams actually hit: fractional years, mid-service increments, unapproved schemes, and full-and-final tax treatment.
✓ Last verified: Based on Standing Orders Ordinance 1968 + Finance Act 2025 tax rules
Estimate gratuity payable under Pakistan Labour Law. Compare both the 30-day (1/12) and 26-day (1/26) formulas — pick the one your contract or HR policy specifies.
1/12: basic × years. 1/26: (basic ÷ 26) × 15 × years. Most companies follow 1/12 unless the employment contract states otherwise.
Under the Standing Orders Ordinance 1968, gratuity is payable after 1 year of continuous service. Provincial laws (Sindh, Punjab, KPK, Balochistan Terms of Employment Acts) carry similar provisions. Always verify against the employment contract and HR policy.
Pakistan's Industrial and Commercial Employment (Standing Orders) Ordinance 1968 gives workers a right to gratuity or an approved Provident Fund — whichever is more favourable. Many larger employers run PF and gratuity as distinct benefits. Always cross-check the employment contract, the company's gratuity scheme document, and any trust deed if the scheme is FBR-approved.
Example: Employee resigns after 7 years 6 months with PKR 80,000 last drawn basic
See how the calculation changes across different salary bands and tenures — use these to benchmark your own numbers.
This calculator and its explainers are grounded in the following statutes, ordinances and official circulars. Always confirm against the latest gazette notification before filing.
Most commonly: Last drawn basic × years of continuous service × 1/12. Gulf-aligned contracts use (basic / 26) × 30 × years. A blended 21-then-30 days variant also appears in UAE-derived contracts. The employment contract and the scheme document override defaults.
Yes — under the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, workers are entitled to gratuity or an approved Provident Fund, whichever is more favourable. Establishments covered by Standing Orders (typically 20+ workers in commercial, 50+ in industrial) must comply.
Gratuity from an FBR-approved scheme is exempt up to PKR 75,000 under the Second Schedule, Part I, Clause 13. Anything above that is taxed as salary in the year of receipt. Unapproved schemes have a different, usually less generous exemption.
1/12 treats a year as producing one month's basic of gratuity. 1/26 treats the basic as a 26-working-day rate, then pays 30 days per year — roughly 30/26 = 1.154 months of basic per year, which is about 2.5× more generous than 1/12 across any tenure.
On last drawn basic — not gross or cost-to-company — unless the scheme document explicitly says otherwise. This is the most common dispute point at exit.
Standing Order 15 allows forfeiture, but only after a proper domestic enquiry with charge-sheet, show-cause, hearing and findings. Unilateral forfeiture gets overturned in labour court.
Pro-rate month-wise. Example: 7 years 6 months at PKR 80,000 basic on 1/12 = 80,000 × 7.5 / 12 = PKR 50,000. Don't round down whole years — it's a common error.
Yes, if the employee serves out the notice period. If the employer pays in lieu of notice, the notice period is generally counted toward service in most scheme documents, but check your contract.
Yes — if the PF is FBR-approved and the scheme is drafted as "in lieu of gratuity" and the PF terminal value is at least as favourable as gratuity would have been. Otherwise the employer pays both.
It is paid to the nominated beneficiary immediately. Many schemes include death-in-service enhancement — e.g. minimum 5 years of notional service credited even if actual service was shorter.
Usually no — most schemes require confirmation plus a minimum qualifying period (commonly 12 months). Check the specific scheme rules.
Not strictly required for small employers, but for larger companies a separate FBR-approved gratuity trust is recommended for tax efficiency, balance sheet clarity, and to protect the liability from the company's general creditors.
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