Final Settlement Calculation in Pakistan

A final settlement in Pakistan is the salary earned and not yet paid, pay in lieu of notice if notice was not given, payment for unused annual leave, and gratuity (or your provident fund), less any notice you failed to give and any advances you owe. The law says it must be paid before the end of the second working day after the job ends.

Pick the province of your workplace, enter your wage, dates and leave, and say how the job ended. The calculator applies that province's rules on notice and gratuity, including the number of workers the law needs, and shows each item with its working.

Notice and gratuity rules by province

Punjab now follows the Punjab Labour Code 2026. Islamabad still uses the 1968 Standing Orders Ordinance, and the other provinces have their own Standing Orders Acts.

These are minimums. A contract, a company gratuity scheme or a collective agreement can give more, never less. Government servants under service rules are outside these laws.

What goes into a final settlement

1. Salary for the days worked in the last month. A common payroll method is pro rata: monthly wage x days worked / days in that month.
2. Pay in lieu of notice, when the employer ends the job without giving the notice the law requires. If you resign without notice, the same amount is owed by you instead.
3. Unused annual leave, paid at your daily wage. The law gives no single divisor for a monthly wage: many employers divide by 30, some by 26 working days, which pays more.
4. Gratuity, 30 days' wages for each year of service (two months a year in Balochistan), with a part year of more than six months counted as a full year. Where the employer runs a provident fund and pays in at least as much as you, the fund is paid instead of gratuity for the years it ran.
5. Other dues: bonus, arrears or allowances already earned.
6. Less an unpaid advance or anything else the employer can lawfully recover.

Worked examples

Lahore office, job ended by the employer. Wage Rs 150,000, joined 1 March 2019, last day 15 September 2026, 60 staff, no notice given, 12 days of leave left.

• Service: 7 years, 6 months and 15 days. The part year is more than six months, so gratuity is for 8 years: Rs 1,200,000.
• Salary for 15 of 30 days in September: Rs 75,000.
• Pay in lieu of 30 days' notice: Rs 150,000.
• Leave: 12 x Rs 150,000 / 30 = Rs 60,000.
• Final settlement: Rs 1,485,000.

Karachi office, employee resigned without notice. Wage Rs 90,000, average over the last three months Rs 95,000 (with overtime), joined 1 July 2021, last day 20 August 2026, 8 days of leave, Rs 20,000 advance outstanding.

• Gratuity: 5 years (the extra 1 month 20 days does not count) x Rs 90,000 = Rs 450,000.
• Salary for 20 of 31 days in August: Rs 58,065. Leave: Rs 24,000.
• Less one month's notice on the 3-month average: Rs 95,000, and the advance: Rs 20,000.
• Final settlement: Rs 417,065.

Punjab factory with 15 workers. Wage Rs 60,000, joined 1 February 2022, job ended by the employer on 30 September 2026 without notice. The Punjab Labour Code's gratuity section does not apply below 20 workers, so the settlement is the September salary, 30 days' notice pay and 10 days' leave: Rs 140,000. If the contract promises gratuity, add it under other dues.

Notice: who pays whom

Under every one of these laws, either side ends a permanent job by giving notice or paying wages in lieu of it.

• Punjab: 30 days, or the last drawn 30 days' remuneration. In a micro-enterprise (fewer than 10 employees) it is 14 days. No notice is due on dismissal for gross misconduct, or during probation, which cannot last more than three months.
• Islamabad, Sindh and Khyber Pakhtunkhwa: one month, with pay in lieu worked out on your average wages over the last three months.
• Balochistan: three months, paid at the last month's wage.

Outside Punjab the notice rule covers permanent workers; temporary workers, probationers and badlis are not covered by it.

If you resign and leave without serving notice, the employer can claim the same amount. If the employer waives the notice, nothing is owed either way.

Gratuity or provident fund

Gratuity is paid when you resign or the employer ends the job for any reason other than misconduct, except in Balochistan (see below). It is worked out on the last month's wage (for piece-rated workers, the highest pay in the last twelve months).

• Punjab: only in establishments with 20 or more workers, and only after one full year of continuous service. For redundancy or retrenchment, the Code caps gratuity at 12 months' pay for employees earning over 5 times the minimum wage and 6 months' pay above 10 times; other terminations are not capped. Gratuity rights already earned under the old law before the Code are kept.
• Islamabad: the gratuity clause does not apply in the first instance to an industrial establishment of 49 or fewer persons.
• Sindh and Khyber Pakhtunkhwa: not in the first instance in an industrial establishment of 20 or fewer persons.
• Balochistan: two months' wages per year. A dismissal for misconduct still earns gratuity, but one-third of the gratuity and provident fund is forfeited when a court upholds the dismissal; the calculator then shows two-thirds.

Where a provident fund runs, Punjab requires the employer's contributions to be at least equal to the gratuity, and Sindh and Khyber Pakhtunkhwa require the fund amount paid to be at least equal to it. Enter your fund balance (and in Punjab the employer's share), and the calculator flags any shortfall. For a gratuity-only check, use the gratuity calculator.

Unused leave and the payment deadline

Unused annual leave is part of the settlement in every province. In Punjab an employee earns 18 calendar days a year after 12 months' service, pro rata in a part year, and can carry up to 30 days; an agreement to give up annual leave is void. Elsewhere the days come from the factories or shops law that covers your workplace, so take the balance from your leave record.

Wages, leave pay and other dues must be paid before the end of the second working day after the job ends. In Punjab the employer must also give a certificate of employment, showing your length of service and the reason the job ended, within ten working days. Government servants' leave is different: see the leave encashment calculator.

Final settlement questions

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