Gratuity in a private job in Pakistan is 30 days' wages for every year of service, plus a full year for any part year over six months. On a wage of Rs 120,000 with 7 years 8 months of service that is Rs 120,000 x 8 = Rs 960,000. In Punjab the Labour Code 2026 pays it only where 20 or more workers are employed and after one full year of service; Balochistan pays two months' wages a year.
Government employees with 5 to 10 years of service get a different gratuity instead of pension: one month's pay for each completed year. Switch to "Federal government" above for that.
How to calculate gratuity in Pakistan
- Count the years. Take your completed years. If the part year is more than six months, add one year. Exactly six months does not count; six months and one day does. In Punjab, nothing is due until one full year of continuous service is complete.
- Find 30 days' wages. With a monthly wage, 30 days' wages is one month's wage. Some employers work out a daily wage by dividing by 26 working days, which gives more. Sindh and Balochistan set gratuity in months of wages (one month a year in Sindh, two in Balochistan), so the divisor makes no difference there.
- Multiply: 30 days' wages x years.
| Service | Years counted | Gratuity on Rs 120,000 |
|---|---|---|
| 7 years 8 months | 8 | Rs 960,000 |
| 5 years 6 months | 5 | Rs 600,000 |
| 5 years 6 months 1 day | 6 | Rs 720,000 |
| 11 months (Punjab) | 0 | Rs 0 |
| 11 months (Sindh or Islamabad) | 1 | Rs 120,000 |
If your employer divides by 26, the first case becomes Rs 120,000 / 26 x 30 x 8 = Rs 1,107,692.
The law on gratuity in each province
Gratuity is paid on the last month's wage when you resign or the employer ends the job for any reason other than misconduct. Balochistan is the exception: a dismissal for misconduct still earns gratuity there, but one-third is forfeited when a court upholds the dismissal. The conditions depend on where you work.
| Where | Law | Rate | Who gets it |
|---|---|---|---|
| Punjab | Punjab Labour Code 2026, sections 159 and 160 | 30 days' wages a year | Establishments with 20 or more workers, after one full year of service |
| Islamabad | Standing Orders Ordinance 1968, Standing Order 12(6) | 30 days' wages a year | 20 or more workmen; not in the first instance in an industrial establishment of 49 or fewer persons |
| Sindh | Sindh Terms of Employment (Standing Orders) Act 2015, Standing Order 16(6) | One month's wages a year | 10 or more workers; not in the first instance in an industrial establishment of 20 or fewer |
| Khyber Pakhtunkhwa | Standing Orders Act 2013, Standing Order 17(6) | 30 days' wages a year | 10 or more workers; not in the first instance in an industrial establishment of 20 or fewer |
| Balochistan | Standing Orders Act 2021, Standing Order 17 | Two months' wages a year | 10 or more workers |
Redundancy cap in Punjab. When the job ends through redundancy or retrenchment, the Code caps gratuity at 12 months' pay for employees whose average pay is more than 5 times the monthly minimum wage, and at 6 months' pay above 10 times. Other terminations, and lower-paid employees, are not capped. Gratuity already earned under the old law before the Code came in is kept.
Provident fund. Where the employer runs a provident fund and pays in at least as much as you, no gratuity is due for the years the fund ran. 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.
Which wage? The law says wages or remuneration. Many employers pay gratuity on the last basic pay, and some on gross pay. Your contract or the gratuity fund rules can give more than the law, so enter the wage they name. To add notice pay, leave and the last salary, use the final settlement calculator.
Gratuity on Rs 100,000 a month
Thirty days' wages for each year of service.
| Years of service | Gratuity on Rs 100,000 a month | If daily wage is monthly / 26 |
|---|---|---|
| 1 | Rs 100,000 | Rs 115,385 |
| 3 | Rs 300,000 | Rs 346,154 |
| 5 | Rs 500,000 | Rs 576,923 |
| 10 | Rs 1,000,000 | Rs 1,153,846 |
| 15 | Rs 1,500,000 | Rs 1,730,769 |
| 20 | Rs 2,000,000 | Rs 2,307,692 |
| 25 | Rs 2,500,000 | Rs 2,884,615 |
Gratuity for government employees
A federal government servant needs 10 years of qualifying service for pension. With at least 5 but under 10 years, the AGPR pension manual gives a gratuity of one month's pensionable pay for each completed year, or one and a half months where service ends through invalidity or death.
Example: last pensionable pay Rs 120,000 and 7 years 3 months of service gives Rs 120,000 x 7 = Rs 840,000. With 9 years 6 months, the six months count as a year, you reach 10 years and get a pension instead: use the pension calculator.
Is gratuity taxable in Pakistan?
Gratuity paid to federal and provincial government employees is exempt from income tax under the Second Schedule to the Income Tax Ordinance 2001. Gratuity from a private employer is exempt only up to limits set in the same schedule, and the limits differ for approved gratuity funds. Ask your payroll team or a tax adviser for the limit that applies to you before you file. Tax on the rest of your salary is on the salary tax calculator.
Gratuity questions
What is the gratuity formula in Pakistan?
Gratuity = 30 days' wages x years of service, with a part year of more than six months counted as a full year. With a monthly wage, 30 days' wages is simply one month's wage. So 8 counted years on Rs 120,000 gives Rs 960,000. Balochistan pays two months' wages a year, and Punjab needs one full year of service first.
Is gratuity compulsory for every private employer in Punjab?
No. Under section 159 of the Punjab Labour Code 2026, gratuity applies only in establishments with 20 or more workers, and only after a year of continuous service. A smaller employer may still pay it under the contract or company policy. Gratuity earned under the old Standing Orders law before the Code came in is kept.
Is gratuity calculated on basic or gross salary?
On wages, as your contract or the gratuity fund rules define them. Most private employers use the last basic pay; some use gross pay. The difference is large, so check your appointment letter before you rely on a figure. Enter that wage in the calculator.
What is the difference between gratuity and provident fund?
Gratuity is paid by the employer alone when you leave, based on your last wage and years of service. A provident fund is a savings account: you and your employer both pay in every month, and the balance is paid out to you when you leave. Some employers offer one, some the other, and some both.
Does six months of extra service count?
Only if it is more than six months. The law says any part of a year in excess of six months counts as a full year. So 5 years 6 months gives 5 years of gratuity, while 5 years 6 months and 1 day gives 6 years. In Punjab this applies after the first full year: 11 months of service gives nothing.
How much gratuity do government employees get?
Those with 10 or more years get a pension instead. Federal employees with 5 to 10 years get one month's pay for each completed year of service. Pick "Federal government" in the calculator to work it out.
Last reviewed 9 October 2026. Results are estimates; official notices always take precedence.