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Gratuity Calculator Pakistan (2026, by Province)

How is gratuity calculated in Pakistan?

Under the Standing Orders laws, gratuity is 30 days' wages for every completed year of service, and any part of a year longer than six months counts as a full year. The wage is usually the last month's. Balochistan pays two months' wages per year. It is not due on dismissal for misconduct, and a provident fund can replace it. Sindh and KP apply it to establishments of 10 or more workers; Islamabad and Punjab to 20 or more.

Six years and seven months of service is seven years of gratuity, not six. That one rule is where most hand calculations go wrong.

The other place is the province. The rate, the threshold and what happens with a provident fund all differ, and Punjab's new Labour Code, reported in force since late May 2026, changes them again.

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Built by Muhammad Shahzeb Anwar, MSc Industrial and Organizational Psychology. Every rule below is taken from the Act's own text, linked at the bottom of the page.

The calculator

Your gratuity

Runs in your browser. Nothing you type is stored or sent anywhere.

The job

Punjab has two options: the Labour Code 2026 was reported enforced in late May 2026, but its commencement notification had not been published when we checked on 17 October 2026.
The most on any day in the last 12 months.

The worker

Piece-rated: the highest monthly pay in the last 12 months.

The rule, province by province

WhereLawRate per yearWho is covered
Islamabad / federalStanding Orders Ordinance 1968, SO 12(6)30 days' wages20+ workers (industrial units of 49 or fewer only if extended)
Punjab, if the Code does not yet applyStanding Orders Ordinance 1968 (Punjab), SO 12(6)30 days' wages20+ workers (same industrial exception)
Punjab Labour Code 2026ss.159-16130 days' remuneration, after one full year20+ workers; capped above five times the minimum wage
SindhSindh Terms of Employment (Standing Orders) Act 2015, SO 16(6)One month's wages10+ workers
Khyber PakhtunkhwaKP Standing Orders Act 2013, clause 17(6)30 days' wages10+ workers (industrial units of 20 or fewer only if extended)
BalochistanBalochistan Standing Orders Act 2021, SO 17Two months' wagesAll industrial and commercial establishments

In every province a part of a year longer than six months counts as a full year. Gratuity is payable whether the worker resigns or is let go; it is not payable on dismissal for misconduct (in Balochistan, one third is forfeited if a court upholds the dismissal).

Punjab's new Labour Code

Punjab passed the Punjab Labour Code 2026 (Act IX of 2026, gazetted 10 February 2026), which repeals the 1968 Standing Orders, the Factories Act, the Shops Ordinance and the Maternity Benefit Ordinance in Punjab. It starts on a date the government notifies. News reports on 29 May 2026 said Punjab had enforced it, and the Chief Minister described it as enforced on 9 October 2026, but on 17 October 2026 we could not find the notification itself (its number and date). Both regimes are offered: for a job that ended before late May 2026, or if your employer or the Labour Department says the Code does not yet apply, use the Standing Orders.

Under the Code, gratuity needs one full year of continuous service, and for anyone paid more than five times the minimum wage it is due only on redundancy or retrenchment, capped at 12 months' remuneration (six months above ten times the minimum wage). Rights earned before the Code took effect are saved. Choose the Punjab option that matches the date you are working to.

Provident fund instead of gratuity

An employer can run a provident fund instead of paying gratuity, but the conditions differ. In Islamabad and under the 1968 Ordinance in Punjab, no gratuity is due for any period in which the employer paid into the fund at least as much as the worker. In Sindh, KP and under the Punjab Code, the fund replaces gratuity only if it pays at least as much as the gratuity would have. Balochistan's Act words this so badly that it reads as if both are paid; treat it as unsettled.

How much of it is taxed

Clause (13) of Part I of the Second Schedule to the Income Tax Ordinance 2001 exempts gratuity received on retirement: in full from an approved gratuity fund, or under government service rules; up to Rs 300,000 under an FBR-approved scheme covering all employees; and otherwise the lesser of half of it or Rs 75,000. The clause speaks of retirement; whether a gratuity paid on resignation qualifies is not addressed by the text, so treat the estimate above as the best case and confirm with your tax adviser.

Before you rely on this

What this will not tell you

This applies the statute. It does not read your contract, which can give more; it cannot settle which Punjab regime applies on your date; and it does not decide whether particular allowances count as "wages", which the federal Ordinance does not define. Courts have long disputed that. The tax estimate assumes gratuity on retirement and that you have not received gratuity from another employer before. Nothing you type leaves your browser.

Questions

Questions people actually ask

What is the gratuity formula in Pakistan?

Last month's wages x years of service, where a part year over six months counts as a full year. In Balochistan it is two months' wages per year. For example, Rs 85,000 a month and 7 years 7 months of service gives 8 years, so Rs 680,000.

Is gratuity paid on resignation in Pakistan?

Yes. The Standing Orders laws make gratuity payable when employment ends for any reason except dismissal for misconduct. Under the Punjab Labour Code it also needs one full year of service, and above five times the minimum wage it is due only on redundancy.

Is gratuity compulsory for private companies?

Yes, for establishments the law covers: 20 or more workers in Islamabad and Punjab, 10 or more in Sindh and KP, all industrial and commercial establishments in Balochistan, unless the employer runs a provident fund that meets the law's conditions.

Is gratuity taxable in Pakistan?

Partly. Gratuity from an approved fund is fully exempt; under an FBR-approved scheme up to Rs 300,000 is exempt; otherwise the exempt part is the lesser of half the gratuity or Rs 75,000.

What if I worked 5 years and 4 months?

Five years count. The four extra months are not more than six, so they are dropped. At 5 years 7 months, six years would count.

Is gratuity calculated on basic salary or gross?

The federal Ordinance says "wages" without defining which allowances are included, and that has been argued in court for decades. Sindh points to its Payment of Wages Act definition. The Punjab Labour Code counts all remuneration except house, medical, travel and similar amenities. Enter the figure your law and contract treat as wages.

Where every rule comes from

Sources

Checked against the text of the law on 17 October 2026. Laws and notified rates change; if a source below has moved on, the source wins over this page.

  1. Standing Orders Ordinance 1968 (federal text), Pakistan Code: https://pakistancode.gov.pk/pdffiles/administrator5b5a573f3bc475ac52eaf06c3dba6c45.pdf
  2. Standing Orders Ordinance 1968 (Punjab text), Punjab Code: https://punjabcode.punjab.gov.pk/uploads/articles/39-industrial-and-commercial-employment-standing-orders-ordinance-1968-vi-of-1968-pdf.pdf
  3. Punjab Labour Code 2026 (Act IX of 2026): https://punjabcode.punjab.gov.pk/uploads/articles/85-of-2025-the-punjab-labour-code-2025_with_contents-pdf.pdf
  4. Sindh Terms of Employment (Standing Orders) Act 2015: https://lhr.sindh.gov.pk/storage/rulesRegulations/6jLG9Ha7bNMwJgKNpGyxfmIVa4YzXmeLAvV60TXW.pdf
  5. KP Industrial and Commercial Employment (Standing Orders) Act 2013: https://kpcode.kp.gov.pk/uploads/2013_11_THE_KHYBER_PAKHTUNKHWA_INDUSTRIAL_AND_COMMERCIAL_EMPLOYMENT_STANDING_ORDERS_ACT_2013.pdf
  6. Balochistan Industrial and Commercial Employment (Standing Orders) Act 2021: https://pabalochistan.gov.pk/storage/4225/2021-07-19_09_54_53_cfe51.pdf
  7. Income Tax Ordinance 2001, Second Schedule Part I clause (13) (FBR text amended to 30 June 2026): https://pakistancode.gov.pk/pdffiles/administratorc09ecd376211abe32a7e44510f3fd719.pdf
Citation

Cite this tool

Free to use and free to quote. If a figure here is useful in something you are writing, a link back is all that is asked.

Muhammad Shahzeb Anwar, MSc Industrial and Organizational Psychology. Gratuity Calculator Pakistan. Shahzeb Speaks. https://www.shahzebspeaks.com/gratuity-calculator-pakistan/

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Working out what an employee really costs?

The Labour Burden Calculator counts what an employee costs once tax, insurance, benefits, holiday and training are added, and gives the burden percentage to price work with. Gratuity is one of the costs it is built for.

See the Labour Burden Calculator