Gratuity Calculator Pakistan

    Calculate your end-of-service benefits accurately as per Pakistani Labor Law.

    Calculate Your Gratuity

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    How is Gratuity Calculated in Pakistan?

    Gratuity calculation in Pakistan is governed by the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968. The law mandates a specific formula to ensure a fair payout to employees upon leaving their job after a qualifying period of service.

    The Official Gratuity Formula

    The calculation is based on your last drawn gross salary and the number of years you have completed in service. The standard formula is:

    Gratuity = (Last Drawn Gross Salary / 26) × 30 × Number of Completed Years of Service
    • Last Drawn Gross Salary: This is your total monthly salary including all allowances, before any deductions like tax or EOBI. It is not just your basic pay.
    • 26 Working Days: The law assumes 26 working days in a month for calculation purposes. Dividing the salary by 26 gives the per-day wage.
    • 30 Days' Wages: For every completed year of service, an employee is entitled to 30 days' wages as gratuity.
    • Number of Completed Years of Service: Any period of service exceeding six months is counted as a full year. For example, 5 years and 7 months of service would be counted as 6 years.

    Frequently Asked Questions (FAQ)

    1. Who is eligible for gratuity?

    According to Standing Order 12(6) of the Ordinance, any workman who has been in continuous service for not less than twelve months is eligible for gratuity upon the termination of his employment for any reason other than misconduct. This applies to employees in industrial and commercial establishments with 20 or more workmen.

    2. Is gratuity calculated on basic or gross salary?

    The Supreme Court of Pakistan has clarified that gratuity must be calculated on the last drawn gross salary. Gross salary includes all fixed components of your pay, such as house rent, utilities, and other regular allowances. It does not include variable or one-off payments.

    3. Is the gratuity amount taxable in Pakistan?

    Yes, but with certain exemptions. As per the Income Tax Ordinance, 2001:

    • Gratuity received from a government-approved fund is exempt from tax up to certain limits defined by the FBR, which are updated periodically.
    • For unapproved funds, the tax exemption limit is generally lower.
    • Any amount received over the exemption limit is added to your income and taxed according to your income slab for that year.

    Disclaimer: This information is for general guidance only. Tax laws can change, and individual circumstances may vary. It is always recommended to consult with a tax professional for specific advice.