Gratuity Calculator Pakistan — Standard Formula
Gratuity is the end-of-service payment Pakistani labour law mandates where no provident fund substitutes: thirty days’ wages for every completed year of service, computed on the last drawn salary. The formula is short; the disputes — what counts as wages, which years count, who qualifies — fill labour courts. This tool runs the standard computation and the sections cover the disputes.
What exactly is thirty days’ wages — a calendar month’s salary?
The standard computation divides monthly wages by 26 working days and multiplies by 30 — yielding slightly more than one month’s salary per year of service. This tool applies the /26 × 30 convention; employers computing /30 × 30 are short-changing the statutory formula, a frequent and winnable dispute.
Does gratuity apply to every employee in Pakistan?
It applies to workers covered under the relevant labour laws in establishments meeting the size thresholds, where the employer hasn’t provided an approved provident fund instead — the law requires one of the two, not both. Management-cadre and contract staff coverage depends on terms and how courts read the worker definition; many employers extend it contractually regardless.
Is gratuity payable if I resign, or only on termination?
Both — resignation, termination, retirement, and death (to heirs) all trigger gratuity for qualifying service. The myth that resigning forfeits gratuity persists because some employers assert it; the statutory entitlement does not distinguish the exit route.
Gratuity Calculator Pakistan
The formula, dissected
Last drawn monthly wages ÷ 26 × 30 × completed years. Each term carries a fight: last drawn rewards exits after increments (a raise three months before departure lifts every year’s payout retroactively); the /26 divisor reflects working days and inflates the daily wage versus /30; completed years turns on joining dates and the rounding convention. The tool computes the worker-favourable standard; an employer’s lower figure should be decomposed against these terms to find which one they shaved.
Gratuity in the job-change decision
Because the formula multiplies final salary by all years, gratuity accrues non-linearly against your career: year ten at a higher salary repriced years one through nine. The planning consequences — leaving just before a known increment forfeits the repricing; a long-tenure employee’s gratuity can rival a year’s salary and belongs in any counter-offer math; and serial two-year job-hoppers accrue little anywhere, which is the quiet retirement-savings cost of the hopping strategy that PF-style accounts don’t share.
Documents that make the claim self-executing
Three papers decide gratuity disputes: the appointment letter (terms, joining date, whether PF substitutes), salary slips for the final months (the wage base), and the service or experience certificate (tenure). Employees who keep these contemporaneously claim in a letter; those reconstructing them years later litigate. The leaving-employment checklist writes itself: final slips, certificate, PF statement if any, and a written gratuity computation signed off before the farewell tea goes cold.
More questions answered
The wage definition in the governing law is broader than basic pay and has been read to include regular allowances of a fixed nature; many employers compute on basic only. The gap is the single largest gratuity dispute — on a salary structured 50 percent basic, the difference doubles the payout. Worth professional advice for any significant claim.
Completed years govern, with service of six months or more in the final year commonly rounded up to a full year under the prevailing interpretation. The tool accepts fractional years; enter per your service certificate and apply the six-month rounding convention.
Gratuity from approved schemes and within statutory frameworks enjoys tax exemption up to limits, with amounts beyond and unapproved-scheme payments taxable per schedule. Most rank-and-file statutory gratuity lands within exemption; large executive payouts need the tax computation run before negotiation.
The law requires the employer to provide one: an approved PF generally discharges the gratuity obligation. Some employers contractually offer both as a benefit. Check the appointment letter and the fund’s approval status — an unapproved informal fund may not legally substitute.
The grievance ladder: written demand, then the labour department / payment-of-wages machinery, then labour court — with limitation periods that punish delay. Documentation wins these: appointment letter, salary slips, and service certificate convert a he-said claim into an arithmetic one.