Gratuity Calculator

Gratuity is a terminal benefit paid when employment ends. For workers covered by the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, Standing Order 12 sets it at 30 days' wages for every completed year of service, or any part of a year above six months, calculated on the wages for the last month of service.

On the default basis (÷ 30 and 30 days) this is simply one month's wage for every counted year. The six-month rule can make a big difference: one extra day of service past six months adds a whole year's gratuity.

An employee with a last drawn salary of Rs 100,000 and 10 years 7 months of service has 11 counted years, so the gratuity is Rs 1,100,000. With 10 years and exactly 6 months only 10 years count and the gratuity is Rs 1,000,000. Dividing by 26 working days instead of 30 gives Rs 1,269,231 for the first case.

The table assumes a Rs 100,000 monthly wage and no part-year. Scale it for your own wage, or use the calculator above.

• Part-years: more than six months counts as a year; six months or less is ignored under the Standing Order. Some employers are more generous.
• Provident fund: where the employer runs a provident fund the worker contributes to, and the employer puts in at least as much as the worker, no gratuity is payable for the period that fund has existed (a second proviso covers an approved pension fund). If the employer contributes less than the worker, gratuity is still due. See the provident fund calculator for that benefit.
• Provinces: after the 18th Amendment, labour law is largely provincial. Reports describe 30 days in Punjab and Islamabad, one month in Sindh and Khyber Pakhtunkhwa and two months in Balochistan. We could not confirm each provincial text, so treat this as a pointer and check the current Act for your province.
• Coverage: the Standing Orders apply to workmen in covered industrial and commercial establishments, and thresholds and definitions vary. Managerial staff and many professionals are paid under their contracts instead.
• Government employees: pension and commutation rules apply instead, and they follow pay scales and service rules we do not model.

Clause 13 of Part I of the Second Schedule to the Income Tax Ordinance, 2001 exempts gratuity (and commutation of pension) received by an employee on retirement, or by heirs on death, to a limit that depends on the payer:

• Paid by the employer, no approved fund or scheme. Clause 13(iv): the lesser of 50% of the gratuity or the rupee limit. The limit is 50% up to Rs 75,000.
• Employer scheme for all employees, approved by the Board. Clause 13(iii): exempt up to the rupee limit. The limit is up to Rs 300,000.
• Approved gratuity fund (Sixth Schedule, Part III). Clause 13(ii): the amount receivable from the approved fund.
• Government, local government or statutory body employee. Clause 13(i): the amount receivable under the service rules.

On the example above, Rs 1,100,000 paid directly by the employer leaves Rs 75,000 exempt and Rs 1,025,000 taxable at these limits. Paid under an approved all-employee scheme it leaves Rs 300,000 exempt and Rs 800,000 taxable.

These limits are the ones in the Ordinance as amended up to June 30, 2026, and the Finance Act 2026 does not change them. If your employer or tax adviser applies a different rule, More options has a switch to enter your own share and limit. In the Ordinance text, the provisos sit under the last limb (iv): no exemption for a payment not received in Pakistan, for a director who is not a regular employee, for a non-resident employee, or for a second gratuity from the same or another employer. The taxable part is added to your income for the year, so use the income tax calculator to see its cost at your slab, and the EOBI pension calculator for the state pension that is paid separately. To see how a gratuity fits into your whole retirement, add it as a lump sum in the retirement calculator.