The law
Standing Order 12(6) of the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance 1968 provides that a worker shall be paid “gratuity equivalent to thirty days wages, calculated on the basis of the wages admissible to him in the last month of service if he is a fixed-rated workman or the highest pay drawn by him during the last twelve months if he is a piece-rated workman, for every completed year of service or any part thereof in excess of six months”. (text)
Who is covered: the Ordinance applies to “workmen” in industrial and commercial establishments employing 20 or more workmen; people employed mainly in managerial or supervisory roles are generally not workmen. Gratuity is payable on resignation, retirement or termination other than for misconduct, in addition to other benefits. Since the 18th Amendment, provinces have enacted their own Standing Orders laws (for example Sindh in 2015); check the law that applies in your province.
Gratuity examples
| Last monthly wages | 3 years | 5 years | 10 years | 20 years |
|---|---|---|---|---|
| Rs 40,000 | Rs 120,000 | Rs 200,000 | Rs 400,000 | Rs 800,000 |
| Rs 60,000 | Rs 180,000 | Rs 300,000 | Rs 600,000 | Rs 1,200,000 |
| Rs 80,000 | Rs 240,000 | Rs 400,000 | Rs 800,000 | Rs 1,600,000 |
| Rs 100,000 | Rs 300,000 | Rs 500,000 | Rs 1,000,000 | Rs 2,000,000 |
| Rs 150,000 | Rs 450,000 | Rs 750,000 | Rs 1,500,000 | Rs 3,000,000 |
| Rs 200,000 | Rs 600,000 | Rs 1,000,000 | Rs 2,000,000 | Rs 4,000,000 |
| Rs 300,000 | Rs 900,000 | Rs 1,500,000 | Rs 3,000,000 | Rs 6,000,000 |
Provident fund and gratuity
Under the 1968 Ordinance no gratuity is payable for any period in which the employer contributed to a provident fund at least as much as the worker. Provincial laws may word this differently. Many companies also run their own gratuity schemes on better terms — your contract or company policy may give more than the legal minimum.
Is gratuity taxable?
Government gratuity and payments from an approved gratuity fund are exempt. Other gratuity is generally reported to be exempt up to the lower of Rs 75,000 or 50% of the amount, with the rest taxed as salary. Confirm the current Second Schedule position with a tax adviser.
Legal minimum only. This calculator applies the Standing Orders formula. Banks, multinationals and the public sector often have their own schemes; check your appointment letter or HR policy.
Last reviewed: 2026-10-04 · Disclaimer