Gratuity Calculator Pakistan
Calculate the gratuity (severance pay) an employee is entitled to upon termination or retirement in Pakistan. Based on the Payment of Gratuity Act, gratuity is calculated as the last drawn basic salary divided by 26, multiplied by the number of years of service
Introduction
Gratuity, also known as severance pay or termination benefits, is a lump-sum payment made to an employee when their employment ends after a qualifying period of service. In Pakistan, gratuity entitlements are governed by the Payment of Gratuity Act and related provincial labour legislation [citation:12]. For HR departments and employees alike, understanding the correct calculation is essential for fair final settlements and compliance.
What is this calculator?
The Gratuity Calculator Pakistan computes the gratuity amount based on an employee's last drawn basic salary and years of continuous service. It applies the standard formula used in Pakistan and shows a clear breakdown of the calculation.
How the calculation works
Gratuity is calculated on the basic salary component only, not the full gross salary. The formula divides the last drawn basic salary by 26 (representing average working days per month) and multiplies by the number of completed years of service [citation:12].
Formula
Gratuity = (Last Drawn Basic Salary ÷ 26) × Years of Service
For example, an employee with a basic salary of Rs. 50,000 and 10 years of service: (50,000 ÷ 26) × 10 = Rs. 19,230.77
Important terms
- Gratuity： A lump-sum payment made on termination or retirement after a qualifying period.
- Last Drawn Basic Salary： The basic salary (excluding allowances) at the time of termination [citation:12].
- Continuous Service： Uninterrupted employment, typically requiring at least one year for eligibility [citation:12].
- 26： The statutory divisor representing average working days per month.
How to use the calculator
- Enter the employee's last drawn basic salary (PKR).
- Enter the years of continuous service.
- Click Calculate Gratuity.
Practical Pakistan-specific example
Example： Basic salary Rs. 60,000, 15 years of service
- Gratuity = (60,000 ÷ 26) × 15 = Rs. 34,615.38
Common mistakes
- Calculating on gross salary instead of basic salary.
- Forgetting to round down service to completed years (partial years often do not count).
- Assuming gratuity applies to all employees regardless of service length.
Who can use the calculator
- HR professionals： Preparing final settlements.
- Employees： Verifying termination benefits.
- Business owners： Budgeting for staff turnover costs.
Disclaimer
This calculator uses the standard gratuity formula under Pakistani labour law. Actual entitlement may vary based on your employment contract, company policy, or provincial legislation. Consult an HR professional or labour lawyer for precise calculations.