Gratuity Calculator Pakistan 2025
Instantly calculate your gratuity online
Gratuity Calculation Result
What is Gratuity?
Gratuity is a lump sum payment given to an employee by an employer as a token of appreciation for long-term service. In Pakistan, gratuity is generally applicable to permanent employees who have completed at least 5 years of continuous service with the same organization.
How Gratuity is Calculated in Pakistan?
Determine years of service:Â Count the total number of years the employee has worked. Any period exceeding six months is considered a full year.
Calculate daily wages:Â Divide the employee’s last drawn monthly salary by 26 (to account for an average of 26 working days in a month).
Calculate gratuity amount:Â Multiply the daily wage by 30 days and then multiply by the number of completed years of service.Example:Let’s say an employee has 4 years and 6 months of service with a monthly salary of Rs. 52,000.Years of service: 4 years (any period exceeding 6 months is considered a full year.Daily wage: Rs. 52,000 / 26 = Rs. 2,000 per dayGratuity Amount: Rs. 2,000/day * 30 days/year * 4 years = Rs. 240,000
Gratuity Law in Pakistan
Under the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, employers must pay gratuity unless they are contributing to an approved pension or provident fund. Employers can choose to provide both gratuity and pension if they wish.
Gratuity vs Provident Fund vs VPS - What’s the Difference?​
Understanding the difference between Gratuity, Provident Fund, and Voluntary Pension Scheme (VPS) is essential when planning for your financial future or managing employee benefits.
| Feature | Gratuity | Provident Fund (PF) | Voluntary Pension Scheme (VPS) |
|---|---|---|---|
| Nature | Employer-paid lump sum at end of service | Monthly contributions by both employee & employer | Long-term investment for retirement by individual |
| Eligibility | After 5 years of continuous service | Usually starts from day one (as per policy) | Open to all individuals (employees, self-employed, etc.) |
| Who Contributes? | Employer only | Employee & Employer (usually 8.33% each) | Individual contributor (voluntary) |
| Withdrawal Time | At resignation, retirement, or termination | Partial before 1 year, full at retirement/separation | After retirement age (60), with early withdrawal penalties |
| Tax Benefit | Tax-exempt up to a limit if conditions met | Tax exemptions on contributions and returns | Tax rebate on contributions (up to 20% of taxable income) |
| Managed By | Employer | Employer (via approved PF trust or bank) | Asset Management Companies regulated by SECP |
| Risk/Return | No investment risk (fixed benefit) | Low-to-moderate risk depending on investment choices | Risk depends on chosen VPS fund (low to high options) |