Gratuity is one of those numbers you only need once — usually on the worst possible day. Knowing the formula in advance is half the battle.
If you have ever stared at a number on a form and wondered where it came from, you are not alone. Gratuity is one of those numbers you only need once — usually on the worst possible day. Knowing the formula in advance is half the battle.
Gratuity = (last drawn monthly salary × completed years of service × 30) / 26
Permanent employees who have completed at least 12 months of continuous service under the Standing Orders Ordinance.
Basic + dearness allowance. House rent, conveyance and bonuses are usually excluded unless your contract says otherwise.
Gratuity received from an approved fund is fully tax-exempt up to a limit; unapproved-fund gratuity is taxable as part of salary.
PF = employer + employee contribution invested over service life. Gratuity = formula-based one-time payment. Both can apply at exit.
Is gratuity paid on resignation? Yes, after one year of service, if the company is covered by Standing Orders. Termination for misconduct can forfeit it.
Why divide by 26? It treats 30-day months but pays based on 26 working days — a labour-law convention favourable to the employee.
If you only remember one thing from this post, make it that the inputs matter more than the calculator. Try the Gratuity in Pakistan linked above to put these numbers to work right now.