Gratuity in Pakistan: how to work out final settlement
Gratuity is 30 days' wages for each year of service, with part years over six months counted. A worked example and everything else in a final settlement.
Munshi Team · 18 Oct 2026 · 2 min read
When a good worker leaves after years with you, the last thing either side wants is an argument about money. A clear final settlement, worked out the right way and given on paper, avoids it. Gratuity is usually the biggest part.
The gratuity calculator works out the whole settlement.
The gratuity rule
Under the Standing Orders law, a permanent worker gets 30 days' wages for every completed year of service. Any part of a year over six months counts as a full year. It is worked out on the last wages drawn.
So 5 years and 7 months counts as 6 years. 5 years and 4 months counts as 5.
A worked example
Last wages Rs 40,000 a month, service 5 years 7 months:
| Rs | |
|---|---|
| Years counted | 6 |
| Gratuity: Rs 40,000 × 6 | 2,40,000 |
| Unused leave paid: 6 days | 8,000 |
| Salary for 12 days worked this month | 16,000 |
| Less advance still owed | −10,000 |
| Final settlement | 2,54,000 |
A day's wage here is the monthly wage ÷ 30.
Who it applies to
The Standing Orders cover industrial and commercial establishments above a size set in the law, and a provident fund can take the place of gratuity where there is one. Many smaller shops and offices are not strictly bound, but pay gratuity anyway, sometimes on fewer days a year, because it keeps good staff. Whatever your rule is, put it in the appointment letter so it is clear from the first day.
The rest of the settlement
- salary for the days worked in the last month
- unused leave, if your policy pays it
- any bonus or increment already due
- less advances and loans still owed
Write it out, give the worker a copy, and get it signed when paid.
Keep the record from day one
Settlements are hard when nobody knows the joining date, the last increment or the loan balance. In Munshi HR & payroll, each worker's joining date, salary history, leave and loans are on their record, so the settlement takes minutes.
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