Gratuity rules in Pakistan
Gratuity is a lump sum your employer pays when you leave. Under the Standing Orders law in each province it is 30 days' wages for every completed year of service, and a final part year of more than six months counts as a full year. Most employers simply pay one month's last salary (usually basic salary) per year. Balochistan's law gives two months' wages per year.
Worked example: Sara joined on 1 March 2021 and leaves on 15 November 2026, with a basic salary of Rs 90,000. Her service is 5 years, 8 months and 14 days. The extra 8 months are more than six, so 6 years count: 6 × Rs 90,000 = Rs 540,000.
Some companies pay a provident fund instead of gratuity, or have their own gratuity scheme. Your appointment letter and company policy decide this, and a better company scheme replaces the legal minimum. Large gratuity payments can be partly taxable, so ask HR how tax will be deducted.
EOBI contributions and pension (2026-27)
| Region | Minimum wage | Employer 5% | Employee 1% |
|---|---|---|---|
| Islamabad / federal | Rs 40,700 | Rs 2,035 | Rs 407 |
| Punjab | Rs 40,000 | Rs 2,000 | Rs 400 |
| Sindh | Rs 43,000 | Rs 2,150 | Rs 430 |
| Khyber Pakhtunkhwa | Rs 45,000 | Rs 2,250 | Rs 450 |
| Balochistan | Rs 40,000 | Rs 2,000 | Rs 400 |
- Old-age pension: 15 years of contributions and age 60 (55 for women). Monthly pension = average minimum wage × years ÷ 50, at least Rs 11,500. In January 2026 the Federal Constitutional Court ruled that 14.5 years counts as 15.
- Old-age grant: 2 to 15 years of contributions gives a one-time payment of one month's average wages for each year.
- Keep your EOBI card number and check that every employer actually deposits your contributions. Years without deposits do not count.
Notice period rules
For permanent workers, the Standing Orders law requires one month's notice from either side, or one month's wages instead of notice. Private companies often write one to three months into the appointment letter. If you leave early, the employer usually deducts salary for the days you didn't serve, worked out as monthly salary ÷ 30 per day. Get your resignation acceptance, relieving letter and experience letter in writing.
Frequently asked questions
How is gratuity calculated in Pakistan?
Under the Standing Orders law, a worker gets 30 days' wages for every completed year of service, and a part year of more than six months counts as a full year. In practice most employers pay one month's last-drawn salary (usually basic salary) for each year. Balochistan's law gives two months' wages per year. Your contract or company gratuity scheme can be more generous.
Do I get gratuity if I resign?
Yes. Under the Standing Orders law, gratuity is payable when employment ends for any reason, including resignation and retirement, once you have enough service (usually at least one year). Some employers run a provident fund instead of gratuity, so check your appointment letter.
What is the EOBI contribution for 2026-27?
EOBI contributions are 5% of the minimum wage paid by the employer and 1% paid by the employee, not a percentage of your actual salary. On the federal minimum wage of Rs 40,700 that is Rs 2,035 from the employer and Rs 407 from the employee each month. Provinces with a different minimum wage give a different figure.
How much EOBI pension will I get?
The monthly old-age pension is the average minimum wage on which your contributions were paid, multiplied by your years of contributions, divided by 50. EOBI pays at least Rs 11,500 a month. You need 15 years of contributions (14.5 years is rounded up) and must be 60 years old, or 55 for women.
What if I have less than 15 years of EOBI contributions?
With at least 2 but fewer than 15 years, you get a one-time old-age grant instead of a monthly pension, equal to one month's average wages for every year of contributions (a part year over six months counts as a year).
What is the notice period for resignation in Pakistan?
Under the Standing Orders law, a permanent worker and the employer must give each other one month's notice, or one month's wages instead. Many private companies set one to three months in the appointment letter, which then applies. Workers on probation are not covered by the one-month rule.
Can I leave before my notice period ends?
Usually yes, if you pay (or the employer deducts from your final settlement) wages for the days of notice you do not serve, or if your employer agrees to waive the rest of the notice. This calculator shows the buy-out amount based on salary ÷ 30 for each day.
Changing jobs?
See the latest IT jobs in Pakistan, get new jobs by email, or work out tax on freelance income with the freelancer tax calculator.
Sources
- WageIndicator: Gratuity law in Pakistan (Standing Order 12 and provincial Acts)
- Ministry of Overseas Pakistanis & HRD: EOBI FAQs (pension formula, old-age grant)
- Dawn: Federal Constitutional Court upholds 14.5-year rounding for EOBI pension
- TechJuice: minimum wages for 2026-27 by province
- WageIndicator: Employment termination and notice in Pakistan
For guidance only; your contract, company policy and the law that applies to your workplace decide the final amounts. Figures last reviewed 10 November 2026.