It is an employee’s right to receive gratuity in Pakistan upon completion of a certain number of years in service. This law requires employers to pay their employees of over five years with gratuity in Pakistan.
In this article, we discuss the gratuity law in Pakistan for private employees. We also cover how to perform the calculation of gratuity in Pakistan.
What is Gratuity in Pakistan?
It is a reward and appreciation for the services of an employee. Companies pay gratuities in Pakistan to their employees. There are certain criteria to be met. Working for the same employer for over five years without any accident of severe misconduct makes an employee eligible to receive their pay.
Gratuity in Pakistan is different from pension plans. It is for private employees. Employers are obligated by the gratuity law in Pakistan to pay their private sector employees with their amount of gratuity.
Benefits of Gratuity Law for employees in Pakistan
There are many advantages of gratuity law in Pakistan for private employees. It acknowledges their efforts. The compensation appreciates and recognizes their hard work and effort over the years. It also provides them with the means to support themselves in the future. Gratuity law in Pakistan works as a safety net for many employees.
Eligibility Criteria for Gratuity
Employees who have worked for the same company for five years or more are entitled to receive gratuity in Pakistan. Qualifying for it requires being an employee from the private sector. Employees having suffered permanent disability during service will receive their gratuity. If the employee’s death occurs, they will receive their gratuity in Pakistan even if they were not on active duty.
The exemptions from receiving this legal entitlement as per the gratuity law in Pakistan include government employees and contract staff. Termination on the accounts of employees’ misconduct will also result in an exemption from this entitlement. Gratuity law in Pakistan requires employers to pay their employees if the termination is due to downsizing or other reasons the employee is not responsible for.
Other conditions for being eligible according to gratuity law in Pakistan include the employee resigning from financial services in exchange for a golden handshake scheme. An employee terminated by the employer for any reason other than misconduct qualifies too. It also encompasses the employee reaching the retiring after reaching the determined retirement age.
See More: Minimum Salary In Pakistan 2024: All You Need To Know
What does the Gratuity Act of 1972 say about gratuity?
The gratuity law in Pakistan for private employees makes it compulsory for employees serving for a minimum of five years to receive their gratuity payments. They have had to work continuously for five years without any breaks or gaps in their employment history with the same employer.
Get to know What is gratuity calculator
The gratuity calculator makes the calculation of gratuity in Pakistan easier. It helps with reducing human errors. It ensures accuracy and compliance with Pakistani laws. This takes into account the different conditions of employment and the various employee categories. It performs gratuity calculations in Pakistan for accurate payouts.
How to calculate gratuity in Pakistan with the formula
Calculation of gratuity in Pakistan takes into account the last salary drawn by the employees, and the years of service they have spent working. Multiply them together. Divide them by 26.
An employee who has worked beyond five years is entitled to receive twelve weeks of salary as their gratuity payment. Workers who have been employed at a company for more than ten years are to receive their twenty-four weeks of salary as gratuity.
Gratuity is also paid in a lump sum amount at the end of the employee’s contract. The employee might receive it upon the termination of employment.
Payment Process and Responsibilities of Gratuity
An employer is legally obligated to pay gratuity in Pakistan. The gratuity law in Pakistan for private employees puts responsibilities on the shoulders of employees and employers. There are certain responsibilities on either side.
Employee Responsibilities
All employees have been empowered by gratuity law in Pakistan for private employees. They have a right to ask for their gratuity. At the same time, they have the power to withdraw their claims to gratuity in Pakistan too. Using the rights granted by gratuity law helps the workers advocate for their rights better.
Initiate the claim
The employee will have to begin the process by initiating the claim. This will get the process going forward. The employee will be the one making the first call. This will also provide the worker with proof of requesting their claim. If the employer for some reason does not move forward with the request, the worker can contact the relevant channels for further action.
Provide necessary documents
Employees might be asked to share relevant documents to move forward with their rights per gratuity law in Pakistan. There will be some documents necessary to provide. This helps with paperwork. Cooperation is necessary in this regard.
Employer Responsibilities
An employer is the one who is responsible for accurate gratuity calculation in Pakistan. They cannot afford mistakes in the calculation of gratuity in Pakistan. They have to ensure their employees are properly compensated with their gratuity. Companies need to make sure they are not violating any labor laws of the country.
Calculate gratuity amount
Gratuity calculation in Pakistan is of course the biggest responsibility of employers. They have to consider the last drawn salary at the end of the service year of their employee, the total number of service years, and the right amount they are entitled to.
Payment timeframe
The timeframe of payment depends on the number of years the employee has worked. The worker might receive a lump sum amount of gratuity in Pakistan upon termination of the employment contract. Having worked five years would lead to one month’s salary for each year of service. Working for longer than five years means two months’ salary for every year of service.
How does Vista Outsourcing help you in the gratuity process as per law?
Not paying the workforce their due share of gratuity means the company is not in adherence with the legal requirements. It is an employee’s right to receive the payment. As a reliable outsourcing recruitment agency in Pakistan, Vista Outsourcing assists you with the calculation of gratuity in Pakistan. We also help with determining the tax on gratuity calculator Pakistan.
