Name: PayPeople Gratuity Calculator Pakistan (Standing Order 12(6))
Rating: 4.6 (65 reviews)
Author: PayPeople

Question 1

Who is statutorily entitled to gratuity under Standing Order 12(6) in Pakistan?

Accepted Answer

Under Standing Order 12(6) of the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance 1968, permanent employees in commercial establishments (20+ workers) or industrial establishments (50+ workers) who complete at least one continuous year of service are entitled to gratuity upon resignation, retirement, termination (other than misconduct), or death.

Question 2

How does PayPeople calculate partial service years exceeding six months?

Accepted Answer

Under statutory law, any service period exceeding six months is legally rounded up and counted as a full additional year of service. PayPeople automatically calculates the exact tenure from official joining and exit clearance dates, applying the correct multiplier with zero manual dispute risk.

Question 3

Can our company configure custom gratuity formulas or vesting periods?

Accepted Answer

Yes. While the statutory minimum is 30 days of wages per completed year, organizations often offer enhanced gratuity schemes (e.g., scaled vesting periods, 30 days vs 26 working days divisor, or custom salary components). PayPeople’s final settlement module allows flexible policy configuration tailored to your company handbook.

Question 4

Is an employer required to pay gratuity if an approved Provident Fund is maintained?

Accepted Answer

Under Standing Order 12(6), an employer maintaining an approved Provident Fund where the employer contributes an equal, non-refundable share is exempt from paying statutory gratuity. Organizations offering both or transitioning between schemes can manage both schemes simultaneously inside PayPeople.

Question 5

What are the FBR tax exemption limits on final gratuity disbursements?

Accepted Answer

Under Clause 13(1) of Part I of the Second Schedule to the Income Tax Ordinance 2001, gratuity from an unapproved scheme is exempt up to PKR 300,000 (or 50% of the total amount, whichever is less). For schemes approved by the Commissioner of Inland Revenue, higher statutory exemption limits apply. PayPeople automatically applies the correct tax exemption ceiling during exit settlement.

Question 6

How does PayPeople integrate final gratuity calculation into employee exit clearance?

Accepted Answer

The exit workflow automatically calculates pending salary, unavailed leave encashment, statutory gratuity, and nets out pending salary advances, company loans, or unreturned assets. It generates an audit-ready clearance voucher and settlement receipt with cross-departmental approval sign-offs.

Question 7

Is the gratuity result final?

Accepted Answer

It is an estimate. Your company's gratuity policy, employment contract and final settlement terms decide the final amount.

Question 8

Does the calculator save my details?

Accepted Answer

No. The figures you enter stay in your browser and are not stored by PayPeople.

Question 9

Which salary should I enter?

Accepted Answer

Enter the last drawn salary that your company policy uses for gratuity, usually basic salary. Check your policy if unsure.

Question 10

Can PayPeople include gratuity in final settlements?

Accepted Answer

Yes. PayPeople can calculate gratuity as part of an employee's final settlement using your company's rules.

Gratuity Calculator Pakistan (Standing Order 12(6))

Calculation Parameters

Statutory Context & Best Practices

Standing Order 12(6) Rule

Tax Exemption Limit

Statutory Gratuity Entitlement Under Pakistan Labor Law

Salary Base and Day Divisor for Gratuity Calculation

Tax Exemption Limits on Gratuity Payouts

Automating Final Settlements with PayPeople

Frequently Asked Questions

Automate Your Payroll and Statutory Deductions