The Gratuity Law In Pakistan is a critical aspect of employee rights, ensuring financial security after retirement or leaving a job. This comprehensive guide explores the intricacies of gratuity law in Pakistan, outlining eligibility criteria, calculation methods, and addressing common questions to help you understand your entitlements and obligations.
What is Gratuity in Pakistan?
Gratuity is a sum of money paid by an employer to an employee as a gesture of appreciation for their services upon leaving the organization. It is a defined benefit plan mandated by law in Pakistan, aiming to provide financial support to employees after their tenure.
Eligibility for Gratuity in Pakistan
To be eligible for gratuity in Pakistan, employees must meet specific criteria outlined in the law:
- Minimum Service: Completion of a minimum of five years of continuous service with the same employer.
- Retirement Age: Reaching the retirement age specified in the company’s policy or employment contract.
- Termination: Termination of employment due to reasons such as resignation, death, or disability.
gratuity calculation formula
Calculating Gratuity in Pakistan
The gratuity amount is calculated based on the employee’s last drawn salary and the duration of service. The formula used for calculation is:
Gratuity = (Last Drawn Salary / 30) x Number of Years of Service x 15
Example:
If an employee’s last drawn salary is PKR 100,000 and they have completed ten years of service, the gratuity payable would be:
(100,000 / 30) x 10 x 15 = PKR 500,000
Payment of Gratuity
- Employers are legally obligated to pay the gratuity amount to the employee or their nominee within 30 days of becoming due.
- Failure to comply with the payment timeline may result in penalties and legal consequences for the employer.
Exceptions to Gratuity Law
While gratuity is a legal right for eligible employees, certain exceptions exist:
- Employees dismissed for misconduct or gross negligence may forfeit their gratuity entitlement.
- Employees covered under a separate gratuity scheme agreed upon in their employment contract.
different payment options for gratuity
Frequently Asked Questions (FAQs)
1. Can an employer withhold gratuity?
Employers cannot withhold gratuity from eligible employees. However, they can deduct any outstanding dues or loans owed by the employee from the gratuity amount.
2. What happens to gratuity in case of an employee’s death?
In case of an employee’s death, the gratuity amount is payable to their designated nominee or legal heirs.
3. Is gratuity taxable in Pakistan?
Yes, gratuity is considered taxable income in Pakistan. The amount of tax payable depends on the employee’s tax bracket and other applicable deductions.
4. Can an employee claim gratuity before completing five years of service?
No, completing a minimum of five years of continuous service is mandatory to be eligible for gratuity.
5. What should an employee do if their employer refuses to pay gratuity?
Employees facing issues with gratuity payment can file a complaint with the Labour Department.
Conclusion
Understanding the gratuity law in Pakistan is crucial for both employers and employees. It ensures fair treatment, financial security, and legal compliance. By adhering to the stipulated guidelines and addressing any concerns promptly, both parties can maintain a harmonious and mutually beneficial working relationship.
Need further assistance regarding gratuity law in Pakistan? Contact us at +923337849799, email us at [email protected], or visit our office located at Dera Ghazi Khan Rd, Rakhni, Barkhan, Balochistan, Pakistan. Our dedicated customer support team is available 24/7 to assist you.
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