Legal Help · Published July 16, 2026
Employee Gratuity and Provident Fund in Pakistan
Two retirement benefits, one legal requirement to offer at least one — here's how to tell which one applies to you.
Quick answer
Employers with 20+ (commercial) or 49+ (industrial) workers must offer at least one retirement benefit — gratuity, a provident fund, or an approved pension fund. Gratuity is generally 20 days' wages per completed year of service, payable unless termination was for misconduct. If your employer runs a matching provident fund, you typically get that instead of gratuity, not both — check your specific employer's arrangement.
The framework, layer by layer
Employers must offer at least one retirement benefit
Standing Order 12(6) of the Industrial and Commercial Employment (Standing Orders) Ordinance 1968 requires commercial establishments with 20+ workers, or industrial establishments with 49+ workers, to offer at least a Gratuity, a Provident Fund, or an Approved Pension Fund.
Gratuity is a lump-sum, service-based payout
A worker who resigns or whose service is terminated for any reason other than misconduct is entitled to gratuity equal to twenty days' wages for every completed year of service (or part of a year beyond six months).
You generally get one or the other, not both
Where an employer has established a Provident Fund with employer contributions at least equal to the employee's own contributions, gratuity generally isn't payable for the period that fund existed — the law expects one meaningful retirement benefit, not a stack of them.
Check which one your employer actually offers
Employees don't automatically have a legal right to both gratuity and a provident fund — confirming which benefit (or combination) your specific employer has established, and its exact contribution terms, is the only way to know what you're actually entitled to.
Why "matching contributions" is the detail worth confirming
Practical guidance from Pakera points out that the gratuity-versus-provident-fund question isn't just theoretical — the law's exemption from paying gratuity depends specifically on the employer's provident fund contributions being at least equal to the employee's own. If an employer's provident fund contributes less than the employee, that condition isn't met, and the gratuity obligation may still apply on top of it.
This is exactly the kind of detail that's easy to overlook in an offer letter but makes a real financial difference over years of employment — worth confirming directly with HR, in writing, rather than assuming the standard arrangement applies to your specific employer.
What Wakeel.org can help with
Explaining how gratuity and provident fund rules generally work, in plain English or Urdu.
What it cannot do
It cannot calculate your specific entitlement or verify your employer's fund terms — a licensed labour law advocate can help with that.
Frequently asked questions
Am I entitled to both gratuity and a provident fund in Pakistan?
Not automatically. The Standing Orders Ordinance 1968 requires an employer to offer at least one retirement benefit — gratuity, a provident fund, or an approved pension fund. Where an employer runs a provident fund with matching contributions, gratuity generally isn't payable for that period.
How is gratuity calculated in Pakistan?
Gratuity is generally calculated at twenty days' wages for every completed year of service, including any part of a year exceeding six months, payable when an employee resigns or their service ends for any reason other than misconduct.
Which employers are legally required to offer gratuity or provident fund?
Under Standing Order 12(6), commercial establishments employing 20 or more workers, or industrial establishments employing 49 or more workers (in the preceding 12 months), are required to offer at least one of these retirement benefits.
Do I lose my gratuity if I resign, rather than being terminated?
Generally no — the entitlement applies whether service ends by resignation or termination, as long as the termination wasn't for misconduct. The key exclusion is misconduct-based dismissal, not simply who initiated the end of employment.
Can Wakeel.org calculate my gratuity or provident fund entitlement?
Wakeel.org can explain how gratuity and provident fund rules generally work. It cannot calculate your specific entitlement or verify your employer's fund contributions — a licensed labour law advocate or your employer's HR records can confirm that.
General educational information, not legal advice. See our full disclaimer.
Sources — check these directly to verify
Related reading
Unsure about your retirement benefit entitlement?
Ask Wakeel how gratuity and provident fund rules generally work — then verify with a licensed advocate.