Who Is Entitled to Gratuity in Pakistan? Supreme Court Explains Worker Status.

What Is Gratuity in Pakistan?

Gratuity is a lump-sum payment employers provide to long-serving employees when they leave. Think of it as a financial cushion, a token of appreciation for years of service. But under Pakistan’s labor laws, gratuity is not a universal right—it is available only to certain categories of employees.

Who Qualifies for Gratuity Benefits?

Under the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, only a “workman” is entitled to gratuity. The law defines a workman as someone engaged in manual or clerical work in an industrial or commercial establishment.

This includes skilled or unskilled workers on factory floors or clerks in offices. But it does not extend to managers, supervisors, or employees in strategic, decision-making roles.

In other words, a factory worker may qualify—but a sales manager usually won’t.

How Is Gratuity Calculated in Pakistan?

Gratuity is governed by Standing Order 12(6). It entitles workmen to:

• 30 days’ wages for every completed year of service (over six months)
• Calculated on the last fixed salary, or in the case of piece-rated workers, the highest pay received in the last 12 months

If an employer maintains a provident fund with equal contributions from both employer and employee, gratuity may not apply for that period.

The Supreme Court Case: Sales Managers vs. Employer (2021)

In a landmark case, three senior sales managers of a pharmaceutical company took their employer to court, claiming gratuity and provident fund after years of service.

• Nafees (joined 2005): Started as a territory manager, rose to senior sales manager, resigned in 2017 after 12 years. He sought gratuity and provident fund, but the company refused.
• Saeed (joined 2003): Rose to national sales manager. Fired in 2017 after a show-cause notice. He claimed Rs. 4.5 million, including gratuity and provident fund.
• Umar (joined 2005): Promoted to senior sales manager. Also dismissed in 2017 and claimed Rs. 2.3 million in dues.

The company accused Saeed and Umar of running a side business and argued that sales managers did not qualify as “workmen” under labor law.

Legal Battle: From Authority to Supreme Court

The employees filed their claims under Section 15 of the Payment of Wages Act, 1936, seeking unpaid gratuity, provident fund, and salaries.

• In 2019, the Authority ruled in their favor, ordering payments.
• The company appealed, but the Islamabad High Court upheld the decision in 2020.
• Finally, the case reached the Supreme Court of Pakistan in 2021.

The question before the Court was simple yet decisive:

👉 Were these sales managers “workmen” under the Standing Orders Ordinance, 1968, and therefore entitled to gratuity?

Why Sales Managers Were Denied Gratuity

The Supreme Court relied on earlier judgments, including:

• Pakistan Tobacco Company Ltd. (1961) – salesmen not considered workmen
• Brooke Bond (1969, 1977) and Syed Matloob Hassan (1992) – sales roles excluded from gratuity protection
• Aurangzaib v. Medipak (2018) – senior sales representatives are not workmen

Applying these precedents, the Court held that sales managers perform supervisory and strategic duties, not manual or clerical work. As a result, they did not qualify as workmen under the law.

The Court set aside the High Court and Authority’s rulings, denying gratuity and provident fund claims. However, it noted the employees could pursue contractual claims in civil courts if their contracts promised such benefits.

Lessons for Employees in Pakistan

This case underscores a vital point: gratuity in Pakistan is not guaranteed to all employees. It applies only if you fall within the legal definition of “workman.”

For professionals in supervisory, sales, or managerial positions, gratuity depends entirely on what your employment contract provides. If the contract does not mention it, the law will not step in to protect you.

The emotional reality is harsh—decades of service may end without gratuity if you are not a workman. This raises a broader question: should Pakistan’s labor laws evolve to include modern roles like sales managers? For now, the law draws a sharp line, and employees must plan accordingly.

FAQs on Gratuity Law in Pakistan

What is gratuity in Pakistan, and who qualifies for it?

Gratuity is a lump-sum payment for long-serving employees, but only “workmen” doing manual or clerical work qualify under the Standing Orders Ordinance, 1968.

How is gratuity calculated in Pakistan?

Workmen receive 30 days’ wages for each completed year of service (beyond six months), based on the last drawn salary.

Why did the Supreme Court deny gratuity to sales managers?

Because their roles were supervisory, not manual or clerical, they did not meet the definition of “workman.”

Can sales managers still claim gratuity?

Not under labor law. However, if their contracts provide for gratuity or a provident fund, they can pursue those claims in civil courts.

What happens if an employee is dismissed for misconduct?

Even if a worker qualifies as a workman, gratuity is not payable in cases of dismissal for misconduct.

Disclaimer

This blog is for public awareness only and does not constitute legal advice.

Written by Jehangir Badar, Advocate, High Court

Corporate Lawyer and Founder of Verdict Tales

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