Carry out a retrenchment in Pakistan, the right way.

Answer a few questions and the toolkit builds your evidence pack — last-in-first-out selection, one month’s notice, the 30-days-a-year gratuity and the Labour Court permission check for large cuts. Pakistan calls it retrenchment.

Pakistan — the Industrial and Commercial Employment (Standing Orders) Ordinance 1968 and its provincial successors: establishments with 20 or more workmen.

Your figures & obligations

The exact numbers and rules that apply — worked out for your situation and jurisdiction.

Every document, written for you

The letters, records and decision — drafted for your situation, ready to send. Not a checklist.

Track it to completion

Save your plan, tick off each step with dates and evidence — proof you ran a proper process.

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Retrenchment, done right — for Pakistani employers

In Pakistan a retrenchment is the termination of a workman because the role is surplus, governed by the Industrial and Commercial Employment (Standing Orders) Ordinance 1968 and its devolved provincial successors. It applies to any establishment with 20 or more workmen and sets a one-month notice, last-in-first-out selection and a gratuity of 30 days’ wages per year. This free AI toolkit walks you through a valid retrenchment for your exact situation and builds the evidence pack.

The retrenchment process, step by step

Business case — record the genuine reason the role is surplus (downturn, reorganisation, closure); a retrenchment is about the post, not the person.
Check the size threshold — the Standing Orders Ordinance applies to establishments with 20 or more workmen; retrenching more than 50% of the workforce, or closing entirely, needs prior Labour Court permission (SO 11A).
Selection — last in, first out — retrench the most recently employed workman in the affected category first (SO 13), and keep the one-year re-hire preference (SO 14).
Notice — give one month’s written notice with reasons, or one month’s average wages in lieu (SO 12(1)).
Gratuity & final pay — pay 30 days’ wages for each completed year of service (a part-year over six months counts as a full year) and settle final wages and dues.

Gratuity (retrenchment pay)

Statutory gratuity is 30 days’ wages for every completed year of service, and any part of a year exceeding six months counts as a full year (Standing Orders Ordinance 1968, SO 12(6)). Wages are the last-month wage for fixed-rate workers, or the highest pay in the last twelve months for piece-rate workers. Where a period is covered by a qualifying provident or pension fund (employer contribution at least equal to the workman’s), gratuity is not additionally due for that period — the workman receives the gratuity or the fund, whichever is higher, not both.

SO 12(6). A part-year over six months rounds up to a full year. Gratuity and a qualifying provident/pension fund are alternatives for the same period, not cumulative.

Notice

All covered workmen	1 month written notice (or 1 month average wages in lieu) + reasons
Retrenching more than 50% of the workforce, or full closure	Prior Labour Court permission (SO 11A)

SO 12(1) — one month’s average wages of the last three months if paid in lieu. A written, reasoned order is required (SO 12(3)).

Large retrenchments (Labour Court permission)

Terminating more than 50% of the workmen, or closing the establishment entirely, requires prior permission of the Labour Court (SO 11A) — except where the closure is caused by fire, catastrophe, power failure, epidemic or civil commotion. Below that, the ordinary process (one month’s notice, last-in-first-out and gratuity) applies without a permission requirement. Retrenchment disputes are decided by the Labour Court.

Common questions

How much gratuity is due?

30 days’ wages for each completed year of service, with any part of a year over six months counting as a full year (SO 12(6)). Wages are the last-month wage for fixed-rate workers or the highest pay in the last twelve months for piece-rate.

Do I need Labour Court permission?

Only if you are retrenching more than half of the workmen or closing the establishment entirely — then you must obtain prior Labour Court permission (SO 11A). Smaller retrenchments proceed on one month’s notice, last-in-first-out and gratuity, with no permission needed.

What selection rule applies?

Last in, first out within the affected category of workmen (SO 13): the most recently employed goes first, and retrenched workmen keep a one-year re-hire preference (SO 14).

Does the provident fund replace gratuity?

For any period covered by a qualifying provident or pension fund where the employer’s contribution is at least equal to the workman’s, gratuity is not additionally due — the workman receives the gratuity or the fund, whichever is higher, not both.

Reference: Industrial and Commercial Employment (Standing Orders) Ordinance 1968, Standing Orders 11A, 12 & 13; pakistancode.gov.pk. General information for employers, not legal advice.