Pakistan Leave Encashment Calculator
Calculate the exact statutory cash value of your unavailed paid annual leaves in Pakistan under Section 49-B of the Factories Act, 1934 and provincial Shops and Commercial Establishments Ordinances. Formulates 14-day annual leave accruals, the 28-day statutory carry-forward accumulation cap, and selectable 26-day or 30-day daily wage divisors.
Essential for corporate HR departments, payroll officers, and departing employees executing final separation settlements across Karachi, Lahore, Rawalpindi, and Peshawar. Computes in real-time with complete browser-side privacy.
Statutory Leave Entitlements Under Pakistani Labor Law
In Pakistan, leave entitlements in the private commercial and industrial sectors are codified under the Factories Act 1934, provincial Shops and Establishments Acts (1969/2015), and the Industrial and Commercial Employment (Standing Orders) Ordinance 1968.
| Leave Category | Statutory Duration | Pay Rate | Accumulation & Encashment Rules |
|---|---|---|---|
| Annual Paid Leave (Section 49-B) | 14 Consecutive Days | Full Pay | Can accumulate up to 28 days (2 years); 100% encashable at separation |
| Casual Leave | 10 Days / Calendar Year | Full Pay | Intended for unforeseen circumstances; lapses annually (non-encashable) |
| Sick / Medical Leave | 16 Days (Half Pay) or 8 Days (Full Pay) | Half or Full Pay | Requires registered medical practitioner certificate; non-encashable |
| Festival / Gazetted Holidays | 10 to 14 Days | Full Pay | Compulsory paid public holidays announced by the Federal/Provincial Government |
Legal Mechanics of Encashment Upon Exit
When an employee tenders their resignation, is retrenched, or attains the statutory retirement age, Section 49-B(3) of the Factories Act mandates that unavailed annual leave must be paid in full cash:
- Right to Monetary Compensation: An employer cannot forfeit unavailed statutory annual leaves earned by a worker during their service. The cash value must be included in the employee's final separation voucher.
- Divisor Selection: While corporate offices commonly divide the monthly wage by 30 calendar days, legal precedents established by Pakistani Labor Appellate Tribunals affirm that for industrial shift workers, dividing by 26 actual monthly working days is equitable because rest days are already paid within the monthly package.
Frequently Asked Questions
What is the statutory annual leave entitlement in Pakistan?
Under Section 49-B of the Factories Act 1934 and Provincial Shops & Establishments Acts, every employee who has completed 12 months of continuous service is entitled to 14 consecutive calendar days of paid annual leave.
Can unavailed annual leaves be accumulated in Pakistan?
Yes. Statutory annual leaves can be carried forward and accumulated for up to two consecutive calendar years, allowing an employee to legally accumulate up to a maximum of 28 paid leave days.
Can casual leaves and sick leaves be encashed in Pakistan?
Under Pakistani labor law, casual leaves (10 days) and medical/sick leaves (16 days at half pay under the Factories Act or 8 days at full pay) lapse at the end of each calendar year and cannot legally be encashed or carried forward, unless specifically provided in the employer's HR policy.
Which divisor should be used for daily wage calculation: 30 or 26 days?
Many commercial organizations use a 30-day divisor (Monthly Gross Salary ÷ 30) for calendar-based settlements, whereas industrial tribunals and the Factories Act often favor a 26-day working divisor (Monthly Gross Salary ÷ 26) representing actual working days without weekly rest days.
Is leave encashment taxable under FBR rules in Pakistan?
Yes. Leave encashment paid during employment or upon resignation is treated as employment income and is subject to standard salary withholding tax (TDS) under Section 12 of the Income Tax Ordinance. However, leave encashment received by federal and provincial civil servants upon superannuation retirement is completely tax-exempt.