Termination, Notice Pay, and Severance in Pakistan
Reviewed by the Commoner Law editorial team. Sources: pakistancode.gov.pk, Punjab/Sindh/KP/Balochistan provincial codes, Supreme Court of Pakistan, FBR, EOBI, SBP, NEPRA, OGRA, PMDC, FIA, and provincial Healthcare Commissions. Provincial variations cite Punjab/Sindh/KP/Balochistan Acts and ICT-specific ordinances. Written in plain English with everyday Urdu legal terms (FIR, qabza, khula, NTN, CNIC) for a general audience — this is educational content, not legal advice. Our editorial standards
What is this right?
The 1968 Standing Orders Ordinance still does the heavy lifting on termination of permanent workers in commercial and industrial establishments employing 20 or more workers. It applies through provincial labour departments since the 18th Amendment but the text is largely the same across provinces.
For a permanent worker, the employer must either give one month's written notice or pay one month's wages in lieu of notice (Standing Order 12). On top of that, on every termination other than dismissal for misconduct, the worker is entitled to severance (gratuity) at 30 days' wages for each completed year of service, calculated on the last drawn wages (basic plus dearness). Some employers offer a Provident Fund instead. Workers can be in either, not both, and the employer must say which scheme applies in the appointment letter or the standing orders.
Termination for misconduct follows a strict procedure. Standing Order 15 lists the grounds — wilful insubordination, theft, dishonesty, habitual late attendance, riotous behaviour, etc. The employer must:
- Issue a written charge sheet within a reasonable time of the alleged misconduct.
- Give the worker an opportunity to reply in writing (usually 7 days).
- Hold a domestic inquiry by an inquiry officer who is not the complainant. The worker can be represented by a co-worker or trade union nominee. Cross-examination is allowed.
- Issue a reasoned final order. Skipping any of these steps makes the dismissal procedurally bad, and Labour Courts will reinstate with back wages even if the underlying misconduct was real.
You have 30 days from the date of termination to file a grievance under section 33 of the Provincial IRA, after which the case goes to the Labour Court. Don't miss this window. The limitation is strict and Labour Courts dismiss late grievances at the threshold.
When does it apply?
- You're a "permanent worker" — not probationary (under 3 months), badli, or apprentice — in an establishment of 20+ workers.
- You've been terminated, retrenched, or dismissed.
- You're below the management/supervisory exclusion (real role, not just title).
What to do if you've been terminated
- Within 24 hours of termination, write to the employer asking for the reasons in writing and a copy of any inquiry report. Standing Order 12 requires reasons; their refusal is itself a procedural breach.
- Compute your dues: notice pay (1 month) + severance (30 days × completed years × last basic+DA) + accumulated leave encashment + any unpaid bonus.
- File a grievance under PIRA/SIRA/KPIRA § 33 within 30 days, addressed to the employer with copy to the labour department. If unresolved in 14 days, it converts into a Labour Court case.
- If dismissed for misconduct without inquiry, the Labour Court can reinstate you with full back wages. Pakistani superior courts have repeatedly held that where the procedural inquiry under Standing Order 15 is skipped, reinstatement is the rule and compensation only the exception.
- If retrenchment, the "last in, first out" rule under Standing Order 13 applies — you can challenge if a junior was kept while you were laid off.
What should you NOT do?
- Don't sign a "full and final settlement" receipt on the day of termination without computing your dues. Once signed, employers will argue it bars future claims — Labour Courts often (but not always) read down such releases when consideration was inadequate.
- Don't miss the 30-day grievance window. Late grievances are dismissed at the threshold by Labour Courts.
- Don't accept a verbal "you've been let go." Demand it in writing. Without a termination letter, the employer can later argue you abandoned the job.
- Don't ignore the inquiry call letter. Even if you think the charge is bogus, attend and reply. Refusing to participate strengthens the employer's case.
Frequently asked questions
Can my employer fire me on the spot?
Only for serious misconduct after a domestic inquiry. For ordinary termination, Standing Order 12 requires one month's notice or one month's wages in lieu, plus severance at 30 days' wages per completed year of service.
What is the time limit to challenge a termination?
30 days from the date of termination to file a grievance under section 33 of your provincial Industrial Relations Act. After that, the matter goes to the Labour Court. The window is strict — late grievances are dismissed at the threshold.
If I'm reinstated, do I get back wages?
Usually yes. The Supreme Court has consistently held that reinstatement on procedural grounds carries full back wages. The Labour Court can deny back wages where the worker contributed to the delay or where the misconduct was real but procedure was bad.
When does termination, notice pay, and severance apply?
You're a "permanent worker" — not probationary (under 3 months), badli, or apprentice — in an establishment of 20+ workers.You've been terminated, retrenched, or dismissed.You're below the management/supervisory exclusion (real role, not just title).
I was fired without notice — what am I owed in Pakistan?
Within 24 hours of termination, write to the employer asking for the reasons in writing and a copy of any inquiry report. Standing Order 12 requires reasons; their refusal is itself a procedural breach.Compute your dues: notice pay (1 month) + severance (30 days × completed years × last basic+DA) + accumulated leave encashment + any unpaid bonus.File a grievance under PIRA/SIRA/KPIRA § 33 within 30 days, addressed to the employer with copy to the labour department. If unresolved in 14 days, it converts into a Labour Court case.If dismissed for misconduct without inquiry, the Labour Court can r...
What mistakes should I avoid with termination, notice pay, and severance?
Don't sign a "full and final settlement" receipt on the day of termination without computing your dues. Once signed, employers will argue it bars future claims — Labour Courts often (but not always) read down such releases when consideration was inadequate.Don't miss the 30-day grievance window. Late grievances are dismissed at the threshold by Labour Courts.Don't accept a verbal "you've been let go." Demand it in writing. Without a termination letter, the employer can later argue you abandoned the job.Don't ignore the inquiry call letter. Even if you think the charge is bo...