Notice period in Pakistan: rules for resignation and termination

StreamHCM

Written by the StreamHCM team for HR and payroll managers in Pakistan. Updated on 31 October 2026.

When someone resigns, the first question in every HR inbox is the same: how long do they have to serve? The answer depends on who the employee is, which law covers your establishment and what the appointment letter says. This guide sets out the legal baseline, how notice pay is calculated, and the points where companies usually get into disputes.

This guide is general information, not legal advice. Check the Standing Orders law of your province and the employee's contract, and speak to a labour lawyer for a disputed case.

Which law sets the notice period?

For industrial and commercial establishments, the rules come from the Standing Orders law:

• Punjab and Islamabad: the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 (as amended in Punjab). It applies to establishments that employ 20 or more workmen, or did so on any day in the preceding twelve months.
• Sindh: the Sindh Terms of Employment (Standing Orders) Act, 2015.
• Khyber Pakhtunkhwa and Balochistan: their own Standing Orders Acts, which follow the same structure.

The rules below quote the 1968 Ordinance. The provincial Acts use the same one-month approach for permanent workers, but clause numbers differ, so cite the law of your own province in letters and policies.

The law protects "workmen", meaning people employed to do skilled or unskilled, manual or clerical work for hire. Managers and senior staff often fall outside that definition, and for them the contract decides the notice period.

The one-month rule for permanent workers

Standing Order 12(1) says that to end the employment of a permanent workman for any reason other than misconduct, one month's notice must be given by either the employer or the workman. If the employer ends the job without notice, it pays one month's wages calculated on the average wages earned during the last three months in lieu of notice.

A "permanent workman" is someone engaged on work likely to last more than nine months who has satisfactorily completed a probationary period of three months.

Who is not entitled to notice?

Standing Order 12(2) excludes three groups. Temporary workmen (monthly, weekly, daily or piece rated), probationers and badlis are not entitled to notice when the employer ends their service, and they do not have to give notice or pay wages in lieu if they leave of their own accord.

In practice this means:

• During probation (the first three months in a permanent post), either side can end the arrangement without the statutory notice, unless the appointment letter promises more.
• Temporary workers on work expected to finish within nine months follow the same rule.
• A contract can be more generous. If the appointment letter says two weeks' notice during probation, honour it.

Notice in employment contracts

For managers, specialists and other staff outside the workman definition, the appointment letter is the rule book. One month is common for junior and mid-level roles; senior roles often carry two or three months. Whatever you choose, write four things into the letter:

1. The notice period for each side, during and after probation.
2. Whether either side can pay or recover salary in lieu of notice, and on what pay basis (gross or basic).
3. Whether unused annual leave can be adjusted against the notice period.
4. Who decides the last working day if the company wants the employee to leave early.

A clause that is clear on day one prevents most arguments on the last day.

How to calculate notice pay (worked example)

Bilal is a permanent worker at a Faisalabad factory. The company decides to close his section and ends his service without notice. His gross wages for the last three months were Rs 90,000, Rs 90,000 and Rs 96,000 (the last month included overtime).

Bilal's notice pay is Rs 92,000. It is added to the rest of his dues: salary for days worked, unused annual leave, and gratuity or provident fund where they apply. The final settlement calculator adds these up in one place.

If the company had given him one month's written notice and he had worked through it, no notice pay would be due; he would simply be paid his normal wages for that month.

When an employee resigns without serving notice

This is the most disputed point. The Standing Orders require a permanent worker to give one month's notice too, and many contracts allow the employer to recover salary for the shortfall from final dues. Two cautions:

• The Payment of Wages Act, 1936 allows only the deductions it authorises, and a worker can complain to the wages authority about an unauthorised deduction. Recover a notice shortfall only where the signed contract clearly allows it, show it as a separate line in the settlement statement, and take advice if the amount is large.
• Do not hold back the whole settlement because notice was short. Pay what is undisputed and record the disputed amount separately.

Can annual leave be adjusted against notice?

Only if your policy or the contract says so, and only with the leave balance confirmed on the date of resignation. Many companies allow it at management's discretion, because an employee on leave cannot hand over work. Whatever your rule, apply it the same way to everyone and record the decision on the resignation request. Annual leave under the labour laws is set out in the leave entitlements guide.

Termination for misconduct is different

Notice and pay in lieu do not apply when a worker is dismissed for misconduct, but the employer then has to follow the procedure in the Standing Orders (Standing Order 15 in the 1968 Ordinance): a written charge, a chance to explain, and an inquiry where required. Standing Order 12(3) also requires that any termination, removal, discharge or dismissal is made by a written order that states the reason.

After the last working day: dues and documents

• Pay dues on time. Under Standing Order 12(4) of the 1968 Ordinance, when a worker's services are terminated, wages earned and other dues, including payment for unavailed leave, are to be paid before the second working day after termination ends. Even where your staff are not covered, settle within a short, fixed period written in your policy.
• Gratuity or provident fund. Check eligibility for gratuity under Standing Order 12(6) or your provident fund rules. The gratuity guide and gratuity calculator cover the formula.
• Service certificate. Standing Order 19 entitles every permanent workman to a service certificate on dismissal, discharge, retrenchment or retirement.
• Final settlement. Use the step-by-step final settlement guide so salary, leave encashment, notice and tax use one consistent basis.

Common mistakes

• Treating everyone as a "workman" and ignoring what managers' contracts say, or the other way round.
• Calculating notice pay on basic salary when the law uses average wages for the last three months.
• Starting the notice clock from the date HR reads the email instead of the date on the resignation.
• Recovering notice shortfall that the contract does not allow.
• Losing track of who is serving notice, so access, assets and handover are left to the last day.

How StreamHCM helps

In StreamHCM, a resignation is recorded on the employee's timeline with its date, the approval chain runs on the request, and the exit clearance list tracks company assets still assigned to the employee. When the last working day arrives, final settlement is processed inside the same payroll module, so salary, leave balance, loans and deductions come from the employee's record rather than a separate spreadsheet. See how it works on the employee offboarding software page or try the final settlement calculator.

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