Pay and rights at work · 5 min read
How to calculate gratuity in Zambia: 25% of basic pay, with examples
Add up the basic pay you earned during the contract and take 25%. On K6,000 basic for 24 months, that's at least K36,000.
Gratuity in Zambia is at least 25% of the basic pay you earned during a long-term contract. So the formula is basic pay x months x 25%. On K6,000 basic for 24 months, you earned K144,000 in basic pay and your gratuity is at least K36,000. It's worked on basic pay only, so allowances don't count. If your contract ends early under the Code, you get a share in proportion to the time you worked. All of this comes from section 73 of the Employment Code Act No. 3 of 2019.
The gratuity formula, worked through
Section 73 says an employer must pay gratuity at a rate of not less than 25% of the basic pay earned during the contract period. Your contract can give more, but it can't give less.
Full contract, same basic pay K6,000 x 24 months = K144,000 K144,000 x 25% = K36,000 Basic pay rose during the contract K5,000 x 12 months = K60,000 K6,000 x 12 months = K72,000 Total basic earned = K132,000 K132,000 x 25% = K33,000 Contract ended early, after 12 of 24 months K6,000 x 12 months = K72,000 K72,000 x 25% = K18,000
If your basic pay changed, use the actual amounts you earned, and not your final pay times the months. The Ministry of Labour's handbook says the same.
Who gets gratuity?
You get it on a long-term contract. The Code defines that as a contract for more than 12 months that can be renewed, or a contract for a specific task or project over a set period, with the end date fixed in advance by both sides. So a 24 month contract qualifies, and so does an 8 month project contract that fits the second part of that definition.
A permanent job works differently. Check your contract and your employer's pension or separation terms. The general minimum wage order, for example, gives separation pay on permanent terms of at least one month's basic pay per completed year. It also says you can't get both a separation package or retirement package and gratuity.
Why basic pay matters so much
The Code defines basic pay as the standard rate of pay before additional payments such as allowances and bonuses. So two offers with the same total can be worth very different gratuity. Offer A is K8,000 basic. Offer B is K5,000 basic plus K3,000 allowances. Over 24 months, A's gratuity is at least K48,000 and B's is at least K30,000. That's K18,000 between two jobs that look the same on the monthly number.
Ask how an offer splits basic and allowances before you sign. Our offer comparison tool shows the monthly money, and the gratuity is on top of that.
When a contract ends early
Section 73(2) says that when a contract is terminated in line with the Code, gratuity is paid in proportion to the period of employment. Section 53(6) repeats this when an employer ends a long-term contract with notice. Section 53 also deals with notice itself: 30 days for a contract over three months if the contract doesn't set a period, in writing where the contract is for more than six months.
Section 54 adds a wrinkle. It says that on a fixed duration contract, severance is either gratuity of at least 25% or the retirement benefits of your social security scheme. But section 54(3) says that section's severance isn't paid to someone on a long-term contract, and section 73 gives that person gratuity. If an employer tells you NAPSA replaces your gratuity, ask a labour office before you accept that. Dismissal for misconduct has its own rules, and we don't cover it here.
Is gratuity taxed, and what if it isn't paid?
We couldn't confirm how gratuity is taxed from the ZRA page we read, so we won't give you a rate. Ask ZRA or your payroll office before you plan around the full amount.
If your employer doesn't pay, first write to them with your contract dates and your sum. Keep your contract and payslips. Then complain to the Ministry of Labour at [email protected] or on WhatsApp at +260958081088. Some employers hold exemptions, so a labour office can tell you whether one applies to you.
Sources and further reading
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Frequently asked questions
Do allowances count toward gratuity?
No, not under the legal minimum. Section 73 uses basic pay, and the Code's definition of basic pay leaves out allowances and bonuses. Your contract could offer more.
When should gratuity be paid?
Section 73 says at the end of the long-term contract period. Check your contract for the exact payment date.
Is 25% the most I can get?
No, it's the floor. The Code says not less than 25%, so a contract can pay a higher rate.
My contract is renewed every 12 months. Do I qualify?
The definition starts at more than 12 months, so a contract of exactly 12 months may not meet the first part of it. Ask a labour office, and bring your contracts.