Big news for thousands of retired employees of Punjab, government to provide benefit of gratuity leave encashment

July 10, 2026

The Punjab government has announced a major relief for state government employees who retired between January 1, 2020 and June 30, 2021. The state has decided to revise the calculation of gratuity and leave encashment by considering the higher estimated dearness allowance (DA), a move that is expected to increase the retirement benefits of eligible employees.

According to the government notification, the revised benefits will be paid within three months.

The decision came during the hearing of the High Court

The development came to light during the hearing of two petitions before the Punjab and Haryana High Court. These petitions were filed by retired government employees seeking revision of their retirement benefits.

During the proceedings, the Punjab government placed before the court a notification issued by the Finance Department on July 6, which outlined the revised formula for calculating gratuity and leave encashment.

Why did the government change the formula?

Earlier, gratuity and leave encashment were calculated for employees who retired during the stipulated period by taking into account 17 per cent dearness allowance. The government said that both these benefits are one-time retirement payments and admitted that employees who retired during this period received less than they were entitled to. Keeping this in mind, the state decided to revise the notional DA used to calculate these benefits.

Revised DA rates for calculation

The revised notional DA used for gratuity and leave encashment will be:

21% of basic pay for employees who retired between January 1, 2020 and June 30, 2020.

24% of basic pay for employees who retired between July 1, 2020 and December 31, 2020.

28% of basic pay for employees who retired between January 1, 2021 and June 30, 2021.

These revised rates will be used only for the calculation of gratuity and leave encashment. All other terms and conditions related to pension under Punjab Civil Services Rules will remain applicable.

Payment to be made within three months

The Finance Department has directed all pension-granting officers to recalculate the eligible benefits and ensure payment to the retired employees within three months from the date of notification.

The government hopes that the revised calculation will provide additional financial relief to thousands of eligible retired employees whose retirement benefits were affected during the period 2020-2021.

This decision is significant as it corrects the calculation of two major one-time retirement benefits for eligible employees of the Punjab Government. With the higher projected DA now being considered, many retirees are expected to receive additional gratuity and leave encashment amounts, offering much-needed financial support after retirement.