End-of-Service Gratuity (EOSB) is one of the most essential employee rights in the UAE and one of the most common areas where employers make mistakes. With the implementation of Federal Decree Law No. 33 of 2021 and its executive regulations, gratuity rules have become clearer—yet more detailed—requiring companies to strictly follow the new provisions to avoid penalties and disputes.
As an FTA-Approved Tax Agent and leading accounting & compliance firm in Dubai, The Accountant LLC has prepared this comprehensive, easy-to-understand guide to help both employers and employees navigate EOSB calculations, eligibility requirements, and compliance obligations.
What Is End of Service Gratuity in the UAE?
End of Service Gratuity is a lump-sum financial benefit paid to an employee upon completing at least one full year of continuous service with an employer. It acts as a retirement-style benefit and is governed under:
Federal Decree-Law No. 33 of 2021 (UAE Labour Law)
Applicable to:
All private sector companies (mainland)
Most free zones
Part-time and full-time workers
Not applicable to:
DIFC (uses DEWS scheme)
ADGM (compensation scheme model)
Government employees
Domestic workers (covered under separate rules)
The gratuity is always calculated based on the last drawn basic salary, not the total salary.
Who Is Eligible for UAE End of Service Gratuity?
To qualify for EOSB:
1. Minimum 1 year of continuous service
Employees completing:
1–5 years: 21 days of basic wage per year
More than 5 years: 30 days of basic wage per year
2. Resignation vs. Termination
Under the new labour law, resignation does not reduce gratuity.
All employees are treated equally, regardless of whether they resign or are terminated (except in cases of proven gross misconduct under Article 44).
3. Part-time and flexible workers
They receive gratuity pro-rata based on the actual working hours stated in the contract.
4. What counts as “basic salary”?
Basic salary = Fixed salary excluding allowances such as:
Housing
Transportation
Telephone
Food allowance
This is one of the most common mistakes made by employers—using gross salary instead of basic salary, leading to disputes during MOHRE complaints.
How to Calculate End of Service Gratuity (Step-By-Step)
Under Article 51 of the UAE Labour Law:
Calculation Formula
First 5 years: 21 days basic wage per year
After 5 years: 30 days basic wage per year
Maximum EOSB: Not more than two years of wage
Service days counted
Counted:
Paid annual leave
Paid maternity leave
Paid sick leave
Not counted:
Unpaid absence
Unapproved leave
Absconding period
Examples of EOSB Calculation
Example 1 — Employee with 2 Years of Service
Basic salary: AED 5,000
Formula:
21 days × 2 years = 42 days
42 days ÷ 30 × 5,000 = AED 7,000 gratuity
Example 2 — Employee with 7 Years of Service
Basic salary: AED 8,000
First 5 years:
21 days × 5 = 105 days
After 5 years:
30 days × 2 = 60 days
Total = 165 days
165 ÷ 30 × 8,000 = AED 44,000 gratuity
Example 3 — Resignation After 1.5 Years
Basic salary: AED 4,000
21 days × 1.5 years = 31.5 days
31.5 ÷ 30 × 4,000 = AED 4,200 gratuity
Example 4 — Part-Time Worker
Uses the ratio:
Actual working hours ÷ total full-time hours × gratuity
If employee works 50% schedule → receives 50% of standard gratuity.
Employer Responsibilities Under UAE Labour Law (Article 51 & 53)
The competitor only listed high-level points, but in reality, employers have specific legal duties. The Accountant LLC ensures companies stay fully compliant with these obligations.
1. Accurate Gratuity Calculation
Must be based on last basic salary
Must follow exact legal formulas
Must include partially completed years
Must exclude unpaid absence
2. Timely Payment (Mandatory 14-Day Rule)
Under Article 53:
Employers must settle all final dues within 14 days from the employee’s last working day.
Failure may result in:
MOHRE fines
Labour ban requests
Legal claims
3. Clear Documentation
Employers must issue:
Salary breakdown
Service certificate
Leave balance statement
Settlement sheet
4. No deductions unless legally justified
Only valid deductions:
Advance salary
Unreturned assets
Court orders
Illegal deductions may lead to penalties.
5. Transparent record keeping
Must maintain:
Contracts
Payslips
Attendance & leave records
Basic salary history
Employee Rights Related to EOSB
Employees are entitled to more than just gratuity. At offboarding, they may claim:
1. Pending salaries
Anything unpaid until last working day.
2. Unused annual leave salary
Based on basic + allowance.
3. Notice period salary
If the employer waives notice without pay.
4. Commissions, incentives & targets
If part of contract or past practice.
5. Air ticket (if included in contract)
Not mandatory unless contractually agreed.
Penalties for Delayed or Incorrect EOSB Payment
MOHRE strictly monitors delayed payments. Penalties include:
1. Fines under UAE Labour Law
Up to AED 20,000 per worker for non-payment.
2. Suspension of new work permits
Companies with repeated violations can face:
Freeze on new visa issuance
Extended inspections
Court referral
3. Labour Complaint Process
Employee can file a complaint via:
MOHRE app
MOHRE helpline (600590000)
Tasheel centres
If unresolved → case escalates to Labour Court.
4. Court orders
Courts may order:
Payment of full EOSB
Compensation
Interest
Reinstatement in certain cases
Gratuity in Free Zones — Mainland vs DIFC vs ADGM
Unlike the UAE Labour Law, DIFC and ADGM have independent gratuity systems.
DIFC (DEWS Scheme)
Since Feb 2020:
Traditional gratuity replaced with DEWS pension-style contributions
Employer contributions: 5.83%–8.33% of basic salary
Funds invested by employee
No EOSB after Feb 2020—except for accrued benefits before transition.
ADGM
Uses “compensation scheme”:
EOSB depends on agreed employer contribution rate
Similar to DIFC structure
Mainland UAE
Governed by UAE Labour Law (21/30 days)
Max payout: two years’ wage
No investment scheme (unless Cabinet introduces alternative funds)
Frequently Asked Questions
1. Is gratuity calculated on basic or gross salary?
Always basic salary.
2. Do maternity or sick leaves count?
Paid maternity & paid sick leave count towards service.
3. Are employees eligible if terminated for performance?
Yes—performance issues are not “gross misconduct”.
4. What happens if an employee is terminated under Article 44 (gross misconduct)?
Employer may deny gratuity only if misconduct is proven with evidence.
5. What if the employer shuts down the business?
Gratuity must still be paid; owners remain liable.
6. What if basic salary changed during employment?
The last monthly basic salary is used.
7. Is EOSB mandatory in all free zones?
Yes—except DIFC & ADGM which follow independent contribution systems.
Why Companies Trust The Accountant LLC for Gratuity Compliance
As a trusted FTA-approved tax agent & leading accounting firm in Dubai, we support businesses with:
Accurate EOSB calculations
Payroll restructuring
HR policy updates
Labour law compliance
Employee settlement and offboarding
Dispute prevention
MOHRE audit preparation
Our experts ensure your company remains compliant, avoids penalties, and maintains strong employee relations.
Staying Compliant
End-of-Service Gratuity is more than just a financial payout—it’s a legally protected employee right and a key compliance responsibility for UAE businesses. With the new labour law and stricter enforcement from MOHRE, companies must ensure they are calculating and paying gratuity correctly, transparently, and on time.
For professional assistance with:
Gratuity calculations
Payroll compliance
HR restructuring
Corporate tax & accounting
