End of service gratuity: what it means for UAE businesses.

What end of service gratuity means

Also called: EOSB, End of service benefits, Gratuity.

End of service gratuity is the lump sum a UAE private sector employer pays a full-time foreign worker who leaves after at least one year of continuous service. Article 51 of Federal Decree-Law No. 33 of 2021 sets the formula: 21 days of basic wage for each of the first five years, and 30 days for each year after that, with part years counted pro rata once the first year is complete. The total cannot exceed two years' wage. UAE nationals are covered by the pensions legislation instead.

For an SME it is a real, growing liability. Every month a worker stays adds to it, and it becomes payable within 14 days of the contract ending under Article 53. Accounts under IFRS for SMEs should carry it as an employee benefit liability. Where a full actuarial valuation would involve undue cost or effort, the standard lets the business measure it as if every employee left at the reporting date, which is the method most UAE SMEs use.

Two alternatives exist. Cabinet Resolution No. 96 of 2023 created a voluntary savings scheme into which employers can pay monthly instead, and the DIFC replaced gratuity with its own funded DEWS plan.

How it works

• Eligibility: a full-time foreign worker with at least one year of continuous service. Unpaid days of absence do not count as service.
• Rate: 21 days of the last basic wage per year for the first five years, then 30 days per year, with part years pro rata after the first full year.
• Cap: the total gratuity cannot exceed two years' wage. Amounts owed under the law or a court judgment may be deducted under the Implementing Regulation.
• Payment: wages and all other entitlements, gratuity included, are due within 14 days of the contract end date.
• Accounting: accrue the liability every month so the year end balance matches what would be payable if all eligible staff left at that date.

Worked example

A foreign sales executive leaves a Dubai trading company after exactly seven years. The last basic wage was AED 6,000 a month. The daily wage here is monthly basic divided by 30, a common practice that the law does not itself fix.

Daily basic wage (6,000 / 30)	AED 200
First five years: 21 days x 5 x 200	AED 21,000
Years six and seven: 30 days x 2 x 200	AED 12,000
Total gratuity payable	AED 33,000

The gratuity is well under the two year cap, and it must be paid within 14 days of the last working day.

Common mistakes

• Calculating on total salary including allowances. Article 51 uses the basic wage, so the contract's split between basic and allowances matters.
• Not accruing gratuity in the monthly accounts and then taking a large, unexpected hit to profit and cash when a long serving employee leaves.
• Applying the federal formula to a DIFC employee, or ignoring contributions already paid into the voluntary savings scheme for a worker.

The law

• Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relationships, as amended, Article 51 (end of service benefits for full-time workers) and Article 53 (payment within 14 days)
• Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021, Article 29 (deductions) and Article 30 (other work patterns)

Frequently asked questions

Is a part-time worker entitled to gratuity?

Yes, pro rata. The Implementing Regulation works out the percentage from contract hours against full-time hours and applies it to the full-time gratuity. It does not apply to temporary work lasting less than one year.

Is the gratuity expense deductible for Corporate Tax?

Taxable Income starts from the accounting profit, so the gratuity expense recognised each year normally reduces it, provided it meets the general deduction rules in the Corporate Tax Law.

Related terms

Provisions · Accruals and prepayments · Wage Protection System · IFRS for SMEs · Year-end close. See every term in the UAE tax glossary.

For the full picture, read our guide: Month-end close for UAE SMEs: a practical checklist.

Need help with accounting and compliance? See our accounting and compliance service.