End of Service Gratuity in UAE

- Faraz Ahmed

All full-time employees in the UAE, UAE nationals or expatriates, are entitled to end of service benefits under Article 51 of the UAE Federal Labour Law, subject to conditions. This financial benefit is paid upon termination, whether by resignation or contract end. Failure to pay can lead to fines, operational issues, and reputational damage affecting recruitment and retention.

The rules, outlined in Federal Decree Law No.33 of 2021 (effective February 2022), differ for UAE/GCC nationals and expatriates, with further details in Cabinet Resolution No.1 of 2022 for part-time, temporary, or flexible contracts. Expatriate employees with at least one year of continuous service in mainland UAE or certain free zones are entitled to a lump-sum end of service gratuity (EOSG), payable within 14 days of contract end. This can pose financial challenges for businesses if multiple employees leave simultaneously.

Emirati nationals are not eligible for EOSG but must be registered with the General Pensions and Social Security Authority (GPSSA) in Dubai or the Abu Dhabi Pension Fund (ADPF) in Abu Dhabi. GCC nationals working in the UAE must also be registered with GPSSA, regardless of the Emirate. The Dubai International Financial Centre (DIFC) has its own Employee Workplace Savings (DEWS) scheme, requiring employer contributions to a savings plan.

End of Service Gratuity Calculator in the UAE

The UAE end of service gratuity (EOSG) for expatriate employees depends on their working pattern, years of service, and basic salary, excluding allowances, bonuses, or commissions. Here’s a concise guide to calculating EOSG for full-time and alternative work arrangement employees.

1. Full-Time Expatriate Employees
Full-time employees qualify for EOSG after at least one year of service, based on their final monthly basic salary. The gratuity accrues as:

  • 21 days’ salary per year for the first 5 years.
  • 30 days’ salary per year thereafter.

Payments are pro-rated for partial years, with a cap at two years’ salary.

2. Alternative Work Arrangements
Employees on part-time, temporary, flexible, remote, or job-sharing contracts also qualify for EOSG after one year of service, per Article 30 of Cabinet Resolution No.1 of 2022. The gratuity is pro-rated based on hours worked compared to a full-time schedule (8 hours/day, 5 days/week, or 2,080 hours/year).

To calculate:

  • Divide the employee’s annual contract hours by 2,080.
  • Multiply by 100 to get a percentage.
  • Apply this percentage to the EOSG a full-time employee would receive for the same service period.

This ensures fair gratuity payments relative to hours worked.

The UAE has introduced a Voluntary End of Service Benefits Savings Scheme in 2023, offering a flexible alternative to the traditional lump-sum system for private sector employers and employees, including those in free zones. This scheme allows employers to invest monthly end-of-service contributions into a licensed fund, calculated at 5.83% of basic salary for less than 5 years of service and 8.33% for 5+ years. Once an employer opts in for specific employees, participation becomes mandatory for those chosen, replacing the old system. Employees can also make additional voluntary contributions (up to 25% of total salary), which they can partially or fully withdraw at any time, even after employment ends, retaining funds in their chosen investment fund. This initiative aims to enhance financial security for the expatriate workforce and attract global talent.

Sovereign PPG’s Employee Savings Scheme

Alarmingly, 41% of UAE expatriates aren't saving for retirement, and 28% aren't saving at all. Sovereign PPG's Employee Savings Scheme (ESS) tackles this head-on, offering expats a secure and flexible way to build their financial future in the UAE.

Unlike typical salary deductions, our ESS allows contributions after salary transfer, offering flexibility without strict minimums. Your savings are managed by leading global fund managers like Vanguard, BlackRock, and Fidelity, with diverse investment options including target-date, multi-asset, and equity funds tailored to your financial goals and risk profile.

What's more, you can access your savings for major life events like marriage or home purchases, or let them grow until repatriation. The scheme is fully portable, so your savings continue to grow even if you change jobs within the GCC or move to another country.
Effectively managing End of Service Gratuity (EOSG) obligations is crucial for UAE businesses, given the potentially significant payouts. Proactive measures are key: consider establishing a dedicated EOSG reserve fund to prevent cash flow issues and implement regular audit processes to accurately track liabilities and adapt to workforce changes. By partnering with specialists like Sovereign PPG, businesses can confidently navigate these complexities, ensuring compliance and safeguarding against future risks. Be proactive, not reactive, to manage your EOSG confidently.

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Faraz Ahmed

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Faraz Ahmed

HR Consultant

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