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UAE End of Service Gratuity (EOSB)
End of Service Gratuity (EOSB) is a lump-sum payment an employer in the UAE must make to an employee upon the termination of their employment contract, provided the employee has completed at least one year of continuous service. It is a key right under the UAE Labour Law (Federal Decree-Law No. 33 of 2021).
How is Gratuity Calculated?
The calculation is based on the employee's last basic monthly salary and their total length of service. Allowances (housing, transport, etc.) are not included.
Step 1: Determine the daily wage. Divide the basic monthly salary by 30.
Step 2: Calculate the total service period. Count the full years and any remaining days from the contract start date to the last working day. Any unpaid leave days are deducted from this period.
Step 3: Calculate the gratuity entitlement in days.
- For the first 5 years of service: 21 days' basic wage for each full year.
- For each full year of service after the first 5 years: 30 days' basic wage.
- For any partial year (remaining days): The entitlement is calculated pro-rata based on the rate applicable to that period (21 or 30 days per year).
Step 5: Apply the legal cap. The total gratuity amount cannot exceed the equivalent of two years' total basic wage.
Example Calculation
Ahmed worked for 6 years and 4 months. His last basic salary was AED 12,000 per month. He did not take any unpaid leave.
- Daily Wage: 12,000 / 30 = AED 400
- Service: 6 full years + 4 months (approx. 120 days)
- Gratuity Days:
- First 5 years: 5 * 21 = 105 days
- 6th year (full year after 5): 1 * 30 = 30 days
- Partial 4 months (120 days): (120 / 365) * 30 ≈ 9.86 days
- Total Days: 105 + 30 + 9.86 = 144.86 days
- Amount Before Cap: 144.86 * 400 = AED 57,944
- Two-Year Cap: 12,000 * 24 = AED 288,000 (cap not reached)
- Final Gratuity Payable: AED 57,944
Frequent Cases
Resignation vs. Termination: Under the current law, gratuity is payable for both resignation and termination by the employer. The old rule that reduced gratuity for resignations before 5 years no longer applies, except if the employee is dismissed for gross misconduct.
Less than One Year: No gratuity is payable if service is less than one full year.
Unpaid Leave: Days of unpaid leave extend your employment end date backwards for the calculation, effectively reducing your total service period.
After Calculating Your Gratuity
Once you know your entitlement, you should formalize the settlement with your employer. The primary document for this is an End of Service Gratuity Settlement Letter, which details the agreed amount and confirms payment. Our template can help you draft this letter accurately.