A 5,500-word reference covering the gratuity regimes of UAE, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain — with actual labour law citations, formula derivations, worked examples for different service durations, and the new UAE savings scheme.
End-of-service benefits (EOSB) — also called gratuity, indemnity, or severance pay — are a defining feature of employment in the Gulf Cooperation Council (GCC) countries. Unlike Western pension systems, which are funded through ongoing contributions during employment, the GCC EOSB system is a defined-benefit obligation that accrues to the employee throughout their service and is paid as a lump sum on termination. The total accrued EOSB liabilities across the GCC are estimated at over USD 100 billion, making this one of the largest unfunded employer obligations in the region. This guide provides a complete comparative analysis of the EOSB regimes in all six GCC countries, with specific labour law citations, formula derivations, and worked examples.
Despite national variations, all six GCC countries share a common EOSB framework derived from the original Kuwaiti Labour Law of 1960 and subsequent GCC labour law harmonisation. The common framework has the following features:
The common framework has been modified by national legislation, with the most significant recent change being the UAE's introduction of an alternative savings scheme in 2023. Each country's specific rules are detailed below.
UAE EOSB is governed by Federal Decree-Law No. 33 of 2021 (the new Labour Law), which took effect on 2 February 2022, and its implementing regulations (Cabinet Resolution No. 1 of 2022). The new law replaced Federal Law No. 8 of 1980 and made several significant changes to the EOSB regime.
Article 51 of Federal Decree-Law No. 33 of 2021 provides the EOSB calculation for employees on contracts of unlimited duration (which is now the default under the new law):
The daily wage is calculated as monthly basic wage divided by 30 (working days in a month under the law).
Under the previous 1980 law, EOSB was reduced for resignation under unlimited contracts: 1/3 of the accrued EOSB if resigned before 3 years, 2/3 if resigned before 5 years, and full EOSB only if resigned after 5 years or if terminated by the employer. The 2022 law removed these reductions — full EOSB is payable regardless of the reason for leaving, whether resignation, termination, or end of contract.
In May 2023, the UAE launched an optional alternative to the traditional EOSB system — the End-of-Service Savings Scheme (also called "EOSD" or the "savings scheme"). The scheme is governed by Cabinet Resolution No. 96 of 2023 and is operated through the General Pension and Social Security Authority (GPSSA) in partnership with licensed investment funds.
Under the savings scheme:
The savings scheme is voluntary for employers — employees cannot demand it. The decision of whether to adopt the scheme is made by the employer based on the trade-off between the unfunded liability (traditional EOSB) and the funded contribution (savings scheme).
For employers, the savings scheme offers:
The downside is that the scheme is more expensive in the short term — monthly cash contributions are higher than the notional accrual of the unfunded liability.
For employees, the savings scheme offers:
The downside is investment risk — the savings scheme balance can decline if the underlying investments perform poorly. The traditional EOSB is a defined benefit (the employer is obligated to pay the calculated amount regardless of investment performance).
For most employees, the savings scheme is a better deal if they have more than 5 years of service remaining — the investment growth compounds significantly over long periods. For shorter-tenure employees, the traditional EOSB may be preferable because the investment growth has less time to accumulate.
Saudi EOSB is governed by the Saudi Labour Law (Royal Decree No. M/51 of 2005, as amended). The law was significantly amended in 2021 by Royal Decree No. M/144, which made several changes to the EOSB regime.
Under Article 84 of the Saudi Labour Law:
"Wage" for EOSB purposes is the last basic wage plus regular allowances that are paid on a regular basis (housing allowance, transport allowance, etc.). This is broader than the UAE definition, which uses only the basic salary.
Under the 2021 amendments, the resignation reduction for the first 5 years was removed — full EOSB is payable for the first 5 years regardless of the reason for leaving. For service beyond 5 years, full EOSB is also payable regardless of the reason for leaving. The previous reductions (2/3 of EOSB for resignation between 2 and 5 years, 1/3 for resignation before 2 years) have been abolished.
Qatar EOSB is governed by Law No. 14 of 2004 (the Qatar Labour Law), as significantly amended by Law No. 18 of 2020. The 2020 amendments aligned Qatari EOSB more closely with other GCC countries and removed several restrictions on worker mobility.
Under Article 51 of Law No. 14 of 2004 (as amended):
"Wage" includes basic salary plus regular allowances, similar to Saudi Arabia.
Kuwait EOSB (called "indemnity") is governed by Law No. 6 of 2010 (the Kuwait Labour Law), Private Sector.
Under Article 51 of Law No. 6 of 2010:
"Wage" includes basic salary plus regular allowances.
Under the Kuwait law, indemnity is reduced for resignation:
Full indemnity is payable if the employment is terminated by the employer (without cause) or if the employee leaves due to employer breach.
Oman EOSB is governed by the Oman Labour Law (Royal Decree No. 53 of 2003, as amended). The law was significantly amended in 2023 by Royal Decree No. 9 of 2023, which introduced a new social security system.
Under Article 43 of the Oman Labour Law:
Under the Oman law, gratuity is reduced for resignation:
Bahrain EOSB (called "indemnity") is governed by the Bahrain Labour Law for the Private Sector (Legislative Decree No. 36 of 2012, as amended).
Under Article 116 of the Bahrain Labour Law:
Under the Bahrain law, indemnity is reduced for resignation:
Full indemnity is payable if the employment is terminated by the employer.
Comparing the accrual rates for service beyond the initial period (the relevant rate for most long-serving expats):
The accrual rates are harmonised across the GCC. The differences are in the initial period and the resignation treatment.
Qatar and UAE have higher initial accrual rates (21 days) than the other GCC countries (15 days). The initial period is 3 years in Qatar, Oman, and Bahrain, and 5 years in UAE, Saudi Arabia, and Kuwait.
The UAE, Saudi Arabia, and Qatar have removed resignation reductions in recent reforms. Kuwait, Oman, and Bahrain retain them, with Kuwait being the most restrictive (no indemnity before 3 years).
The UAE has the narrowest wage definition — only basic salary counts. This is significant because many UAE employment contracts have low basic salary and high allowances, which reduces EOSB liability. The other GCC countries use a broader definition that includes regular allowances.
Saudi Arabia has the most generous cap (5 years' wages), which means EOSB continues to accrue for very long-serving employees. The UAE cap (2 years' wage) is the most restrictive.
For long-serving expats, EOSB can be a significant financial asset. The following table shows the EOSB for 10, 15, 20, and 25 years of service at a basic monthly salary of USD 5,000 (AED 18,365 equivalent), assuming full EOSB payable (no resignation reduction):
For an expat who has spent 25 years in the Gulf, EOSB can equal 2–3 years of living expenses — a meaningful retirement supplement. The EOSB should be planned for explicitly in long-term financial planning, not treated as a windfall at the end of service.
The most common EOSB dispute is over the wage definition — specifically, whether allowances should be included. In the UAE, the law is clear that only basic salary counts, but employees often argue that the basic salary was artificially low to reduce EOSB. The legal position is that the contractually agreed basic salary governs, regardless of whether it is "artificially" low.
The mitigation: review the employment contract before signing and ensure the basic salary is reasonable as a percentage of total compensation. A basic salary that is 50% of total compensation is reasonable; 30% or less is a red flag.
The second common dispute is over the calculation method — specifically, the daily wage calculation. Some employers calculate daily wage as monthly wage divided by 26 (working days), while the law typically specifies division by 30 (calendar days). The difference is significant — dividing by 26 instead of 30 reduces the EOSB by approximately 13%.
The mitigation: verify the calculation method against the specific labour law of the country. Most GCC labour laws specify division by 30 (or by 21 in some older interpretations). If the employer's calculation differs, request the legal basis in writing.
EOSB is calculated based on the last basic salary, not the average salary during service. This can be unfair to employees whose salary has been reduced (e.g., during COVID-19). The legal position is generally that the last basic salary governs, but some disputes have been litigated successfully based on the principle that the salary reduction was involuntary and temporary.
EOSB may be forfeited if the employee is terminated for cause (gross misconduct, fraud, etc.) under the labour law. The threshold for "cause" is high and the employer bears the burden of proof. Disputes often arise when the employer attempts to characterise a routine performance issue as "cause" to avoid paying EOSB.
EOSB disputes are typically resolved through the labour dispute resolution mechanism of the relevant country:
The conciliation process is typically free, fast (2–4 weeks), and resolves the majority of disputes without going to court. The conciliation officers are generally knowledgeable about EOSB calculations and can identify employer errors quickly.
GCC end-of-service benefits are a significant financial asset for long-serving expats, with the potential to equal 2–3 years of living expenses for employees with 25+ years of service. The regimes are broadly harmonised across the six GCC countries but differ in important details: the UAE, Saudi Arabia, and Qatar have removed resignation reductions, while Kuwait, Oman, and Bahrain retain them. The UAE has the narrowest wage definition (basic salary only), while the other GCC countries include regular allowances. The caps vary, with Saudi Arabia being the most generous (5 years' wages) and the UAE the most restrictive (2 years' wages).
The new UAE End-of-Service Savings Scheme offers an alternative that may be preferable for employees with 5+ years of service remaining, due to the investment growth and portability. The scheme is voluntary for employers — employees cannot demand it — but it is likely to spread as more employers adopt it.
For expats, the key actions are: track your accrued EOSB annually using the formulas above, understand the wage definition in your contract, and document the calculation in writing when you leave. Use our End-of-Service Gratuity Calculator for an instant estimate based on your specific situation. EOSB is a defined-benefit obligation that the employer must pay — it is your money, accrued through your service, and you should treat it as a meaningful part of your long-term financial planning.
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