EOSB is the GCC equivalent of a pension — but the calculation, caps and reduction rules trip up most employees. Here is the full breakdown with worked examples.
End-of-service gratuity — often abbreviated EOSB, EOSG or simply "gratuity" — is the Gulf equivalent of a pension. It is a lump sum paid to employees when their employment ends, calculated based on length of service and the last basic salary. The system is unique to the GCC and is one of the most important things for any expat employee in the region to understand. Get it wrong, and you can forfeit tens of thousands of dirhams.
The End-of-Service Gratuity Calculator handles UAE, Saudi Arabia, Qatar, Oman, Bahrain and Kuwait. Enter your basic salary and years of service for an instant estimate.
Under UAE Federal Decree-Law No. 33 of 2021 (the new labour law that took effect in February 2022), the gratuity calculation for employees on unlimited contracts is straightforward. For the first five years of service, the employee is entitled to 21 days of basic salary for each year. For each subsequent year beyond five, the entitlement increases to 30 days of basic salary. The total is capped at two years' gross salary.
"Basic salary" is the key term — and the source of most disputes. Under the new law, gratuity is calculated on the basic salary stated in the employment contract, not on total compensation. Allowances for housing, transport, education and similar are excluded. Some employers structure contracts with a low basic salary and large allowances to minimise gratuity liability; this is legal but worth understanding before signing.
The daily wage is calculated by dividing the monthly basic salary by 30. So an employee with a basic salary of AED 8,000 has a daily wage of AED 266.67, and the first-five-year accrual is AED 5,600 per year.
Consider an employee with a basic salary of AED 8,000 who resigns after 6 years of service. The calculation:
Because this is below the 24-month cap (AED 192,000), the full amount is payable. Note that under the 2022 law, the previous "one-third" and "two-thirds" reductions for resignation under unlimited contracts before certain service milestones have been removed — full gratuity is payable regardless of resignation reason.
The same employee after 12 years:
Still well below the cap. The cap of two years' salary (AED 192,000) becomes relevant only at very long service or very high salaries.
Gratuity is payable when employment ends, regardless of the reason. This includes resignation, end of contract, employer termination, and mutual agreement. The calculation is the same in each case under the 2022 law — the previous reductions for early resignation under unlimited contracts no longer apply.
The main exception is dismissal "for cause" under Article 44 of the labour law — gross misconduct, fraud, unauthorised absence exceeding 30 days, and similar. In these cases, gratuity may be forfeited entirely. The threshold is high and the employer bears the burden of proof.
Before signing an employment contract, look at the basic salary as a percentage of total compensation. If basic is 40% of total, your gratuity will be 60% lower than if basic were 100%. Some employers will negotiate a higher basic in exchange for a lower total — this is often worth doing for employees who plan to stay 5+ years.
Periods of unpaid leave are excluded from the gratuity calculation. If you took a 3-month sabbatical, your service length for gratuity purposes is reduced by 3 months. Track this carefully.
The 24-month cap applies to the total gratuity, not to the annual accrual. Long-serving employees on high salaries can hit the cap surprisingly late in their career.
Always insist on a written final settlement that itemises gratuity, unused leave, and any deductions. Sign only when the numbers match your own calculation. Verbal assurances are not enforceable.
Gratuity must be paid along with the final settlement when the employment relationship ends. In practice, some employers delay payment until after visa cancellation. This is technically incorrect but common. If your employer delays beyond 14 days after visa cancellation, you have grounds to file a complaint with the Ministry of Human Resources and Emiratisation.
From late 2023, the UAE introduced an optional alternative to traditional gratuity: a savings-and-investment scheme (deemed "EOSD" — End of Service Deposit) under which employers make monthly contributions to an investment fund in the employee's name. The scheme is opt-in for employers; employees cannot demand it. The advantage for employees is investment growth and portability (the fund follows the employee if they change jobs within the UAE). The advantage for employers is cash-flow smoothing.
If your employer offers the scheme, the decision is non-trivial. Traditional gratuity is a defined benefit (you know exactly what you will get). The savings scheme is a defined contribution (returns depend on investment performance). Conservative employees may prefer the certainty of traditional gratuity; younger employees with longer time horizons may benefit from investment growth.
UAE gratuity is paid tax-free in the UAE — there is no income tax. However, if you are a citizen of a country that taxes worldwide income (the United States, Eritrea, and — depending on circumstances — some others), your gratuity may be taxable in your home country. The US Foreign Earned Income Exclusion may apply if you meet the bona fide residence or physical presence test. Consult a cross-border tax specialist before assuming the payment is tax-free everywhere.
If your employer's calculation differs from yours, request a written breakdown. Compare the daily wage, the year-by-year accrual, and any deductions they have applied. If the dispute persists, file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE) through the app, website, or call centre. The MOHRE conciliation service is free, fast (typically 2–4 weeks), and resolves the majority of disputes without going to court. Only if conciliation fails does the case proceed to the Labour Court.
End-of-service gratuity is one of the most valuable benefits of working in the UAE — for a long-serving mid-career employee, it can equal a year's salary or more. But the calculation is technical, the contract structure matters enormously, and disputes are common. Use the calculator to track your accrued gratuity annually, understand the basic salary structure of any contract before you sign it, and never resign without first requesting a written gratuity estimate from HR.
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