During my first year of employment in the UAE, I didn’t think much about what happens at the end of a job. But as I moved forward, I realized how important end of service benefits are for all employees, especially in the private-sector. These financial payments are not optional — they are mandatory and are clearly outlined by law.
Based on basic salary and years of service, the benefits are calculated to support workers after they leave a company. Eligibility begins after one full year of continuous work, and the process demands proper compliance from employers, ensuring fair treatment and legal adherence for all.
What I learned over time is that these benefits are more than just numbers — they’re a cornerstone of employment structure in the United Arab Emirates. They serve as a safety net that protects employees, while also being a critical obligation for businesses. Governed by the UAE Federal Labour Law and supplemented by different resolutions, these rules reflect a national commitment to fostering a secure and equitable work environment for a diverse workforce.
For companies, understanding and implementing these rules is a strategic imperative. Failing to comply may lead to significant financial penalties, operational disruptions, and reputational harm — all of which can seriously undermine efforts in recruitment and retention. In today’s highly competitive UAE job market, proper management of end-of-service rights doesn’t just meet the legal requirement — it enhances the employer’s attractiveness.
When I first moved to the UAE for a full-time job, I was surprised by how clearly the country defines the rights of employees at the end of service. All UAE nationals, foreign workers, and expatriate employees are entitled to receive benefits once their employment ends, but this is subject to conditions mentioned in Article 51 of the UAE Federal Labour Law.
This law is key to protecting workers and applies across both public and private sector roles. Whether you’re working in mainland UAE or one of the UAE free zones, as long as you complete a minimum of one year of continuous service, you’re automatically eligible for a lump sum End of Service Gratuity (EOSG) payment.
The rules do differ depending on whether you are a UAE national, a GCC national, or a foreign employee. The Federal Decree Law No.33 of 2021, which came into effect in February 2022, was designed to govern employment relations more clearly. It’s supplemented by Cabinet Resolution No.1 of 2022, which helps explain the system better for part-time, temporary, and flexible work contracts. These updates have given much-needed clarity to both employers and employees, especially those in newer work arrangements.
It’s important to understand that failure to pay these benefits can cause substantial issues for businesses. Not only can it result in operational fines, but it can also lead to reputational damage and negatively impact staff recruitment and retention.
I’ve personally seen companies in the UAE struggle with high turnover because they didn’t handle their EOSG settlements correctly or didn’t pay them within the required 14 days after the employees’ contract ended. In contrast, companies that ensure proper handling of these obligations gain more trust from their teams.
In 2023, the UAE government introduced a voluntary Savings Scheme as an alternative to the traditional EOSG system. Some employers in the private sector now contribute to these plans regularly instead of paying a lump sum at the end. Meanwhile, Emirati nationals are not entitled to EOSG and must instead be registered under a pension scheme like the General Pensions and Social Security Authority (GPSSA) in Dubai or the Abu Dhabi Pension Fund (ADPF) in Abu Dhabi.
GCC nationals also need to be registered, regardless of the Emirate they are employed in. For certain areas like the Dubai International Financial Centre (DIFC), the DIFC Employee Workplace Savings (DEWS) scheme operates separately and requires employers to contribute on behalf of their employees.
Read More: How To Calculate Gratuity uae
End of service benefits eligibility and types
In the UAE, your eligibility for end of service benefits mainly depends on the length of your service and the nature of your employment contract. From my experience working with both small and large firms, I’ve seen how carefully employers track these details to make sure every employee’s timeline matches the rules. Whether your role is fixed-term or open-ended, your time on the job will directly affect how much you receive when your service comes to an end.
These benefits are designed not just to offer financial relief but also to show recognition for an employee’s contribution. It’s about ensuring fair treatment once the employment concludes. I’ve worked with teams that felt reassured knowing that their years of effort were valued and compensated properly. That’s exactly what this system aims to protect: trust between workers and companies.
Below are the key aspects of eligibility and entitlements.
General eligibility criteria: Expatriates vs. UAE/GCC nationals
Employees in the UAE—whether UAE nationals or expatriates—become eligible for end of service benefits only after completing one year of continuous service. I remember advising a colleague who was just shy of 12 months and was surprised to learn how this rule affects payout rights. No matter the job title, this timeline is critical, and missing even a few days before hitting that one year mark can make a big difference.
For expatriates, these benefits usually come as a lump-sum gratuity payment, calculated according to service duration. On the other hand, UAE nationals and GCC nationals follow a different path. They are enrolled in mandatory pension schemes such as the General Pensions and Social Security Authority (GPSSA) or the Abu Dhabi Pension Fund (ADPF). This structured approach ensures that everyone, regardless of background, is covered appropriately depending on their employment category.
Types of contracts and termination scenarios
Types of contracts
Employees who are hired on fixed-term contracts are entitled to gratuity payments depending on the duration of their employment. I’ve worked on several such contracts myself, and each time, the entitlements were calculated at the completion of the contract, based on the total length of service. It’s a straightforward method that rewards loyalty and time spent with the employer.
Meanwhile, if you’re under unlimited contracts, the process for end of service benefits is quite similar to that of fixed-term contracts. However, from what I’ve observed, there are specific considerations that come into play, especially around the reasons and circumstances of termination. These factors can impact how your final payout is handled, and it’s something employees should clarify early with HR to avoid surprises.
Termination scenarios
When an employee submits a resignation after one year of continuous service, they become eligible for gratuity payments. I’ve seen many friends go through this process, and the key is that your time with the organization is not wasted—it’s compensated fairly. The longer you stay, the more value you build in this system.
If an employee is terminated arbitrarily or without cause, they are still entitled to receive the full range of end of service benefits. This serves as a powerful safeguard against unjust treatment, something I’ve found especially important in workplaces where job security can be unpredictable. These protections exist to uphold fairness regardless of how the job ends.
In special cases like redundancy or mutual termination agreements, there’s often room for additional compensation through negotiated exit terms. These packages are usually based on the unique circumstances of the departure and can offer extra financial security to the employee. From my experience helping others navigate these exits, this part can really ease the stress of transition.
Alternative work patterns and special cases
Many people assume that end of service benefits only apply to full-time jobs, but that’s not true. Employees working under part-time, temporary, or flexible contracts are also eligible. I once took on a temporary role in Dubai, and to my relief, I found that I still qualified for gratuity.
The only difference is that the amount is calculated on a pro-rata basis, based on working hours compared to a standard full-time schedule. It’s a fair system that ensures everyone gets compensated, even if they’re not working a traditional full-time job.
Additional entitlements
In my own HR consulting experience, I’ve seen many employees overlook the fact that, besides gratuity, they are also entitled to payments for unused annual leave, unpaid salary, and any contractual allowances stated in their agreement.
It’s crucial that employers settle these dues within 14 days of contract termination, and I always advise clients to review their final settlement carefully to ensure every item is included, especially when leaving on short notice or after a long project.
Checkout: Is Gratuity Part of CTC
Calculating EOSG – Alternative Work Pattern Expatriate Employees
In the UAE, employers need to know that employees working under an alternative pattern to the standard full-time schedule — such as part-time, temporary, flexible, remote working, or job sharing — are still eligible for EOSG. This is clearly stated in Article 30 of Cabinet Resolution No.1 of 2022.
However, to qualify, the employee must have completed over one year of service with their employer. From my experience, understanding this rule helps both workers and companies avoid confusion about benefits when work schedules aren’t traditional.
The EOSG calculation for these alternative work pattern employees is pro-rated based on the actual hours worked compared to a full-time employee working 8 hours a day for 5 days a week. This system ensures every employee will receive a fair EOSG amount that reflects their real contribution. It’s fair because the payout depends on the hours worked relative to a full-time position, so no one is shortchanged if they work less.
To calculate the EOSG, the total working hours specified in the employee’s contract per year are divided by the standard number of full-time working hours for the same period — usually 2,080 hours per year for full-time employees.
This result is then multiplied by 100 to get a percentage. That percentage is then applied to the full EOSG amount the full-time employee would be due for the same duration of service. This formula makes sure part-time workers are fairly rewarded.
For example, consider a part-time employee working 6 hours per day for 3 days a week. Using a case study for Full-Time Employees in mainland UAE, with a final monthly basic salary of AED10,000 and 7 years worked, the total EOSG settlement payment for a full-time employee is AED55,000.
The Part-Time hours per year are calculated as (6 × 3) × 52 = 936 hours, while Full-Time hours per year are (8 × 5) × 52 = 2,080 hours. The Prorated percentage is (936 ÷ 2,080) × 100 = 45%. Applying this to the full-time EOSG gives (AED55,000 ÷ 100) × 45 = AED24,750 for the part-time employee.
Calculating EOSG – Full-Time Expatriate Employees
In my experience working with HR teams in the UAE, I’ve learned that the benefit depends heavily on a full-time employee’s basic salary and their length of service. Employees who have not completed one year of continuous service are not entitled to any EOSG pay-out at the end of their employment contract.
This rule ensures that only those committed for a meaningful period receive this financial protection.
The EOSG is calculated using only the employees’ final monthly basic salary, which excludes allowances and increments, right before termination of employment. It accrues at different rates: 21 days’ salary for each of the first five years of service, and 30 days’ salary for every year thereafter.
The calculation is pro-rated if part of the year is worked, but the total EOSG payment cannot exceed the equivalent of two years’ salary.
For example, imagine an employee with a final monthly basic salary of AED10,000 who worked 7 years. For the first five years, the entitlement is 21 days per year. Using a daily salary of AED333.33, the calculation is 333.33 × 21 × 5 = AED35,000. For the remaining two years, the entitlement rises to 30 days per year, calculated as 333.33 × 30 × 2 = AED20,000. Adding both gives a total EOSG settlement payment of AED55,000.
It’s important to note that while the EOSG is based on the final monthly basic salary, this may not provide enough future security for staff with a low basic wage but a high chance to earn through commission or other sales incentives.
Thankfully, the Law allows employers the flexibility to be more generous than the statutory minimum. From my observations, companies that offer more generous EOSG benefits often have an advantage when attracting and retaining the best employees.
Calculating end of service benefits
Gratuity calculation for limited contracts
For employees working on limited contracts, the gratuity is calculated based on their basic salary and years of service following a clear formula with specific guidelines. During the first five years of service, employees earn 21 days’ basic salary for each year worked. After these initial years, the gratuity increases to 30 days’ basic salary for every additional year of service.
This structure ensures that long-serving employees are properly rewarded with higher gratuity payments, recognizing their extended contribution to the company. I have seen this approach motivate many workers to stay longer and feel valued for their dedication.
Gratuity calculation for unlimited contracts
When it comes to unlimited contracts, the calculation of gratuity works in a way similar to limited contracts but with a cap that limits the payout to a maximum of two years’ salary. During the first five years of service, employees are entitled to 21 days’ basic salary for each year worked. After that period, the gratuity rises to 30 days’ basic salary for every subsequent year.
This cap on the total payout ensures that gratuity payments stay within reasonable limits, even for long-tenured employees. From my experience, this rule helps employers manage costs while still fairly compensating loyal staff.
Basic salary as the basis for calculation
In my work with HR professionals, it’s clear that only the employee’s basic salary, as explicitly stated in the employment contract, is used to determine gratuity payments. Any additional income such as allowances, commissions, or bonuses is strictly excluded from this calculation.
Both employers and employees must always refer to the most recent salary details in the contract to ensure the accuracy of the gratuity computation. This practice helps avoid misunderstandings and keeps the process transparent and fair for all involved.
Enhanced end of service benefits
From my experience advising businesses, some employers choose to offer benefits that exceed the statutory minimum requirements. These enhanced schemes often provide more substantial gratuity payments along with additional financial incentives.
It’s important for employees to carefully review their contracts or any relevant collective agreements to fully understand if such provisions apply in their case.
Practical application
It is crucial that employers ensure the gratuity is calculated accurately and settled promptly when termination of employment occurs. At the same time, employees should take the time to familiarize themselves with the formulas and methods used to confirm they receive their full entitled benefits.
By maintaining transparency and strict adherence to labor laws, both parties can navigate this process effectively and minimize disputes, creating a fair and smooth transition at the end of service.
Process and documentation needed for claiming end of service benefits
Process and documentation for claiming end of service benefits
To ensure a seamless process when claiming end of service benefits in the UAE, employees must take certain steps and have all the required documentation prepared in advance. Having proper understanding and good organization can significantly help avoid disputes and unnecessary delays during the claim process.
Reviewing the employment contract
The first step in managing end of service benefits is to thoroughly review the employment contract, which clearly outlines the specific terms and conditions related to the benefits. This includes the method of calculation, notice periods, and any additional entitlements. It’s essential that employees familiarize themselves with these details to fully understand their rights.
Providing the required notice
Employees who plan to resign must adhere strictly to the notice period specified in their contract or as mandated by UAE labor law. Failure to provide the proper notice can result in reduced benefits or penalties, which will directly affect the final settlement of their end of service benefits. It’s a crucial step I always advise employees to follow carefully to avoid any financial loss.
Maintaining accurate records
Keeping comprehensive and accurate employment records is absolutely crucial when managing end of service benefits. This means maintaining copies of the employment contract, salary certificates, and any other relevant documents. Such records serve as important evidence to support claims for benefits and to ensure that all entitlements are calculated correctly.
From my experience, organized documentation makes the entire process smoother and helps prevent disputes.
Engaging with the employer
Open communication with the employer is essential for a smooth claims process regarding end of service benefits. Employees should openly discuss key aspects such as the calculation, the expected payment date, and any outstanding dues to ensure mutual understanding and to prevent misunderstandings. Based on my experience, clear dialogue helps both sides avoid conflicts and speeds up the settlement process.
Seeking legal advice if necessary
In cases where disputes arise or there are concerns about the calculation or payment of benefits, seeking legal advice is often a prudent step. Consulting a labor lawyer or contacting the relevant UAE labor authorities can provide valuable guidance and help resolve issues efficiently. From what I’ve seen, this approach ensures fair treatment and smooth conflict resolution.
FAQs regarding end-of-service benefits in the UAE
What are end-of-service benefits in the UAE?
End of service benefits, commonly referred to as gratuities, are financial payments owed to employees when they leave their jobs, provided they meet the specific eligibility requirements outlined by UAE labor law.
These benefits are designed to fairly compensate employees for their tenure with the organization and are calculated based on the employee’s basic salary and years of service. In my experience, understanding these fundamentals helps employees better navigate their rights.
Who is eligible for end-of-service benefits?
Employees working in the UAE’s private sector are eligible for end-of-service benefits under Federal Decree Law No. 33 of 2021, provided they have completed at least one year of continuous service with their employer.
However, employees in other sectors or those who do not meet the tenure requirement may unfortunately not qualify. From what I’ve observed, understanding these eligibility rules is essential for both employers and employees to avoid confusion.
How is the duration of service calculated for gratuity entitlement?
The duration of service for end of service benefits is calculated based on the total number of days worked with the employer. However, extended periods of unpaid leave, such as sabbaticals, are not included in this calculation. In practice, this means only active working days contribute towards your eligibility and final benefits.
How are gratuity payments calculated in the UAE?
Gratuity payments are determined by the employee’s basic salary and years of service. For those with 1 to 5 years of service, employees are entitled to 21 days of basic salary for each completed year. For employees with more than 5 years of service, the entitlement increases to 30 days of basic salary for every completed year after the fifth year. From my experience, understanding this structure is key to calculating your rightful gratuity.
Can you provide an example of gratuity calculation in the UAE?
Suppose an employee’s basic monthly salary is AED 10,000 (approximately US$2,722.58). For each year up to 5 years, the daily wage is AED 333.33 (about US$90.75), calculated by dividing the monthly salary by 30. The gratuity for 21 days of service would then be AED 7,000 (or US$1,905.81), which is 21 times AED 333.33. For years beyond 5, the daily wage remains the same, but the gratuity increases to 30 days’ salary, equaling AED 10,000 per year. It’s important to note that the total gratuity amount cannot exceed two years’ worth of the employee’s salary. This clear example helps make the calculation transparent and easier to understand.
Are all employees in the UAE entitled to end-of-service benefits?
The end-of-service benefits under UAE labor law specifically apply to private-sector employees. However, employers may include additional provisions for other sectors or expatriate workers, which should be confirmed with the relevant organization. From my experience, clarifying these details early helps avoid surprises regarding eligibility.
What should employees do to confirm their gratuity entitlements?
Employees should review their employment contracts carefully and consult with their employer to gain clarity on specific calculations and entitlements within their organization. If any disputes or uncertainties arise, it is wise to seek legal advice or contact labor authorities for proper guidance. From what I’ve seen, this approach helps resolve issues quickly and ensures everyone understands their rights.
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