End-of-service gratuity (EOSB) is one of the few payroll calculations in the UAE with an exact legal formula behind it — Article 51 of Federal Decree-Law No. 33 of 2021 — which means it’s also one where a wrong number is easy to notice and hard to explain away. For a manpower supplier settling dozens of leavers a month, getting the formula right consistently matters more than getting it right once.
Who’s entitled to it
Any private-sector employee who has completed at least one full year of continuous service with the same employer is entitled to gratuity, whether their contract is limited or unlimited, full-time or part-time (calculated proportionally for part-time).
The formula
Gratuity is calculated on the employee’s last basic salary, not gross:
- 21 days’ basic salary for each of the first five years of service.
- 30 days’ basic salary for each year beyond five.
- Capped at two years’ total basic salary, however long the service.
Allowances, commissions and overtime are excluded from the base figure entirely. Only the basic salary component counts, which is exactly the field that has to be tracked separately and accurately for every employee, not bundled into one all-in monthly figure.
When it’s due
The full amount is payable within 14 days of the employee’s last working day. A short window that leaves little room for a calculation to be worked out from scratch after someone has already left.
The alternative scheme
Since Cabinet Resolution No. 96 of 2023, employers can opt into a Voluntary Alternative End-of-Service Benefits Scheme instead — monthly contributions into a regulated investment fund rather than a lump sum calculated at exit. Either way, the same underlying question has to be answered correctly: what was this person’s basic salary, and how long did they actually serve.
Why this is a system problem, not a one-off calculation
The formula itself isn’t complicated. What’s hard is applying it correctly, every time, across a workforce where basic salary, join date and service breaks are scattered across old contracts and spreadsheets. Payroll that already separates basic salary from allowances for every employee, and tracks join date and any service gaps on the same record, turns EOSB from a manual recalculation into a number the system already has.
Want a number now? Use the free UAE gratuity calculator. Gratuity accrues every month, so it belongs inside payroll rather than in a spreadsheet at exit: see how WPS payroll software applies it automatically, and read about UAE overtime rules for the other big pay variable.
More on the surrounding rules: UAE gratuity rules and eligibility, and what a final settlement includes.