Calculate UAE End of Service Benefit (EOSB) under UAE Labour Law — Federal Decree-Law No. 33 of 2021.
Basic salary only — do not include housing, transport or other allowances.
Estimate only. Based on UAE Federal Decree-Law No. 33 of 2021. For DIFC/ADGM employees, different rules apply. Confirm with your HR team or a UAE labour consultant.
UAE End of Service Benefit (EOSB) — commonly called gratuity — is governed by Federal Decree-Law No. 33 of 2021. The formula is based on the employee's last drawn basic salary and their length of continuous service:
Gratuity is calculated on basic salary only. The following are excluded:
If a contract has a single consolidated salary with no breakdown, the FTA and MOHRE typically treat the full amount as basic for gratuity purposes — consult your labour advisor.
UAE Labour Law caps EOSB at 2 years' basic salary regardless of length of service. This cap typically affects employees with over 15+ years of service whose calculated entitlement (using the 21/30 day formula) would exceed 24 months of basic salary.
Under the current UAE Labour Law (Federal Decree-Law No. 33 of 2021), employees who resign are entitled to the same EOSB as employees who are terminated, provided they have completed at least 1 year of continuous service. The previous rules that reduced gratuity for resignation (1/3 for 1–3 years, 2/3 for 3–5 years) were removed in the 2022 reform.
Employees who are dismissed for gross misconduct under Article 44 forfeit their gratuity entitlement.
EOSB accrued monthly for every employee — balance sheet provision posted automatically.
Calculate precise end-of-service benefits for departing employees. UAE Labour Law mandates specific gratuity amounts based on length of service, contract type, and reason for termination — and the calculation is more nuanced than many employers realise.
No gratuity is payable if the employee completes less than one full year of continuous service, regardless of contract type or reason for leaving.
For each completed year in years 1 to 5, the employee is entitled to 21 calendar days of basic salary. Partial years are calculated pro-rata.
For each completed year of service after the fifth year, the entitlement increases to 30 calendar days of basic salary per year of service.
EOSB is calculated on basic salary only — housing allowance, transport, food allowance, and other benefits are excluded from the gratuity calculation base.
UAE gratuity (EOSB) is calculated on basic salary only. The daily rate is monthly basic salary ÷ 30. First 5 years: 21 days per year. Beyond 5 years: 30 days per year for each additional year. Maximum: 2 years' basic salary. Example: AED 10,000/month × 3 years = 3 × 21 × (10,000÷30) = AED 21,000.
Gratuity is based on basic salary only — not total salary. Housing allowance, transport allowance, commissions, and other non-basic components are excluded from the EOSB calculation.
Employees must complete at least 1 year of continuous service to be entitled to EOSB gratuity. Employees who leave before completing 1 year are not entitled to gratuity.
Yes. UAE gratuity is capped at 2 years' total basic salary under UAE Labour Law. Even if the calculated entitlement (21 days × 5 years + 30 days × remaining years) exceeds 24 months of basic salary, the maximum payable is 2 years' basic salary.
Yes, under the current UAE Labour Law (Federal Decree-Law No. 33 of 2021), employees who resign are entitled to the same EOSB as employees who are terminated, provided they have completed at least 1 year of continuous service. The previous reductions for resignation (1/3 for 1–3 years, 2/3 for 3–5 years) no longer apply.
EOSB gratuity must be paid on the last day of employment or within a reasonable time thereafter, typically at the same time as the final salary payment. Delay can result in MOHRE complaints and labour disputes.
Most UAE free zones follow the same UAE Labour Law gratuity rules. DIFC and ADGM have their own employment frameworks — DIFC has a mandatory savings scheme replacing traditional gratuity for newer employees. Always confirm the applicable employment law for your specific free zone.
Under IFRS, UAE employers recognise an EOSB liability on the balance sheet — accruing the estimated gratuity entitlement monthly as an expense. This requires calculating the current EOSB entitlement for all employees at each balance sheet date. ETaxFlow's HR module calculates this provision automatically and posts the journal entry each month.
Yes. EOSB gratuity paid to employees is a business expense deductible for UAE corporate tax purposes. The accrual recognised in your financial statements under IFRS is generally deductible when the liability crystallises (i.e., when the employee leaves and gratuity is paid).
There is currently no personal income tax in the UAE, so gratuity received by employees is not taxed in the hands of the employee.
Quick answers about UAE end-of-service benefit calculations.
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