When working in the United Arab Emirates (UAE), it’s essential to understand your rights as an employee especially when it comes to End of Service Benefits (EOSB). This mandatory payout, also known as a gratuity, acts as a financial reward for an employee’s service and is governed by the UAE Labour Law. Whether you’re working in Dubai, Abu Dhabi, or any other emirate, understanding how EOSB is calculated, who qualifies, and what your rights are is crucial.
In this detailed guide, we’ll break down everything you need to know about End of Service Benefits in the UAE, including eligibility, calculation methods, legal updates, and frequently asked questions.
What are End of Service Benefits in the UAE?
End of Service Benefits (EOSB) are financial payments made by employers to employees upon the termination of their employment contract. This could happen due to resignation, dismissal, or end of a fixed-term contract. EOSB is designed to provide financial security to employees who have completed a certain tenure with their employer.
EOSB applies primarily to expatriate workers in the UAE, as UAE nationals and citizens of GCC countries are usually covered by pension schemes like the General Pension and Social Security Authority (GPSSA) or Abu Dhabi Pension Fund (ADPF).
Who is Eligible for End of Service Benefits?
Under the UAE Labour Law (Federal Decree-Law No. 33 of 2021), EOSB eligibility depends on a few key factors.
Minimum Employment Period
The employee must complete at least one year of continuous service with the same employer to be eligible for EOSB.
Employment Type
Both full-time and part-time employees are eligible, although part-time EOSB is calculated proportionally based on actual working hours.
Exclusions
UAE nationals and GCC citizens are excluded from EOSB as they are covered under their respective pension schemes.
How is End of Service Benefits Calculated?
The method of EOSB calculation in UAE is straightforward but varies based on the number of years you’ve worked with your employer.
For the First Five Years
You earn 21 days of basic salary for each year of service.
Beyond Five Years
You are entitled to 30 days of basic salary for each additional year of service beyond the initial five.
Important Cap
The total EOSB cannot exceed two years’ worth of the employee’s total salary.
Basic Salary Matters
EOSB is calculated based only on your basic salary. It does not include allowances such as housing, transport, or bonuses.
Example: EOSB Calculation in Practice
Let’s say you worked for 6 years, and your basic salary is AED 10,000.
- For the first 5 years:
21 days x 5 = 105 days of salary
105 divided by 30 = 3.5 months of basic salary = AED 35,000 - For the 6th year:
30 days = 1 month of basic salary = AED 10,000
Total EOSB = AED 45,000
Tools to Calculate EOSB in UAE
There are multiple online EOSB calculators available that simplify the process:
These tools help estimate your EOSB based on:
- Date of joining and leaving
- Basic salary
- Type of contract (limited or unlimited)
EOSB for Limited vs Unlimited Contracts
Although the new labor law in 2022 phased out unlimited contracts, understanding their legacy impact is still relevant.
- Under the limited contract, EOSB is straightforward and contractual.
- Under the old unlimited contract, resignation before completing 5 years could lead to a reduced gratuity, depending on the notice period served and the reason for leaving.
Today, all contracts are limited by law, ensuring uniformity in EOSB calculations across sectors.
What Happens if You Resign?
If you resign after one year of continuous employment, you are eligible for EOSB. However, depending on your contract and the terms under which you resign, such as providing proper notice, the payout may be partially reduced.
Also, the law no longer penalizes employees for resigning before completing five years of service, making the process more employee-friendly.
Important Considerations for Employees
Final Settlement
Always request a detailed EOSB breakdown as part of your final settlement from the HR department.
Double-check the Calculation
Ensure the EOSB does not include:
- Housing allowance
- Transportation benefits
- Commissions or performance bonuses
Dispute Resolution
If you suspect any discrepancy in your EOSB:
- Speak to your employer first.
- If unresolved, complain with the Ministry of Human Resources and Emiratisation (MOHRE) via the app or their customer service hotline.
EOSB Taxation and Repatriation
EOSB is not taxable in the UAE. However, if you’re planning to transfer the gratuity back to your home country, be aware of any foreign income tax laws in your country of residence.
Final Thoughts: Why EOSB Knowledge is Crucial
Understanding what End of end-of-service benefits are in the UAE is essential for any professional working in the Emirates. It not only ensures that you’re financially prepared when your employment ends, but it also empowers you to protect your employee rights.
Whether you’re a fresh hire or a long-term employee, knowing how your gratuity is calculated can save you from confusion and disputes later. Always stay updated with the latest UAE Labour Law amendments, and don’t hesitate to seek legal help or guidance from MOHRE if you need support.
FAQs About End-of-Service Benefits in UAE
Do part-time employees receive EOSB?
Yes, part-time workers are entitled to EOSB on a pro-rata basis.
Can my employer withhold my EOSB?
No. EOSB is a legal right and must be paid upon contract termination.
Are bonuses and allowances included in the EOSB calculation?
No. Only the basic salary is considered for gratuity calculations.
How long does it take to receive EOSB?
Typically, EOSB is paid along with your final settlement, usually within 14 days of termination.
