End-of-service gratuity is a lump-sum payment that GCC labor laws require employers to make when an employee leaves. It is calculated from the employee's final wage and years of service. Every Gulf country mandates it in some form, and the formulas differ enough that miscalculating it is one of the region's most common payroll disputes.
Each country sets a number of days’ or weeks’ pay per year of service, usually with a higher rate after year five. Two details decide most disputes. First, the wage base: the UAE and Qatar calculate on basic salary only, while Saudi Arabia uses the last wage, which can pull in regular allowances. Second, how the employment ends: in some countries resignation cuts the entitlement, in others it does not.
| Country | Rate | Key detail |
|---|---|---|
| Saudi Arabia | Half a month’s wage per year for years 1 to 5, a full month per year after | Resignation reduces it: nothing under 2 years, one third from 2 to 5, two thirds from 5 to 10, full after 10 |
| UAE | 21 days’ basic pay per year for years 1 to 5, 30 days per year after | Capped at two years’ total pay; paid in full on resignation under the current labor law |
| Qatar | Minimum three weeks’ basic pay per year | Based on the final basic wage; one year minimum service |
| Kuwait | 15 days’ pay per year for years 1 to 5, one month per year after | Capped at 18 months’ total pay |
| Bahrain | Monthly contributions to the Social Insurance Organisation since March 2024 | Employers pay as they go for expats instead of a final lump sum |
| Oman | Moving from lump-sum gratuity to employer contributions under the Social Protection Law | Transition rules have rolled out in stages; check the current position before calculating |
Rates above are the statutory minimums. A contract can promise more, never less.
Late payment is a violation on its own. Saudi Arabia’s Labor Law gives an employer one week from the end of contract if it ended the employment, and two weeks if the employee resigned. The UAE requires settlement within 14 days. The delay is penalized separately from any argument about the amount, so gratuity is one of the fastest-moving liabilities on a Gulf payroll.
Because it accrues silently every month an employee stays, a mispriced or unfunded gratuity liability is how growing companies get surprised at year-end. Building the accrual into monthly payroll, rather than treating it as a one-off exit cost, is the difference between a predictable line item and a shock.
Masdar accrues and settles gratuity for every employee on its GCC payrolls. If month-end in the Gulf is your problem to own, see the payroll outsourcing service.
A UAE employee earns AED 10,000 basic and leaves after seven years. Years one to five: 21 days at AED 333 per day is AED 7,000 per year, so AED 35,000. Years six and seven: 30 days per year, AED 10,000 each, so AED 20,000. Total gratuity: AED 55,000. Allowances for housing or transport play no part, because the UAE base is basic salary only.
In the UAE, yes, in full. In Saudi Arabia, resignation before ten years of service reduces it on the sliding scale above. Termination for gross misconduct can forfeit it entirely under Article 80 of the Saudi Labor Law.
Basic only in the UAE and Qatar. In Saudi Arabia the calculation uses the last wage, and regular, recurring allowances are generally counted in it. This single difference changes payouts by thousands, so check which base applies before you promise a figure.
Days without pay are typically excluded from the service calculation. Approved paid leave counts as service in all GCC countries.
The employer of record does, because it is the legal employer. The accrual is usually built into the monthly invoice, so the liability never arrives as a surprise.