What is end-of-service gratuity?
End-of-service gratuity (also known as EOSB, end-of-service benefits, or simply gratuity) is a statutory lump-sum payment that an employer must make to an employee when the employment relationship ends. It exists under labour laws across all six GCC countries and functions as a form of mandatory severance that supplements, or in some countries replaces, pension or social insurance arrangements available to expatriate workers. The entitlement is created by law and cannot be waived through an employment contract, though some newer savings-scheme frameworks are changing how it is structured in certain jurisdictions.
The right to gratuity is generally established once an employee completes a qualifying minimum period of continuous service, most commonly one year. Once that threshold is met, the entitlement grows with each additional year of service.
How to calculate end-of-service gratuity
- Identify the governing labour law: the formula differs by country and in some cases by free zone versus mainland employment within the same country.
- Determine the basic salary: in most GCC formulas, gratuity is calculated on the last drawn basic salary only, excluding allowances such as housing, transport, and other supplements. Confirm what counts as basic in the relevant law.
- Count total years of completed service: calculate full years and, in most systems, prorate the final partial year.
- Apply the applicable rate per year of service: the most common structure awards a higher daily or salary equivalent for earlier years (for example, 21 days of pay per year for the first five years) and a different rate for subsequent years. A resignation may result in a lower rate than a termination or contract expiry depending on the country's rules.
- Check for any statutory cap: some laws cap total gratuity at a set number of months of salary regardless of the total years of service.
- Use the country-specific calculator on this site for an estimate, and confirm the final figure against the applicable labour law or with the HR department, as the formula details differ.
Rules and costs
Gratuity is payable on termination by the employer, resignation (subject to meeting a minimum service threshold in some countries), expiry of a fixed-term contract, or the death of an employee. In some countries, employers may legally deduct amounts the employee owes (such as salary advances or unpaid loans) from the gratuity before payment. Some GCC jurisdictions have introduced or are piloting alternative end-of-service savings or investment schemes; employees enrolled in such schemes receive contributions during the employment period rather than a single lump sum at the end, which changes the calculation and the timing of the payout.
Country differences across the GCC
UAE: The UAE Labour Law formula covers most mainland workers; the specific calculation steps for resignation versus termination and the treatment of partial years are set by the law. Several free zones operate different rules or alternative savings schemes. Saudi Arabia: The Saudi Labour Law sets the EOSB formula; the General Organisation for Social Insurance (GOSI) applies to some workers and interacts with the gratuity calculation. Qatar: The Qatar Labour Law formula applies; a mandatory savings scheme introduced in recent years covers certain categories of workers. Bahrain: A portable savings scheme has been introduced; check whether your employment is covered by the new scheme or the traditional formula. Kuwait: The Kuwaiti Labour Law sets an indemnity (rather than gratuity) calculation that differs from other GCC formulas. Oman: The Oman Labour Law formula applies, with specific provisions for resignation versus termination.
What expats should know
A common misconception is that resigning forfeits any gratuity entitlement. In most GCC countries, a resignation after the qualifying service period still generates a gratuity entitlement, though the rate may be lower than for termination or contract expiry. If an employer refuses or delays payment, each country has a formal labour dispute mechanism through the Ministry of Labour or an equivalent tribunal. Gratuity is normally paid in local currency; for employees whose salary was structured in a foreign currency, the exchange rate at payment date affects the actual value received. Keep your original employment contract and payslips in a secure place, as they establish your basic salary and start date, which are the two critical inputs in any gratuity calculation.