UAE End-of-Service Gratuity (ESOB) Calculation
End-of-service gratuity (ESOB) is a lump-sum payment that UAE employers must pay to employees upon the termination of their employment. It is governed by Federal Decree-Law No. 33 of 2021 (UAE Labour Law).
The Formula
For the first 5 years of service:
21 days of basic salary per year of service
For each year beyond 5 years:
30 days of basic salary per year of service
Key Rules
Basic Salary Only Gratuity is calculated on basic salary only — not total package. Allowances (housing, transport, food, etc.) are excluded.
Partial Years Service is calculated on a pro-rata basis for partial years. A 3-year-and-6-month employee earns 3.5 × 21 days' basic salary.
Resignation Before 5 Years (Old Law Employees) For employees under the old Labour Law contracts (prior to February 2022), partial gratuity may apply if the employee resigns before completing 5 years. Under the new 2022 law, this distinction is removed — all employees earn full gratuity regardless of who initiates termination.
ADGM and DIFC Employees Employees in ADGM and DIFC are typically enrolled in the DEWS (Defined Contribution End of Service Benefits) scheme instead of the standard gratuity formula. DEWS contributions are made monthly to a pension fund.
Example Calculation
An employee earning AED 15,000 basic salary who serves 7 years:
- First 5 years: 5 × 21 × (15,000 ÷ 30) = AED 52,500
- Next 2 years: 2 × 30 × (15,000 ÷ 30) = AED 30,000
- Total ESOB: AED 82,500
Gratuity and WPS
The final settlement (including ESOB) must be paid via WPS or directly, and the employee's visa must be cancelled after payment.
Kounted calculates ESOB as part of every employee offboarding and final payroll run.