End of Service Benefits, Calculation & Rules

End of Service Benefits (EOSB), also known as gratuity, are lump-sum payments mandated by applicable labour laws that employers provide to employees when their employment ends. These benefits provide financial support to employees and recognize their years of service, especially for expatriates who may not have access to traditional pension schemes. Some countries also refer to them as employee gratuity.

Gulf countries, including the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman, have EOSB or gratuity provisions under their labour laws. These statutory gratuity provisions are governed by country-specific end of service benefits rules. Other countries, such as India, also provide gratuity to eligible employees, while others offer severance pay or similar employee termination benefits.

End of Service Benefits Calculation Across GCC Countries

End-of-Service Benefits (EOSB) are generally calculated based on an employee’s basic salary or wage and length of service. EOSB calculation varies by country. The GCC End of Service Benefits calculation varies by country:

UAE: Under the UAE labour law, eligible employees generally receive 21 days’ basic salary for each year of the first five years and 30 days for each additional year. Employees generally need at least one year of service. These UAE gratuity rules explain how gratuity in the UAE is calculated, including the basic salary gratuity calculation.

Saudi Arabia: Under the Saudi gratuity rules, employees generally receive half a month’s wage for each of the first five years and one month’s wage for each additional year. The final amount may depend on the reason for leaving. These provisions cover EOSB Saudi Arabia.

Qatar: At least three weeks’ basic salary for each year of service, processed through payroll, after completing one year of continuous service.

Oman: For eligible expatriates, the calculation depends on the applicable scheme and employment start date. Under the traditional system, it is 15 days’ basic wage per year for the first three years and 30 days per year thereafter.

Bahrain: For eligible expatriate employees, the traditional calculation is 15 days’ basic wage per year for the first three years and one month’s basic wage for each additional year. Applicable social insurance rules may affect the arrangement.

Kuwait: For monthly-paid employees, payroll processing calculations dictate 15 days’ wage per year for the first five years and one month’s wage per year thereafter, subject to a maximum of 1.5 years’ wages.

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Frequently Asked Questions

Q1.	What are End of Service Benefits (EOSB)?
Ans.	End of Service Benefits, also known as End of Service Gratuity or simply gratuity. These are lump-sum payments that employers provide to employees when their employment ends, as required by the applicable labour laws.
Q2.	Which countries provide End of Service Benefits?
Ans.	Gulf countries, including the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman, provide End-of-Service Benefits (EOSB) or gratuity under their labour laws. Other countries, such as India, provide gratuity to eligible employees, while many others offer severance pay or similar termination benefits.
Q3.	How are End of Service Benefits calculated?
Ans.	End of Service Benefits (EOSB), also known as employee separation benefits, are generally calculated using an employee’s basic salary or wage, excluding allowances. However, the calculation basis varies by country, so employers should check the applicable labour laws to determine which salary components are included. The gratuity calculation also depends on the employee’s length of service and eligibility.
Q4.	Who is eligible for End of Service Benefits?
Ans.	Employees are eligible for End-of-Service Benefits (EOSB) if they meet the requirements set by their country’s labour laws. Generally, in GCC countries, eligibility depends on the employee’s length of service, employment type, and reason for leaving. Some countries also require employees to complete a minimum period of service before they can receive these benefits. These conditions determine gratuity eligibility.
Q5.	How do End of Service Benefits differ across GCC countries?
Ans.	End of Service Benefits (EOSB) differ across GCC countries in terms of eligibility, calculation methods, salary basis, and years of service. The UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman each follow their own labour laws, which determine how much an eligible employee receives when their employment ends.
Q6.	Are End of Service Benefits calculated on basic salary or gross salary?
Ans.	End of Service Benefits (EOSB) are generally calculated based on an employee’s basic salary, excluding allowances. However, the calculation rules vary by GCC country, so employers should check the applicable labour laws to determine which salary components are included.
Q7.	What happens to End of Service Benefits when an employee resigns?
Ans.	When an employee resigns, they may be entitled to End of Service Benefits (EOSB), depending on the country’s labour laws, their length of service, and the applicable eligibility rules. The amount payable may also vary based on the terms of resignation and the country where they work.
Q8.	When must employers pay End of Service Benefits?
Ans.	Employers must pay End of Service Benefits (EOSB) when an eligible employee leaves the company. The payment deadline depends on the labour laws of the country, as each GCC country has its own rules for settling these benefits. The payment is generally part of the employee’s final settlement.
Q9.	What is the difference between EOSB and a pension?
Ans.	End of Service Benefits (EOSB) are a lump-sum payment made to eligible employees when their employment ends, while a pension provides regular income after retirement. EOSB is linked to an employee’s salary and length of service, whereas pension benefits are generally based on pension contributions.
Q10.	Can payroll software help calculate and manage EOSB?
Ans.	Yes, Empxtrack payroll software helps calculate End of Service Benefits (EOSB) based on employee salary and length of service. It also helps HR teams manage payroll records and process final settlements when an employee leaves the organization.