How UAE end-of-service gratuity (EOSB) is calculated
The 21-day and 30-day rule, what counts as basic wage, the two-year cap — and why the provision belongs in your books every month, not as a year-end surprise.
The core rule
A full-time foreign employee who completes at least one year of continuous service is entitled to an end-of-service benefit calculated on their basic wage: 21 days of basic wage for each of the first five years of service, and 30 days for each year beyond five. The total benefit is capped at two years' wage.
Two details do most of the damage in practice: the calculation runs on the basic wage — allowances for housing, transport and the like are excluded — and unpaid days of absence don't count toward the service period.
A worked example
An employee on a basic wage of AED 10,000/month leaves after 7 years. Daily basic wage: 10,000 × 12 ÷ 365 ≈ AED 328.77. First five years: 5 × 21 days = 105 days. Years six and seven: 2 × 30 = 60 days. Total 165 days ≈ AED 54,247.
Why it belongs in your monthly books
The gratuity is a liability that grows with every month of service. A business that only computes it when someone resigns is carrying an understated liability all year — and discovering the true cost at the worst moment. The clean pattern: accrue the provision monthly per employee, and settle against the provision on exit, so the P&L feels the cost in the periods that earned it.
How Orbit applies this
Orbit's payroll engine computes the EOSB provision per employee as part of the monthly run, posts the provision movements with the register as evidence, and keeps the salary history append-only — so the balance sheet always carries what you actually owe.
General information for Gulf businesses, not tax advice. Regulations move — verify against the official FTA/ZATCA text or your advisor before acting.