Highlights

• End of Service Benefits UAE provide a lump-sum payment based on basic salary and years of continuous service.
• Employees must complete at least one year of service to be eligible, with gratuity affected by the contract type and leave.
• Calculations use 21 days per year for the first five years, 30 days for additional years, capped at two years’ salary.
• Resignation, termination, or contract type can impact gratuity; proper HR processes ensure accurate payments and record-keeping.
• Smart strategies include increasing basic salary, tracking employment history, using pension schemes, investing wisely, and consulting advisors.

Calculating your final settlement is important for every employee. Companies must follow the rules and pay accurately while keeping proper records. Many now use tools like payroll software and HR software in UAE to manage these processes more easily.

This guide explains end of service benefits UAE and shows how to calculate what employees are entitled to. It breaks the process into simple steps, covering eligibility, rules for resignation or termination, and key factors that affect the calculation. With this information, both employees and companies can handle the final settlement clearly and correctly.

What Are End of Service Benefits in the UAE?

End-of-service benefits (EOSB) in the UAE are a mandatory lump-sum payment given to employees when their employment ends, after completing at least one year of continuous service. These benefits are designed to recognize long-term service and provide employees with financial support as they transition out of a role. The payment is based on the basic salary and the total number of years worked, in accordance with UAE labor law.

Employers can manage calculations and records efficiently using HR tools on platforms like Paismo, ensuring accuracy and compliance. This makes the process transparent and fair for both employees and companies, helping everyone understand their entitlements clearly and avoid errors in the settlement.

Who Is Eligible for Service Benefits?

Ensuring employee growth includes understanding the rules for receiving end‑of‑service payments under UAE law. Employees must meet certain conditions to qualify. The key eligibility criteria are:

• As per Article 51 of the UAE Labour Law, a worker who completes at least one year of continuous service is eligible for end of service benefits UAE law.
• Days of unpaid absence are not counted toward the service period.
• Workers are entitled to gratuity for fractions of a year, proportionate to their time served, if they have completed one full year.
• The gratuity is based on the last basic salary, excluding other allowances.
• Employers must pay all outstanding pay and gratuity within 14 days of contract termination.
• Employers may deduct legally owed amounts from the gratuity (e.g., loans or court‑ordered debts).

How to Calculate End of Service Benefits in the UAE?

To calculate your end-of-service gratuity, start with your last drawn basic salary, as this is the only amount used (allowances, such as housing or transport, are excluded). Then, calculate your total years of service, excluding any unpaid leave days. For the first five years, you are entitled to 21 days’ salary per year; beyond five years, you’re entitled to 30 days per year. The total gratuity you get cannot exceed two years’ basic salary. Using an end of service benefits UAE calculator and better HR & payroll processes helps make this calculation precise.

Step-by-Step Calculation:

1. Identify your basic salary.
2. Work out your total years of service, excluding unpaid leave.
3. First 5 years formula:

Basic Salary × 21 × Years worked (up to 5) ÷ 365

4. Years beyond 5 formula:

 Basic Salary × 30 × Years worked (over 5) ÷ 365

5. Add both amounts to find your total gratuity.
6. Ensure the result does not exceed two years’ basic salary.

How Resignation or Termination Affects Your Gratuity?

In the UAE, your gratuity depends on why you leave, your length of service, and your contract type. Employees are generally entitled to full gratuity after one year unless terminated for serious misconduct. Companies using an employer of record (EOR) like Paismo can simplify the process and ensure accurate calculations through proper workflows.

Impact Based on Reason for Leaving:

• Resignation: After one year, you are entitled to gratuity. Reductions may apply if you leave a limited-term contract before five years.
• Termination for Cause: Serious misconduct, such as theft or assault, may result in losing the entire gratuity.
• Termination Without Cause: Full gratuity is payable after at least one year of continuous service.
• Job Abandonment: Leaving without notice on an unlimited contract may forfeit gratuity.

Impact Based on Length of Service:

• Less than 1 year: No gratuity.
• 1–5 years: Gratuity proportional to service; resignation may reduce it.
• More than 5 years: Full gratuity is payable.

Impact Based on Contract Type:

• Unlimited Contract: Full gratuity after one year unless terminated for serious misconduct.
• Limited Contract: Resignation before the contract ends may reduce or remove gratuity; termination pays based on service duration.

Step-by-Step Process to Receive Your Final Settlement

Receiving your final settlement in the UAE is straightforward if you follow the right process. Below are the steps to ensure timely and accurate payment of your end-of-service benefits:

1. Verify Your Service Details: Check your total years of service, last drawn salary, and any unpaid leave to calculate your final gratuity.
2. Review Employment Contract: Confirm your contract type (limited or unlimited) and any clauses that may affect your gratuity or final settlement.
3. Submit Resignation or Exit Notice: Provide formal notice as per your contract terms and ensure HR acknowledges your submission to avoid delays.
4. Request Final Settlement Calculation: Ask HR to prepare a detailed breakdown of your gratuity, accrued leave, and other entitlements.
5. Check All Deductions: Verify deductions, such as loans, advances, or penalties, to ensure they are legally justified.
6. Approve the Settlement: Confirm the final calculation and provide written approval if required.
7. Receive Payment: Payment should be transferred to your bank account within the time frame specified under the UAE Labour Law.
8. Obtain Clearance Letter: Request a clearance or experience certificate to confirm all dues are settled and for future employment reference.

9 Smart Strategies to Maximise Your End of Service Benefits in the UAE

Your end of service benefits in the UAE are a key part of planning your finances. Using platforms like Paismo can make managing gratuity and final settlements simple and accurate. Here are strategies to maximise your benefits:

1. Increase Your Basic Salary: Gratuity is calculated on your basic salary, not allowances. Even a slight increase can significantly boost your benefit.
2. Check Your Contract Carefully: Make sure there are no clauses that reduce or offset your gratuity. Know your entitlements clearly.
3. Complete at Least One Year: You must work at least 12 months to be eligible for gratuity. Staying longer can secure full benefits.
4. Avoid Early Resignation Deductions: Leaving before completing five years of service may result in a reduced payout. Understand the rules to maximize your benefits.
5. Maintain Employment Records: Track start dates, salary changes, and contract updates to ensure accurate and up-to-date records. Paismo can simplify recordkeeping and help calculate your benefits.
6. Explore Pension or Savings Schemes: Some employers offer additional contributions that can increase your overall settlement.
7. Use Your Gratuity Wisely: Consider investing in savings accounts, pension plans, or diversified portfolios for long-term financial growth.
8. Plan for Taxes and Transfers: If relocating, know how gratuity is taxed and the best way to move funds safely.
9. Seek Expert Advice: A financial advisor can help you combine gratuity with your broader investment and retirement plans.

Summary

End of Service Benefits UAE provide a lump-sum payment based on basic salary and years of continuous service. Employees must complete at least one year to qualify, with gratuity affected by contract type, resignation, or termination. Platforms like Paismo help manage calculations and records accurately. Following strategies such as tracking employment history, reviewing contracts, and investing gratuity wisely ensures maximum benefits and a smooth final settlement.

FAQ

How To Calculate End of Service Benefit?

Start with your last drawn basic salary. Multiply 21 days per year for the first five years, and 30 days per year for service beyond five years. Add both amounts and divide by 365; total gratuity cannot exceed two years’ basic salary.

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