A complete guide to end of service benefits (EoSB) in the UAE

• What Are EoSB?
• Reform Introduced in 2023
• EoSB Calculator
• Gratuity Calculator
• EoSB Disputes
• Rights Protection
• FAQs

The UAE Labour Law entitles employees in the country to a specific set of end of service benefits (EoSB). These benefits, which include gratuity in the UAE, are extended as a token of appreciation for the employee’s hard work and dedication to the company. EoSB are paid after the termination of the employment contract on an accumulated basis for the tenure served. Here is everything you need to know about employee end of service benefits in the UAE. 

This post applies to employees working in private-sector companies in the UAE. 

WHAT ARE END OF SERVICE BENEFITS IN THE UAE?

End of service benefits (EoSB) are a statutory monetary entitlement. Employees receive these benefits from employers upon the termination of their employment contract, given they are eligible for it.

Once an employment contract in the UAE is terminated, an employee is eligible for the gratuity benefits. Here are the leading provisions included towards the end of service benefits for private-sector employees in the UAE. 

• Any unpaid wages or overtime payments due.
• Encashment of unutilised leaves.
• Any repatriation expenses applicable as per the employment contract and/or the UAE Labour Law for end of service benefits.
• End of service gratuity.

ADDITIONAL BENEFITS IN CASE OF UNFAIR DISMISSAL

Employees facing unfair dismissal can approach the legal authorities. 

• Eligible employees can be compensated for up to three months’ salary provided they meet the necessary criteria.
• For limited contracts in the UAE, the compensation amount should not exceed the total three-month remuneration or the amount due for the remaining contractual period – whichever is shorter, unless specified otherwise in the contract. 

CHANGES INTRODUCED IN 2023

In September 2023, the government announced a voluntary alternative for end of service benefits for the private sector employees. Under the new reform, both employers and employees have the choice to participate in the scheme.

This is a voluntary initiative and it entails the establishment of investment funds and savings from the private sector. The funds are supervised by the Ministry of Human Resources and Emiratisation in collaboration with the Securities and Commodities Authority.

Here’s a look at the key features of the new end of service benefits savings scheme.

• Voluntary participation of employer and employee.
• No minimum salary requirement.
• Employer handles subscription applications and end of service entitlements.
• Employee contributes a percentage of their basic salary to the scheme.
• Employees have the option to make additional voluntary contributions.

The goal of the scheme is to protect the savings of the employees and ensure the investments made are safe. The companies that opt-in are asked to pay a monthly amount. At the end of the service, employees are handed the savings they have made.

It allows employees to invest their end-of-service benefits in three different investment options:

• A risk-free investment where the capital is maintained
• A risk-based option where the risk factor can be high, medium and low
• A sharia-compliant option

END OF SERVICE BENEFITS UAE CALCULATOR

The most important part of the end-of-service benefits in the UAE is the gratuity pay. Gratuity is a monetary compensation given at the end of the service period to the employee by the employer.

Previously, the calculation of gratuity was based on the type of contract; limited vs unlimited contracts. However, with the changes in labour law, all employment contracts are now to be converted into limited contracts with a validity of up to 3 years.

This has also changed how end of service benefits are calculated in the UAE. Under the amendments introduced in 2023, the amount of mandatory EoSB is calculated based on an employee’s basic salary and years of service.

The formula to calculate end of service benefits in the UAE is:

EoSB = (basic salary * years of service) / 3

For instance, if you earn a basic salary of AED 10,000 with 10 years of service, you would be entitled to an EoSB of AED 33,333.

Please Note:

• EoSB is paid to employees who terminate their employment contract for any reason. This includes voluntary resignation, retirement or termination by the employer.
• In case of termination by the employer, the employee is also entitled to severance pay. It is also calculated based on basic salary and years of service.

HOW TO CALCULATE GRATUITY PAY?

Any employee who has been working with the same organisation for one or more years is entitled to gratuity pay. Please note that unpaid leaves are not included in the period of service. Here are some of the key factors you should consider while calculating gratuity.

• If you have worked for more than a year but service time is less than five years, you’re entitled to full gratuity pay based on 21 days’ salary.
• If you’ve been working for more than five years, you are entitled to receive full gratuity of 30 days’s salary.
• In all cases, the total gratuity cannot exceed the wage of two years.

What Happens If the Ex-Employer Refuses to Pay End of Service Benefits?

According to the UAE gratuity law, an employee is entitled to immediate payment of their end-of-service gratuity upon termination, even if the employee is terminated for gross misconduct, as detailed in article 120.

The changes to the gratuity rules under the new labour law have further secured this right. According to the updated law:

• All end-of-service benefits of an employee must be paid within 14 days of the end of employment.
• Employees cannot be terminated without payment for end of service benefits.
• Where employment is terminated due to the death of an employee, the entitlements must be paid to the deceased’s family after the deduction of body repatriation costs (where applicable).
• Unless granted by the law, the employer must not reduce or deduct the gratuity amount based on the employee’s contract type and/or resignation date.

Disputes arise when the ex-employers refuse to pay the due end-of-service benefits to the employee. The best way to deal with the issue is to file an immediate complaint at the Labour Office and then pursue legal proceedings in the Labour Court. 

In such matters, each case is different from the other, so a resolution that worked for another employee might not be the best for you. You will need to consult an advocate for legal counsel and dispute resolution. 

How to Protect Your Rights before Leaving the Job

When you take to the Labour Court for dispute resolution of your end of service benefits, it is important to have proof that reinforces your position. Your post-termination rights are more likely to be upheld if you have documented everything leading to your dismissal.

The best way to go about it is to maintain an employment diary that dates and records all significant events at work. These may include, but aren’t limited to:

• Salary bumps or slashes
• Reprimands and commendations
• Performance reviews
• Informal remarks by the employer

It’s best to note everything with time, date, location and the presence of witnesses (if any). Also, keep track of the written materials, including memos, emails and evaluations pertaining to your work.

FAQS ABOUT END OF SERVICE BENEFITS IN THE UAE

WHAT IS THE NEW RULE FOR GRATUITY IN THE UAE?

The UAE’s rules for calculating gratuity remain unchanged even under the new labour law. Employees eligible for gratuity are entitled to 21 days of basic pay per year for each of the first five years of their service and 30 days of calendar pay for every year after that.

Please remember that unpaid leave days are not included in calculating the gratuity for private sector employees as per the latest MOHRE announcement.

WHO IS ELIGIBLE FOR GRATUITY IN THE UAE?

An employee becomes eligible for gratuity in the UAE after completing 12 months of consecutive service with an employer. When calculating the service period, any absence without pay is not included.

WHAT HAPPENS IN CASE AN UNLIMITED CONTRACT IS TERMINATED BEFORE ITS RENEWAL?

As per the new UAE Labour Law, all existing unlimited employment contracts must be converted into limited contracts with a validity of up to 3 years.

WHAT IS THE SUBSCRIPTION FEES FOR THE SCHEME?

Employers contribute 5.83% to the investment fund for employees who have not completed five years of service. For the employees who have served for more than five years, the contribution should be 8.33% of the basic salary.

Please note that the subscription should be transferred into the investment fund within the first 15 days of each calendar month.

HOW MUCH CAN I INVEST IN TERMS OF VOLUNTARY CONTRIBUTIONS?

You can invest up to 25% of your annual salary as a voluntary contribution.

CAN PUBLIC SECTOR EMPLOYEES SIGN UP FOR END OF SERVICE BENEFITS?

Yes, public sector employees have the choice to participate in this scheme.

That’s a wrap to this post on the end of service benefits in the UAE. We hope you find this information useful. To be able to work in the UAE, you need a valid work permit. Most of you would already have one, but it’s still important to keep up with the new list of UAE work permit fees. Also, the UAE now allows work permits for men sponsored by their wives. 

If you wish to work, study or live in the UAE, you also need a police clearance certificate. You can obtain a police clearance certificate via a simple procedure.  The process is mostly hassle-free as long as you know what you need and how to do it.

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