Updated August 2026. End-of-service benefits are a critical component of employment compensation in the UAE. Whether you are an employee planning your departure, an HR professional managing payroll obligations, or an employer needing to record IFRS-compliant provisions, this guide explains every element of UAE gratuity law, portable savings, government pension schemes, and WPS integration.
- UAE Labour Law (Federal Decree-Law 33/2021) entitles employees to EOSB at 21 calendar days’ basic salary per year for the first five years of service
- After five full years, the rate increases to 30 calendar days’ basic salary per year of additional service
- DIFC-based employees moved from EOSB to the DEWS (WorkSave) portable savings scheme — contributions of 5.83% or 8.33% of monthly basic salary paid monthly by the employer
- Abu Dhabi government employees and some semi-government entities are covered by the GPSSA (General Pension and Social Security Authority) defined-benefit pension
- Employers following IFRS must recognise gratuity provisions under IAS 19 (Employee Benefits) using an actuarial present-value calculation
UAE End-of-Service Gratuity (EOSB) Calculation Under Federal Law
The UAE’s end-of-service benefit (EOSB) is governed by Federal Decree-Law No. 33 of 2021 on Regulation of Employment Relations (the New Labour Law), which came into effect on 2 February 2022. The gratuity is calculated on the employee’s last drawn basic salary — excluding housing allowance, transport allowance, commissions, and other variable components — unless the employment contract explicitly states that gratuity should be calculated on total salary.
For the first five years of continuous employment, gratuity accrues at 21 calendar days of basic salary per year. For each year of service beyond five years, the rate increases to 30 calendar days of basic salary. The total gratuity is capped at two years’ total basic salary across the entire tenure. An employee with ten years of service earning AED 15,000 basic salary per month would receive: (21/30 × 5 × 15,000) + (1 × 5 × 15,000) = AED 52,500 + AED 75,000 = AED 127,500. This is below the two-year cap of AED 360,000, so the full amount is payable.
Under the 2021 Labour Law, resignation no longer triggers a reduced gratuity entitlement regardless of years served — a significant change from the previous regime under Federal Law No. 8 of 1980, under which employees who resigned after fewer than five years received only one-third of the standard entitlement. Employers have 14 days from the termination date to pay outstanding gratuity.
DEWS: The DIFC Employee Workplace Savings Scheme
The DIFC Employee Workplace Savings (DEWS) scheme, operated under the commercial name WorkSave and managed by Equiom Savings Solutions, replaced the traditional EOSB model for DIFC-based employers as of 1 February 2020. Under DEWS, employers are required to make monthly contributions to a portable savings account held in the employee’s name, eliminating the employer’s obligation to fund a lump-sum at termination.
The contribution rate is 5.83% of basic monthly salary for employees who have served less than five years, and 8.33% for employees with five or more years of service (reflecting the jump from 21 to 30 days equivalent). For an employee earning AED 20,000 basic salary in their first four years, the employer contributes AED 1,166 per month. After five years, this rises to AED 1,666 per month. Contributions are invested in a choice of funds managed by Mercer, Zurich Life, and other approved investment managers.
DEWS accounts are portable: if the employee changes jobs within or outside the DIFC, the accumulated savings travel with them. Employees can access vested funds upon resignation, termination, or retirement. DEWS is supervised by the DIFC Authority and regulated by the Dubai Financial Services Authority (DFSA). As of August 2026, over 35,000 DIFC employees are enrolled in DEWS with cumulative assets exceeding AED 2.8 billion.
GPSSA: Abu Dhabi Government Pension Scheme
The General Pension and Social Security Authority (GPSSA) administers a defined-benefit pension scheme for UAE nationals employed by federal and Abu Dhabi emirate-level government entities. Mandatory participation applies to all UAE national employees of GPSSA-registered employers. Contributions are shared between the employer and employee: the employer contributes 15% of the employee’s insurable salary, and the employee contributes 5%, resulting in a total contribution rate of 20% of insurable salary each month.
The pension benefit is calculated at 2.5% of the average insurable salary over the final 3 years of service, multiplied by the number of contributing years, subject to a maximum of 80% of salary. An employee who contributed for 25 years to GPSSA and earned an average AED 18,000 insurable salary would receive: 2.5% × 25 × 18,000 = AED 11,250 per month in pension, representing 62.5% of insurable salary. The scheme also provides end-of-service gratuity for employees who do not meet the minimum 15-year contribution period required for pension eligibility.
Expatriate employees in the UAE do not participate in GPSSA and are entitled to EOSB under the Labour Law instead. Some Abu Dhabi government entities offer expatriate employees voluntary pension top-up schemes through approved insurance providers.
WPS Integration with Gratuity Payments
The Wage Protection System (WPS), mandated by the Ministry of Human Resources and Emiratisation (MOHRE) under Ministerial Decree 788/2009, requires employers with more than 100 employees to pay salaries electronically through WPS-approved agents (banks and exchange houses). As of 2024, WPS compliance has been extended to all private sector employers regardless of size.
Gratuity payments on termination of employment must also be processed through WPS-compliant channels. MOHRE’s eDNRD (electronic system) records each employee’s end-of-service details, and non-payment or delayed payment of gratuity can trigger a WPS violation flagged automatically to MOHRE. Repeated WPS violations result in the employer being placed on a restricted list, preventing new work permit applications until the violation is resolved and any fines paid.
Employers are advised to maintain a gratuity provision fund — a dedicated bank account or insurance policy accumulating the accrued gratuity liability — to avoid cash-flow issues when multiple employees terminate simultaneously. Group gratuity insurance schemes are offered by insurance companies including Zurich, MetLife, and Oman Insurance Company in the UAE.
Calculating UAE Gratuity: AED Worked Examples
Example 1 — Resignation after 3 years: Employee with AED 12,000 basic salary. EOSB = (21/30) × 3 × 12,000 = AED 25,200. Under the 2021 Labour Law this full amount is payable on resignation, regardless of the reason for leaving.
Example 2 — Termination after 8 years: Employee with AED 22,000 basic salary. EOSB = (21/30 × 5 × 22,000) + (1 × 3 × 22,000) = AED 77,000 + AED 66,000 = AED 143,000. Two-year cap = 24 × 22,000 = AED 528,000. Full AED 143,000 is payable.
Example 3 — Capped gratuity after 30 years: Employee with AED 50,000 basic salary. Uncapped EOSB = (21/30 × 5 × 50,000) + (1 × 25 × 50,000) = AED 175,000 + AED 1,250,000 = AED 1,425,000. Two-year cap = 24 × 50,000 = AED 1,200,000. Payable amount = AED 1,200,000.
Voluntary Savings Schemes in UAE
Beyond the mandatory EOSB and DEWS/GPSSA frameworks, UAE employees can access a range of voluntary savings schemes. The ADGM (Abu Dhabi Global Market) launched its own Employee Savings Plan regulations in 2023, allowing ADGM-based employers to opt for a DEWS-equivalent portable savings structure. Several major employers outside free zones have implemented contractual gratuity top-up schemes that pay above the statutory minimum.
The UAE government’s 2023 introduction of a voluntary private sector pension fund option allows private sector employees (including expatriates) to make voluntary contributions to approved pension fund managers regulated by the Securities and Commodities Authority (SCA). These contributions are tax-deductible for corporate entities under the 9% corporate tax regime introduced in 2023, making employer top-up contributions an efficient staff retention tool.
IFRS Accounting for Gratuity Provisions
Employers preparing financial statements under IFRS are required to account for end-of-service gratuity obligations under IAS 19 (Employee Benefits). Gratuity obligations are classified as defined benefit obligations. Under IAS 19, the employer must calculate the present value of the defined benefit obligation (DBO) using a projected unit credit method and a discount rate derived from high-quality corporate bond yields or government bond yields in the currency of the obligation.
In the UAE, where deep corporate bond markets do not exist, the discount rate is typically derived from UAE government bond yields or ADIB/DIB Sukuk yields for AED-denominated obligations. As of August 2026, a commonly used discount rate for UAE AED-denominated gratuity provisions is in the range of 4.5% to 5.2%. Actuarial assumptions also include expected salary increase rates (typically 3%–5% for UAE private sector), employee turnover rates, and mortality tables.
Actuarial gains and losses under IAS 19 are recognised in Other Comprehensive Income (OCI) in the period they arise. Employers with more than 50 employees and significant gratuity obligations should engage a qualified actuary to calculate the IAS 19 obligation annually. Underestimating gratuity provisions is a common audit finding in UAE companies, particularly where fast-growing businesses have not adjusted salary growth assumptions.
UAE Gratuity and Savings Scheme Comparison
| Scheme | Who Qualifies | Contribution | Portability | Regulator |
|---|---|---|---|---|
| EOSB (Mainland) | All private sector employees | Employer-funded on exit | No (lump sum at termination) | MOHRE |
| DEWS (DIFC) | DIFC employees | 5.83%/8.33% monthly by employer | Yes (fully portable) | DFSA / DIFC Authority |
| GPSSA (Gov) | UAE nationals, gov sector | 15% employer + 5% employee | No (defined benefit pension) | GPSSA |
| ADGM ESP | ADGM employees | Employer-set (min EOSB equiv.) | Yes (portable savings) | ADGM / FSRA |
| SCA Voluntary Pension | All UAE employees (voluntary) | Employee-chosen contribution | Yes | SCA |
Frequently Asked Questions
How is end-of-service gratuity calculated in UAE?
Gratuity is calculated on the employee’s basic salary (excluding allowances) at the rate of 21 calendar days per year for the first five years, and 30 calendar days per year for each additional year. The total payout is capped at the equivalent of two years’ basic salary. Under Federal Decree-Law 33/2021, the full entitlement is payable on both resignation and termination, provided the employee has completed at least one year of continuous service.
What is DEWS and who qualifies for it?
DEWS (DIFC Employee Workplace Savings, commercially marketed as WorkSave) is a mandatory portable savings scheme for all employees of DIFC-registered employers, effective from 1 February 2020. Employers contribute 5.83% of basic monthly salary for employees with under 5 years of service, and 8.33% for those with 5 or more years. Funds are held in portable individual accounts managed by approved fund managers. The scheme replaces the traditional EOSB obligation for DIFC employers entirely.
Do expatriates in the UAE receive a pension?
Expatriate employees in the UAE do not receive a government pension. Instead, they are entitled to end-of-service gratuity under the UAE Labour Law, payable as a lump sum on termination or resignation. Some employers offer voluntary top-up pension schemes, and the SCA’s voluntary private pension framework allows expatriates to make their own contributions to approved pension funds. DIFC employees benefit from DEWS, which functions similarly to a portable defined contribution pension.
Is UAE gratuity calculated on basic salary or total salary?
Gratuity is calculated on the employee’s basic salary only, unless the employment contract explicitly provides for gratuity to be calculated on total remuneration. Basic salary excludes housing allowance, transport allowance, food allowance, commissions, overtime payments, and other benefits. This is confirmed by Article 51 of Federal Decree-Law No. 33/2021. Employees should verify whether their contract specifies any enhanced basis for gratuity calculation.
What happens to gratuity if unpaid leave was taken?
Periods of unpaid leave are excluded from the service period for gratuity calculation purposes under UAE Labour Law. If an employee took three months of unpaid leave during a seven-year tenure, the effective gratuity service is calculated as 6 years and 9 months. The MOHRE’s EOSB calculator automatically excludes approved unpaid leave periods registered in the eDNRD system. Employers must ensure that unpaid leave records are accurately maintained in the WPS and MOHRE systems to avoid disputes on termination.