End of Service Gratuity Calculator for Saudi Arabia & UAE

Comprehensive Legal Guide to End of Service Gratuity in the GCC

In the Gulf Cooperation Council (GCC) private sector, End of Service Gratuity (EOSG)—often referred to as severance pay or terminal benefits—is an employer-funded statutory right granted to employees at the conclusion of their employment relationship.

While both Saudi Arabia and the United Arab Emirates mandate end-of-service benefits, their respective labor codes differ fundamentally in wage definitions, resignation reductions, accrual rates, and statutory caps.

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1. Saudi Labor Law Framework (Articles 84, 85, & 87)

The Saudi Labor Law, issued under Royal Decree No. M/51, provides a structured framework based on tenure, reason for separation, and comprehensive wages:

#### A. Standard Accrual Formula (Article 84) When employment terminates via employer dismissal (without misconduct under Article 80), natural expiration of a fixed-term contract, retirement, or mutual consent: - First 5 Years of Continuous Service: Half a month’s wage (15 days) for each completed year. - Years Beyond 5 (Year 6+): One full month’s wage (30 days) for each subsequent completed year. - Fractional Years: Pro-rated down to the exact day on a 365-day calendar year basis. - The "Actual Wage" Rule: Crucially, Saudi gratuity is computed on the employee's last actual wage, which encompasses the base monthly salary plus fixed recurring allowances (such as housing allowance, transport allowance, and regular commissions).

#### B. Resignation Reductions (Article 85) If an open-ended or fixed-term employment relationship ends due to the employee's voluntary resignation: - Service under 2 years: 0% entitlement (no gratuity is payable). - Service from 2 to less than 5 years: 1/3 (33.33%) of the Article 84 base award. - Service from 5 to less than 10 years: 2/3 (66.67%) of the Article 84 base award. - Service of 10 years or more: 100% full award.

#### C. Article 87 Statutory Exceptions Article 87 explicitly guarantees the full 100% award even upon resignation under specific protective conditions: - Female Workers: Resignation within 6 months of the date of marriage, or within 3 months of giving birth. - Force Majeure: Contract termination caused by uncontrollable catastrophic circumstances beyond the employee's control. - Employer Breach (Article 81): Departure resulting from gross employer contractual default or abuse.

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2. UAE Unified Labor Law (Federal Decree-Law No. 33 of 2021)

The modernized UAE employment code, effective since February 2022 across the mainland private sector:

#### A. Accrual Rates and the 1-Year Threshold (Article 51) - Minimum Qualifying Period: An employee must complete at least one continuous year of service. Less than 1 year results in zero statutory gratuity. - First 5 Years: 21 calendar days of basic wage for each year of service. - Subsequent Years (Year 6+): 30 calendar days of basic wage for each subsequent year. - Daily Wage Formula: Legally specified as $\text{Daily Wage} = \text{Monthly Basic Salary} \div 30$. - Basic Wage Basis Only: In sharp contrast to Saudi Arabia, UAE gratuity is computed strictly on basic salary. Housing, travel, schooling, utilities, and discretionary bonuses are legally excluded.

#### B. Zero Resignation Reductions Under Decree-Law 33 of 2021, the historic distinction between limited and unlimited contracts has been abolished. Resignation does not diminish gratuity; employees receive 100% of their statutory entitlement after one year of tenure.

#### C. The Statutory 2-Year Cap Total accumulated gratuity cannot exceed two years’ worth of basic wage (24 months of basic pay), regardless of whether tenure extends to 25, 30, or more years.

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Key Comparisons: Saudi Arabia vs. United Arab Emirates

| Aspect | Saudi Arabia (Labor Law M/51) | United Arab Emirates (Decree-Law 33/2021) | | :--- | :--- | :--- | | Salary Basis | Total Actual Wage (Basic + Housing + Transport) | Basic Salary Only (all allowances excluded) | | Years 1 to 5 Rate | Half-month wage (15 days) per year | 21 days basic wage per year | | Years 6+ Rate | Full-month wage (30 days) per year | 30 days basic wage per year | | Resignation Penalty | Sliding scale: <2 yrs (0%), 2-5 yrs (1/3), 5-10 yrs (2/3), 10+ yrs (100%) | None (100% full award after completing 1 year) | | Statutory Cap | None (accumulates uncapped across entire career) | Strictly capped at 2 years' basic wage (24 months) | | Female Marriage/Birth | Article 87 awards 100% full gratuity | Unified standard applies automatically | | Regulating Body | Ministry of Human Resources (HRSD) | Ministry of Human Resources & Emiratisation (MOHRE) |

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Unpaid Leave Exclusions & Deductions Both labor frameworks agree that **unpaid leave days** (authorized or unauthorized leave without pay) are strictly subtracted from continuous service time. Employers may legally deduct outstanding employee loans, documented equipment liabilities, or court-mandated debts from the final gratuity settlement.