"UAE End of Service Gratuity (EOSG) 2025: New Calculation Rules and Contract Types"

💰 UAE End of Service Gratuity (EOSG): New Calculation Rules and Contract Types (2025 Update)

The calculation and entitlement rules for the End of Service Gratuity (EOSG) have been entirely updated under the Federal Decree-Law No. 33 of 2021 (the New UAE Labour Law), effective from February 2, 2022.

1. The Core Calculation (Article 51)

The calculation method (21 days for the first 5 years, 30 days thereafter) remains, but the maximum cap is removed, and the calculation basis is confirmed.

Old Law (Article 132)	Current Law (Article 51)
Calculation: 21 days for the first 5 years, 30 days for subsequent years. Maximum Cap: Total gratuity cannot exceed 2 years' salary.	Calculation: Same rates apply. 21 days for the first 5 years, 30 days for subsequent years. Maximum Cap: REMOVED. The total gratuity is not capped at two years' salary.
Part of the Year: Entitled to a prorated amount after one year of service. (Article 133)	Part of the Year: Confirmed. The worker is entitled to a prorated amount for the fraction of the year, provided one full year of service is completed.
Leaves Without Pay: Not included in the service period. (Article 132)	Leaves Without Pay: Confirmed. Periods of unpaid leave are excluded from the service period calculation.

2. The Calculation Basis: BASIC Salary Only

The current law explicitly confirms the calculation basis.

Old Law (Article 134)	Current Law (Article 51)
Basis: Calculated based on the last basic salary. Confusing Point: Stated allowances "shall be included in the basic salary" (which was legally disputed).	Basis: Calculated exclusively on the Basic Salary. Clarified: The law confirms that allowances (housing, transport, commission, etc.) are NOT included in the gratuity calculation.

3. Contract Type Distinction: UNLIMITED is ABOLISHED

This is the most critical change. The distinction between Unlimited and Limited contracts for EOSG calculation is GONE because the Unlimited Contract type is abolished for new/renewed contracts.

Old Law (Articles 137 & 138)	Current Law (Article 51 & 42)
Unlimited Contract Resignation: Reduced Gratuity (1/3 or 2/3 reduction based on service period).	Fixed-Term Contract Resignation: NO REDUCTION. The worker is entitled to the full gratuity regardless of the length of service (after 1 year), provided they comply with the lawful termination (notice period).
Limited Contract Resignation: Forfeiture unless service exceeded 5 years.	Forfeiture: ELIMINATED. There are no reductions or forfeitures for an employee's resignation under the new law, provided they follow the lawful notice period.

4. Forfeiture and Dismissal (Article 51 & 44)

The conditions for the worker being banned from gratuity have been streamlined and simplified.

Old Law (Article 139)	Current Law (Article 51)
Forfeiture: Worker dismissed under Article 120 (gross misconduct) OR worker voluntarily resigns without notice (unlimited contract) OR limited contract worker resigns before 5 years.	Forfeiture: The worker forfeits the entire gratuity ONLY if they are dismissed for one of the 11 specific reasons listed in Article 44 (Gross Misconduct).
Voluntary Resignation: Forfeiture is ABOLISHED for lawful resignation.

5. Death, Savings, and Pensions (Article 51)

• Death: Confirmed. If the worker dies, the employer must pay the full gratuity to the heirs.
• Savings/Pension Funds (Article 140 & 141): Confirmed. The worker retains the right to choose between the gratuity or any better terms offered by a savings/pension scheme, provided the scheme terms allow it.

6. Return Tickets (Not in EOSG Law)

The obligation for return tickets is NO LONGER tied to the EOSG Law but to the general conditions of the employment contract (Article 13).

• Current Rule: The employer is responsible for the worker's return ticket to their home country upon termination of the contract, unless the worker joins a new employer in the UAE, or the worker is dismissed for gross misconduct (Article 44 reasons).