Guide to the End of Service Benefits in the UAE (2025)

End-of-service benefits (EOSB) are mandatory final payments. UAE employers must provide it to employees when their contracts come to an end. EOSB is calculated based on the employee’s basic salary, excluding allowances like housing, transportation, or bonuses.

This guide walks you through mandatory employer obligations, highlights differences across various laws, and outlines penalties you can suffer for non-compliance. The following information is based on the UAE Labour Law (Federal Decree-Law 33/2021), Cabinet Resolution 1/2022, the DIFC DEWS framework, and MOHRE guidance (2025). 

Different EOSB Compliance Frameworks in the UAE

End-of-service benefits (EOSB) in the UAE don’t work the same in every case. Instead, it varies depending on whether you are registered on the mainland, in a MOHRE-regulated free zone, or in a financial free zone. Recently, this landscape has become more complex. One of the reasons for these changes is the introduction of savings-plan alternatives to traditional end-of-service benefits. Business leaders must understand the intricacies of these frameworks. Unfortunately, selecting the wrong one can result in compliance risks, unforeseen consequences and employee disputes. It is definitely not worth the gamble.

Depending on the location of employer registration, the rules around end-of-service benefits (EOSB) may be as follows:

• Mainland & MOHRE free zones → Traditional gratuity system under federal UAE labour law.
• DIFC (Dubai International Financial Centre) → No gratuity; instead, employers must contribute monthly to the DEWS savings plan. It works as a pension fund.
• ADGM (Abu Dhabi Global Market) → From April 2025, employees can choose a traditional gratuity system or a savings plan similar to DIFC’s.

Gratuity Rules in Mainland UAE & MOHRE Free Zones

The majority of employers across the mainland and MOHRE free zones still use the traditional gratuity system to calculate end-of-service entitlements. This mechanism is used to provide employees with a lump-sum payment at the end of their contract. It is based on their length of service and basic salary. On paper, the rules appear simple, but the devil lies in the details. If employers overlook these nuances, it can result in a lack of compliance and legal disputes.

Key rules for gratuity include:

Eligibility: Employees completing 1+ years of continuous service.

Calculation:

• Years 1–5: 21 days’ basic wage per year
• 6+ years: 30 days’ basic wage per year
• Cap: Two years’ wage maximum

Deadline: Final settlement within 14 days of contract end.

No resignation penalty: Unlike pre-2022 law, resignations do not reduce entitlements.

Part-time/flexible workers: Pro-rata entitlement based on working hours.

Tip for employers: Always check the final basic salary. Exclude non-wage allowances, like housing, transportation, or bonuses.

Savings-Plan Alternatives vs. Gratuity

In light of changing labour markets, the UAE has introduced savings-based schemes. They are a different type of saving plan. It ensures timely payments and helps employers meet the needs of today’s workers. Depending on the rules in place, these savings plans are either mandatory (as in DIFC), optional (as in ADGM), or voluntary (through the federal MOHRE system).

There are 3 savings schemes:

A) DIFC – DEWS (Mandatory)

• Monthly employer contributions: 5.83% (<5 years) and 8.33% (≥5 years) of basic salary.
• Administered via regulated Qualifying Schemes (approved savings/retirement plan).
• Replaces gratuity entirely.
  

B) ADGM — Employee Opt-in (From April 2025)

• Employees may choose a pension/savings plan.
• If they do it, gratuity entitlements will cease.
  

C) Federal Voluntary Savings Scheme (MOHRE, 2025)

• Employers outside DIFC/ADGM may voluntarily opt into this fund-based alternative.
• Contributions replace gratuity accrual going forward.

Employer Checklist regarding Visa Cancellation and Final Settlement 

Final settlement is not just about paying dues—it is also tightly linked to the visa cancellation process. Employers in the UAE must ensure all financial obligations are cleared before cancelling work permits and residence visas. Failure to follow the correct order can create administrative delays, legal risks, and even prevent new hiring if flagged in the Wage Protection System (WPS). To keep operations smooth and protect reputation, every employer should treat final settlement as a structured process rather than an afterthought.

The required steps are as follows:

Step 1: Calculate and Pay Final Dues (≤14 days)

• Gratuity (end-of-service benefits)
• Accrued leave
• Salary until last working day
• Contractual benefits
• Pay via WPS and issue settlement receipt

Step 2: Cancel Work Permit 

• Employer initiates cancellation through MOHRE
• Employee signs acknowledgement of dues paid

Step 3: Cancel Residence Visa (GDRFA/ICP)

• Submit cancellation request after MOHRE approval
• Collect Emirates ID and passport from the employee
  

Step 4: Manage Grace Period

• Employees receive 30–180 days depending on visa type
• During this time, they may exit the UAE, transfer to a new employer, or adjust visa status

Step 5: Provide Repatriation Ticket (if required)

• Employer covers the cost of the return ticket

Penalties for Non-Compliance

The UAE authorities take EOSB compliance seriously, and enforcement is swift. Late or incomplete payments are quickly detected through the Wage Protection System, triggering administrative action against the employer. In my view, penalties go beyond fines—they can directly disrupt business by blocking new work permits from being issued. What is more, they have a negative influence on the company’s reputation.

The key risks of non-compliance are as follows:

Under Ministerial Resolution 598/2022, late or non-payment triggers:

• Suspension of new work permits
• WPS inspections & audits
• Fines escalating by severity
• Prosecution referral in extreme cases
  

High-Risk Triggers

• Paying after day 14
• Using gross instead of basic salary
• Forgetting fractional-year service
• Misalignment of jurisdictional rules

Governance Checklist for Employers

Beyond meeting minimum legal obligations, employers should adopt strong governance practices around EOSB. When companies manage end-of-service benefits (EOSB) properly through their HR and finance systems, they protect themselves from legal or financial risks — and at the same time, they show employees that their benefits are safe, which builds trust.

A practical governance checklist:

• Be clear in contracts: State if EOSB is through gratuity or a savings plan.
• Financial planning: Keep track of gratuity accruals/savings plan contributions.
• Audit trail: Keep WPS records, signed settlements, and visa cancellation proofs.
• Vendor check: Use only approved Qualifying Schemes and funds.

Handling end-of-service benefits (EOSB) doesn’t have to be stressful. It really comes down to three things:

• Get the calculations right
• Pay employees on time
• Cancel visas properly

Auxilium’s Employer of Record (EOR) services in the UAE simplify this by embedding compliance, payroll, and visa management into a single seamless solution.

Schedule a free consultation with Auxilium to learn how we handle the complexities of employment in the UAE, including payroll, visa processing, and end-of-service obligations, so you can focus on growth, not red tape.