End of Service Gratuity in GCC Countries

Introduction

End of Service Gratuity (ESG) is a mandatory payment provided by employers to employees at the end of their employment contract. It serves as financial support for employees transitioning out of the company and as recognition of their service.

The gratuity amount depends on:

• Employee’s last drawn basic salary

• Total years of service

• Exit reason (resignation or termination)

• Applicable labor laws of the GCC country

Keka incorporates ESG calculations to ensure statutory compliance across GCC countries, automating payout calculations during payroll exits.

ESG Rules by Country

Saudi Arabia

• Gratuity Calculation:

  • First 5 years → ½ month’s basic salary × years of service.

  • After 5 years → 1 month’s basic salary × years beyond 5.

• Example: 9 years of service, SAR 2,000 salary

  • First 5 years = ½ × 2000 × 5 = SAR 5,000

  • Next 4 years = 1 × 2000 × 4 = SAR 8,000

  • Total = SAR 13,000

• Resignation Proration:

  • < 2 years = No gratuity

  • 2–5 years = ⅓ gratuity amount

  • 5–10 years = ⅔ gratuity amount

  • 10 years = Full gratuity

• Termination:

  • < 1 year = No gratuity

  • 1 year = Full gratuity

United Arab Emirates

• Eligibility:

  • < 1 year service = No gratuity

  • Misconduct terminations = Not eligible

• Calculation (up to 2 years’ pay maximum):

  • First 5 years → 21 calendar days’ basic pay × years

  • After 5 years → 30 calendar days’ basic pay × years

• Resignation Rule:

  • < 5 years = No gratuity

  • ≥ 5 years = Same as termination

Oman

• Gratuity Calculation:

  • First 3 years → ½ month’s basic salary × years of service

  • After 3 years → 1 month’s basic salary × years beyond 3

• Example: 9 years, OMR 2,000 salary

  • First 3 years = ½ × 2000 × 3 = OMR 3,000

  • Next 6 years = 1 × 2000 × 6 = OMR 12,000

  • Total = OMR 15,000 (capped at OMR 12,000)

• Eligibility:

  • < 1 year = No gratuity

  • ≥ 1 year = Full gratuity

Qatar

• Gratuity Calculation:

  • 21 days’ basic salary × years of service

• Example: 9 years, QAR 2,000 salary

  • 2000 × 21/30 × 9 = QAR 12,600

• Eligibility:

  • ≥ 1 year continuous service = Full gratuity (regardless of exit reason)

Bahrain

• Gratuity Calculation:

  • First 3 years → ½ month’s basic salary × years

  • After 3 years → 1 month’s basic salary × years beyond 3

• Example: 9 years, BHD 2,000 salary

  • First 3 years = ½ × 2000 × 3 = BHD 3,000

  • Next 6 years = 1 × 2000 × 6 = BHD 12,000

  • Total = BHD 15,000

• Eligibility:

  • < 1 year = No gratuity

  • ≥ 1 year = Full gratuity

Kuwait

• For daily/hourly/piecework employees:

  • First 5 years → 10 days’ basic salary × years

  • After 5 years → 15 days’ basic salary × years beyond 5

• For monthly/annual employees:

  • First 5 years → ½ month’s basic salary × years

  • After 5 years → 1 month’s basic salary × years beyond 5

• Example: 9 years, KWD 2,000 salary

  • Daily/hourly basis → Total = KWD 7,333

  • Monthly basis → Total = KWD 13,333

• Resignation Proration (monthly basis):

  • < 3 years = No gratuity

  • 3–5 years = ½ gratuity

  • 5–10 years = ⅔ gratuity

  • 10 years = Full gratuity

• Termination:

  • Full gratuity payable regardless of service years

We hope you now have a good understanding of this new addition to Keka so as to ensure statutory compliance. Please feel free to get in touch with one of our product experts in case of further queries!