How to calculate end-of-service gratuity
End-of-service gratuity is the amount an employee is entitled to when their contract ends, usually calculated as a number of salary days for each year of service. Bands and bases differ widely between countries, and the basic salary plays a central role. This guide explains the calculation and follows the same example used by the end-of-service calculator on Klar.
What you need
You need four inputs: the country, because it determines the bands, caps and resignation rules; the service start date; the service end date; and the basic monthly salary, i.e. the salary before allowances and commissions, because most regional laws base the gratuity on it. Use the basic salary, not the gross one; allowances, housing and transport are generally excluded from the base, and including them inflates the result.
Daily wage and years of service
The daily wage is derived by dividing the basic salary by 30 days: a basic salary of 900 units gives a daily wage of 30 units. Service length is measured between the start and end dates in years with fractions: eight years and six months is treated as about 8.5 years, and the fractional year is pro-rated on a 365-day basis.
Days-per-year bands
The base rule varies by country: Jordan: one full month (30 days) per year of service, with fractional years pro-rated. Saudi Arabia: half a month for the first five years, then one month per year after that, applied cumulatively. UAE: 21 days for the first five years, then 30 days after, with an overall cap of about 24 monthly salaries. Kuwait: 15 days for the first five years, then one month after, capped at 18 months. Qatar: half a month for the first five years, then one month after. Bahrain: half a month for the first five years, then one month after. Oman: one full month (30 days) for each year of service with no upper cap. The calculator applies these bands automatically for the selected country, including pro-rating a partial year.
Voluntary resignation
Voluntary resignation can reduce the gratuity in some countries. The clearest example is Kuwait: no gratuity before 3 years, half from 3 to 5 years, two-thirds from 5 to 10 years, and the full amount after 10 years. In this version, the other covered countries do not provide a resignation reduction scale, so choose “Terminated by employer” if the contract ended without a voluntary resignation.
Worked example
A worked example matching the calculator: an employee in Jordan served from 2018-01-01 to 2026-01-01 (≈ 8 years) on a basic salary of 800 units, with the contract ended by the employer. Daily wage = 800 ÷ 30 ≈ 26.67 units. Entitlement days = 8 × 30 = 240 days. Gratuity ≈ 240 × 26.67 ≈ 6,400 units.
Caps and transitional periods
Some countries cap the gratuity, such as the UAE (about 24 monthly salaries) and Kuwait (18 months), and the calculator applies these automatically. Service before a law change may also be computed on different bases in some countries. The result is an estimate based on current law; for exact transitional treatment consult your employer or the authorities.
Assumptions
The result assumes the basic salary is stable over service (or that the entered value represents the current basic salary) and that a year is 365 days. Bands are reviewed periodically against official sources, and laws can change, so verify the figures with the relevant authorities before making decisions.
Key takeaways
- Gratuity = entitlement days × (basic salary ÷ 30).
- Bands and caps differ by country and apply cumulatively.
- Voluntary resignation reduces the gratuity in Kuwait per a statutory scale.
- Fractional years are pro-rated, and caps limit the result where they exist.
Frequently asked questions
Do allowances and housing count?
Most regional laws base the gratuity on the basic monthly salary excluding allowances, so enter only the basic amount in the calculator.
What is the difference between cumulative and flat-rate calculation?
A cumulative calculation applies a different rate to each service band (e.g. half a month for the first five years, then a full month after), which is what the calculator follows in banded countries.
Does the gratuity change if a new contract follows without a gap?
It depends on continuity rules and the contract’s terms. Enter the actual service end date and check how continuous service is treated in your country.