Employee Healthcare Benefits
End-of-service gratuity: the liability that grows with every hire
It accrues from day one, it is rarely funded, and it is the most common surprise in a GCC acquisition.
In short
End-of-service gratuity is a statutory entitlement that accrues from an employee's first day and grows with tenure and final salary. Most UAE SMEs disclose it rather than fund it, which turns a predictable obligation into a cash event. Keel Partners helps employers quantify the accrual, decide whether to fund it, and understand how the voluntary savings-scheme alternative changes the cash and accounting picture.
Diagnostic
Three questions most employers cannot answer
What is the number today?
Total accrued gratuity across the workforce, at today's salaries — not an estimate, a calculation.
Is it funded or just disclosed?
A provision in the accounts is not cash. If everyone left tomorrow, where would the money come from?
What does growth do to it?
Every hire and every raise increases the liability. It compounds quietly with headcount and tenure.
Consequences
Where it bites
- In a transaction: buyers price unfunded gratuity as debt, and European buyers are frequently surprised by it
- In a restructure: a redundancy programme triggers the cash effect all at once
- In scale-up: growing headcount grows an obligation nobody has budgeted
- In year-end: an audit adjustment nobody modelled
FAQ
Frequently asked
How is gratuity calculated?
It is based on basic salary and length of service under the applicable labour law, with different treatment by service band and by reason for leaving. Because it keys off basic salary, how a package is structured materially affects the liability.
Should we fund it?
If you are growing headcount, planning a transaction, or would struggle to pay it as a lump sum, yes. Funding converts a lumpy surprise into a predictable monthly cost, which is almost always the better business outcome.
How does this affect a sale?
Buyers treat unfunded gratuity as debt-like and deduct it from the price. Quantifying and addressing it before a process is one of the cheaper valuation improvements available.
Next step
Book a 30-minute briefing
No deck, no pitch. Bring one decision you are stuck on and we will work it through.