End of service gratuity provision: book it monthly, not at exit

You ask in plain English, the AI does the bookkeeping work, and you or your accountant approve the result.

• You ask: “Update the gratuity provision using the October staff schedule and post the difference.”
• The AI agent: The AI reads the attached schedule of basic salaries and service dates, compares the total with the current gratuity liability in the ledger, and drafts a journal for the difference to the gratuity expense account.
• You review: Your accountant checks the schedule's figures and assumptions, approves the journal, and signs off on any settlement for a leaver.

The UAE government portal summarises Article 51 of Federal Decree-Law No. 33 of 2021 for private-sector workers. A worker who completes at least one year of continuous service is entitled to gratuity on leaving. It is 21 days of basic salary for each of the first five years, and 30 days for each year after that, with proportionate amounts for part years. The total cannot exceed two years' wages, days of unpaid absence do not count as service, and payment is due within 14 days of the contract ending.

Basic salary means basic pay without housing, transport and similar allowances. Some employers have joined the voluntary alternative end-of-service savings scheme instead; if that is you, the accounting changes, so confirm the arrangement with your adviser.

Create a liability account for end-of-service benefits and an expense account for the annual cost. Keep a simple schedule with each employee's start date, basic salary and accrued days, and attach it to the journal each month. Many accountants accrue on a straight-line daily basis from day one even though the entitlement only vests after a year, because the obligation builds over time; others follow a different policy. Pick one with your auditor and stay consistent.

• Manual today: the per-employee calculation in a schedule
• In HelloBooks: the recurring or monthly journal, the liability balance and the attached schedule
• AI check: compares the schedule total to the ledger and flags a gap
• On exit: the settlement payment clears the liability for that person

Omar's last basic salary is AED 12,000. A daily rate on a 30-day month basis is AED 400. Five years at 21 days gives 105 days, and one year at 30 days gives 30 days, so 135 days in total, or AED 54,000. That is well under the two-year cap.

Your ledger already holds AED 51,600 for Omar from the monthly accruals. The AI drafts a top-up of AED 2,400 to gratuity expense, then matches the AED 54,000 bank payment against the liability. Some employers compute the daily rate differently, for example on 365 days a year, which is a policy point for your adviser. Firms that want a gratuity report built for their clients can ask at /book-a-demo.