End-of-service provision
An end-of-service provision is the liability an employer records for gratuity its workers have earned but will be paid only when they leave. In the UAE it tracks Article 51 of Federal Decree-Law No. 33 of 2021: 21 days' basic wage per year for five years, then 30 days, capped at two years' wage.
On this page
Where you meet it
It sits on the balance sheet under liabilities, usually as a non-current provision, and its monthly charge sits in payroll cost. When a worker leaves, the gratuity paid in the final settlement is taken from it. The gratuity and final settlement guide explains the statutory figure it should match.
How it works
Each month the employer charges payroll with the gratuity earned in that month and credits the provision. The statutory figure depends on service length, the last basic salary and unpaid leave, which is not counted as service. Under IFRS the provision is a post-employment benefit under IAS 19, which some employers measure with actuarial assumptions and others approximate with the statutory amount; the choice is a matter for the company and its auditor.
Two things make a provision fall short. An accrual at the 21-day rate does not cover workers past five years, who earn 30 days a year. A month with no accrual at all leaves a permanent gap. Comparing the statutory liability with the provision for each worker finds the shortfall before a resignation turns it into a loss in a single month.
Where it appears in SupaJack Construct
The payroll run accrues the provision monthly at the 21-day rate and posts it with the payroll journal. A reconciliation report compares, per employee, the statutory liability with the provision accrued. The final settlement uses the accrued provision first, posts any shortfall as expense or releases any excess, and splits the cost by project. See payroll and WPS.
Related terms and answers
- Gratuity: the payment the provision funds.
- How SupaJack calculates gratuity
- Is gratuity capped?
- Gratuity calculator