End of service and gratuity

When an employee leaves, an end-of-service settlement pays what they are owed in one go: the end-of-service gratuity, the annual leave they did not take, any time off for overtime they did not take, and any salary of the last month that payroll did not pay. Verasol calculates it from the employee's service and salary, and pays it out of the provisions that payroll has built up month by month, so a leaver does not hit your profit and loss in one month.

How Verasol calculates the gratuity#

Verasol follows the UAE Labour Law on the basis used by the Ministry of Human Resources and Emiratisation (MOHRE). Its gratuity calculator states the rule: "Under Federal Decree-Law 33 of 2021: 21 days' basic wage for each of the first five years, 30 days for each year after, pro rata; nothing before one year of service; at most two years' wage. The same calculation as Verasol's payroll."

In practice:

UAE and GCC nationals who are insured under a pension scheme (GPSSA, the Abu Dhabi Pension Fund or their home country's scheme) receive no gratuity: their end-of-service benefit is the pension.

For example, an employee who joined on 1 February 2021 with a basic salary of AED 9,900 and left on 30 April 2026 had a daily wage of AED 330 and 5.24 years of service. Verasol calculated 105 days for the first five years and 30 days a year for the rest: AED 37,063.97.

Create a settlement#

Open Payroll & HR › Pay › Settlements. The list shows every settlement with the gratuity, the net payable and the status.

1. Click 1 New Settlement.
2. Choose the employee.
3. Under Settlement Parameters, choose the Settlement Type and the Last Working Day. You can note the notice period.
4. Check the Calculation Preview: the service period, the basic salary, the Daily Basic, the Gratuity Amount and the Leave Encashment for the annual leave earned and not taken, at the basic wage. When the employee was given time off instead of overtime pay and did not take it by the last working day, a line Unused compensatory time off pays those days at the basic daily wage (basic salary ÷ 30). Days already paid out with Pay out days off not taken are not paid again (see Attendance and overtime).
5. Under Adjustments, enter any Pending Salary (the salary of the last month, when payroll does not pay it), Other Additions and Other Deductions, with the reason. When payroll carried other deductions forward because deductions from a wage may not take more than half of it, the screen says how much is not withheld yet: add it to Other Deductions to recover it from the settlement.
6. Below, the screen lists what the settlement pays: the subtotal, plus the pending salary and other additions, less the other deductions, the Outstanding employee loans (recovered) and, for an employee insured under a pension scheme, the Employee's pension contribution on the final salary. Check the Net Payable Amount and click Create Settlement.

1 The Settlement Type is recorded on the settlement; 2 the Last Working Day decides the service, the wage and the leave. 3 The Gratuity Amount, the leave encashment and any unused compensatory time off add up to the 4 Subtotal, before the adjustments. 5 The Net Payable Amount is what the employee receives.

The settlement is saved as Draft. Verasol sets the employee's last working day: payroll pays them up to that day and no further. Outstanding employee loans are recovered from the settlement in full, including instalments payroll carried forward.

A final salary paid by the settlement carries pension contributions like a payroll month: for an employee insured under a pension scheme, the employee's share is withheld from the net payable, and the employer's share is the company's cost. Both are payable to the pension fund.

One employee has one open settlement. To change a draft, withdraw it from the list and create a new one; withdrawing puts the employee's exit date back.

Pay the settlement#

1. Click Approve & Mark Paid on the draft.
2. Check the net payable, and the loans and the employee's pension contribution it includes.
3. Enter the Payment Reference, choose the bank account and the payment date (on or after the last working day: the gratuity is earned up to that day). When the settlement has other deductions, choose the account they go to: Other Income (a cost recovered from the employee), or a liability account when they are owed to someone else.
4. Click Confirm Payment.

Verasol works the figures out again first: if anything changed since the draft, it updates the draft and asks you to check it. Once paid, the settlement's status is Paid, the employee's loans are closed and the employee is deactivated. 2 Download PDF gives the settlement statement.

For an employee insured under a pension scheme, the shield button on the paid settlement (Pay the pension contributions on the final salary to the fund (or cancel that payment)) records the payment of both shares to the fund from a bank account.

3 Cancel payment (reverses its journal entry) undoes a payment recorded by mistake: its entry is reversed, the loans it recovered are reopened, the employee is active again and the settlement is a draft again.

What Verasol books#

The settlement uses the provisions first. When the settlement of the example above (AED 49,227.77: gratuity AED 37,063.97 and 36.86 days of leave, AED 12,163.80) was paid, the provisions covered it exactly and Verasol posted:

When the gratuity or leave is more than the provision, the difference goes to End of Service Benefits Expense or Leave Salary Expense; a provision that is more than needed is released to the same accounts. A pending salary, other additions and unused compensatory time off are debited to the employee's salary account (Salaries & Wages unless the employee has an account of their own); loans recovered are credited to Employee Loans & Advances, and other deductions to the account you choose (Other Income by default). For an employee insured under a pension scheme, the employer's contribution on the final salary is debited to the employer pension contributions account (for example 6007 Employer Pension Contributions), and both shares are credited to Pension Contributions Payable (for example 2260) until you pay the fund.

See a settlement#

View Details (the eye) on a settlement opens Settlement details.

1 Settlement figures are the figures the settlement was saved and booked with, the same as on its PDF, down to the 2 Net Payable. Once the settlement is paid, 3 Payment shows the payment date, the reference, the bank account and the journal entry, where other deductions were credited and whether the pension contributions on the final salary have been paid to the fund. 4 Download PDF gives the settlement statement.

The gratuity provision#

You do not wait for an employee to leave to recognise the gratuity. Every month, payroll brings the provision up to the gratuity each employee has earned by the month-end, counted from their first day (it is earned from day one, even though it is due only after one year). For example, the September 2026 payroll posted:

The leave salary provision works the same way for unused annual leave. See Leave.

Gratuity provision report at the top of Payroll & HR opens the report that checks the provision: what every employee is entitled to, what the books hold, and whether they agree.

1 Total entitlement is the gratuity due if every employee's service ended on the report date. 2 Provision in the books is the balance of the End of Service Benefits Provision account. 3 Unexplained difference compares the books with the gratuity earned by the end of the latest payroll month. When they do not agree, the report lists the usual causes: an exit date or a salary change recorded after that month's payroll was processed, a payroll that was not posted, or a journal entered by hand to the provision account.

See Stock and other reports for the whole report.

Related#

• Run payroll and WPS
• Leave
• Attendance and overtime
• Employee loans and expense claims
• Payroll opening balances
• Stock and other reports