How Your End of Service Gratuity Gets Calculated
One employee, one resignation, one full OMR calculation, including the payment most final settlements quietly leave out.
When Rashid, an operations coordinator at a logistics company in Ghala, resigns after six and a half years, his end of service gratuity is not one simple number. Oman's Labour Law changed the formula on 31 July 2023, so anyone who joined before that date gets paid under two different rules for two different chunks of the same job. Here is the full calculation, done step by step, including the payment most final settlements quietly leave out.
Who actually gets a gratuity
End of service gratuity is a one-time payment an employer owes a worker when the job ends, based on how many years that person worked there. In Oman, this specific payment only applies to employees who are not part of the Social Protection Fund (Oman's government pension and savings system for workers), which in practice means non-Omani employees.
Omani employees build up a pension through the Social Protection Fund instead of receiving a gratuity. If you are Omani, ask payroll about your Social Protection Fund contributions instead, since the rest of this article does not apply to you. If you are a non-Omani employee, keep reading, because the rules for you changed in the middle of 2023.
The formula and the 2023 turning point
Before 31 July 2023, Oman's old Labour Law set gratuity at 15 days of basic wage for each of the first three years of service, then one month of basic wage for every year after that. Basic wage means your salary before allowances like housing, transport or a phone allowance are added. It is not the same as your total gross pay.
That changed with Royal Decree 53/2023. From 31 July 2023 onward, gratuity is at least one full month of basic wage for every completed year of service, from year one, with no lower 15-day tier.
The Ministry of Labour confirmed in a circular this year that when a job spans both periods, the two rules are not blended into one average rate. Service before 31 July 2023 is calculated under the old formula, service from that date onward is calculated under the new formula, and the two amounts are added together.
- Before 31 July 2023: 15 days of basic wage per year for years one to three, then one month of basic wage per year after that.
- From 31 July 2023 onward: one full month of basic wage per completed year, from day one, with partial years paid proportionally.
Rashid's full calculation
In this example, Rashid joined the company on 1 March 2020 with a basic wage of OMR 450 a month (his total gross pay, including allowances, is OMR 600). His last working day is 31 August 2026, giving him six years and six months of service split across the July 2023 change. This mirrors the two-part method described in an earlier public clarification from the Ministry of Labour, and it applies whether someone resigns or is asked to leave. Rashid also has 10 unused annual leave days when he departs.
| Service period | Rule applied | How it is worked out | Amount (OMR) |
|---|---|---|---|
| 1 Mar 2020 to 31 Jul 2023, years 1 to 3 | Old law, 15 days per year | 3 years x (450 / 2) | 675.000 |
| 1 Mar 2020 to 31 Jul 2023, remaining 5 months | Old law, 1 month per year, pro-rated | 450 x 5/12 | 187.500 |
| 1 Aug 2023 to 31 Aug 2026, 3 full years | New law, 1 month per year | 450 x 3 | 1,350.000 |
| 1 Aug 2023 to 31 Aug 2026, remaining 1 month | New law, 1 month per year, pro-rated | 450 x 1/12 | 37.500 |
| Gratuity subtotal | Old plus new periods added together | 675.000 + 187.500 + 1,350.000 + 37.500 | 2,250.000 |
| Unused leave, 10 days | Gross wage divided by 30, times days | (600 / 30) x 10 | 200.000 |
| Total owed at departure | Gratuity plus leave payout | 2,250.000 + 200.000 | 2,450.000 |
The two payments people forget
Two mistakes show up again and again when this is worked out by hand. The first is using gross pay instead of basic wage, which inflates the number and sets an expectation the law does not support. The second is forgetting that unused annual leave is a separate, additional entitlement, not something already folded into gratuity.
- Basic wage only. Housing, transport and other allowances are excluded from the gratuity calculation itself.
- Unused leave is paid on top of gratuity, at the employee's daily wage rate, not absorbed into it.
- Partial years still count. You do not lose the last few months of service just because you did not finish a full year.
What this means for you
If you are leaving a job, ask for your exact start date, your last basic wage figure, and a written breakdown before you sign your final settlement. If you started before 31 July 2023, check that your employer actually split the two periods instead of applying one rate to your whole service, since that single error can change the total by hundreds of Rials.
If you run payroll for a small team, this two-part calculation, plus the separate leave payout, is one of the easiest places to make a costly mistake in a spreadsheet. Payroll tools built for Oman, including Amaal's HRM & Payroll module, run both halves automatically and flag the July 2023 split date so nobody has to remember it manually.
If you are the one resigning, our guide on notice, handover and final pay covers what else is owed alongside gratuity.
The bottom line
Gratuity in Oman is not a guess or a round number handed over at the door. It is calculated in two blocks around 31 July 2023, on basic wage only, with unused leave added separately on top. Whether you are packing up your desk or running payroll for someone who is, that is the whole formula, nothing more and nothing less.
