Restaurants, cafes & cloud kitchens
End-of-service gratuity for restaurant staff: how to accrue it
Gratuity is earned every month. It should be in your books every month too.
How gratuity is calculated
Under the UAE Labour Law, a full-time employee who completes at least one year of continuous service is entitled to end-of-service gratuity based on basic wage: 21 days' basic wage for each of the first five years, and 30 days' basic wage for each year after that, with a cap of two years' total wage. Free-zone employers may have their own rules or alternative savings schemes, so check which regime applies to your staff.
Why restaurants get caught out
Restaurants employ many staff, often for several years. When gratuity is only paid when someone leaves, a few departures in the same month can hit cash flow hard, and the profit and loss for every previous month was overstated.
Accrue it monthly
- Keep a list of staff with joining date and current basic wage
- Calculate each person's entitlement at month-end
- Book the increase as an expense and a liability
- Reconcile the liability when someone leaves and is paid
Corporate Tax
How gratuity provisions are treated for Corporate Tax depends on when the amounts are actually paid and on the accounting standard applied. Keep the calculation schedule with your records so the treatment can be supported.
Recent result
AED 36,000
of AED 40,000 in penalties waived for an IFZA free-zone company. We prepared the waiver request; the investor paid AED 4,000.
Not sure where you stand?
Send us your last VAT return or your trade licence. A chartered accountant will tell you what is in order and what needs attention. No obligation.