End-of-Service Gratuity in Oman: Why One Employee Needs Two Calculations

Oman's Labour Law, issued by Royal Decree 53/2023, came into force on 31 July 2023 and changed how end-of-service gratuity accrues. The rule now is straightforward: not less than one month's basic wage for each completed year of service, calculated on the employee's last basic wage, with partial years paid pro rata.

What is not straightforward is that the previous regime accrued differently — fifteen days' basic wage for each of the first three years, and one month for each year after that. Service before the commencement date keeps the old treatment. So for anyone employed across 31 July 2023, the entitlement is the sum of two separately calculated periods, and that is where the arithmetic goes wrong.

A worked example

Take an employee who joined on 1 August 2020 and leaves on 31 July 2026 — six years exactly, three under each regime. Assume a final basic wage of OMR 900. The salary here is an illustration chosen to make the arithmetic legible, not a typical figure.

Two details in that table do most of the damage when they are missed. The first is that both halves are calculated on the last basic wage, not on what the employee earned at the time — so a promotion in 2025 revalues the 2020 service as well. The second is that the old regime's fifteen-day rate applied only to the first three years of service; an employee who had already passed that mark before the law changed accrues at one month throughout, and treating them as a fifteen-day case understates what they are owed.

Who this actually applies to

Gratuity is owed to workers not covered by the Social Protection Law, which in practice makes it primarily an expatriate entitlement — Omani nationals accrue through the social insurance system instead. This is worth getting right at the level of the employee record rather than by assumption, because it determines whether a leaver generates a gratuity liability at all.

It also means an accrual provision that treats the whole workforce uniformly is wrong in one of two directions, and the direction it is wrong in changes as the workforce mix changes.

Where the spreadsheet fails

The failure is rarely the formula. It is that the formula was written once, correctly, by somebody who has since left, and it encodes assumptions nobody restates: that service is continuous, that basic wage is the right base, that the split date is applied to the day rather than the year.

The specific cases that break it are predictable. Unpaid leave that may or may not count toward service. A contract converted from fixed term to indefinite. An employee transferred between group entities whose service should carry across. A salary structure where the distinction between basic wage and allowance was never clean, so the base itself is arguable. Each is a judgement, each is defensible when documented, and none is safe when it lives in a cell reference.

The consequence is not usually a dispute. It is a provision in the accounts that nobody can reproduce, discovered when an auditor asks how the number was derived.