End-of-Service Gratuity in Oman: The 2023 Transition Rule, With Examples

End-of-service gratuity is one of the most misunderstood payments in Oman. It is also one of the easiest to get wrong, because the rules changed in 2023 and a lot of people are still calculating it the old way.

If an employee has worked through that change, their gratuity has to be calculated in two parts. Miss that, and you either underpay, which causes disputes, or overpay, which costs you money. Here is how it actually works now, with examples you can follow.

What End-of-Service Gratuity Is, and Who Gets It

End-of-service gratuity is a lump sum an employer pays a worker when they leave, based on how long they worked and their last basic salary.

One point clears up a lot of confusion: gratuity in Oman is for expatriate employees who are not covered by the Social Protection Law. Omani nationals do not receive gratuity in the same way, because they are covered by social insurance through the Social Protection Fund instead. So when we talk about gratuity here, we are mostly talking about your expat staff.

The payment is based on the employee’s last basic wage, not their total package. Allowances, bonuses, and other extras are not part of the basic wage for this calculation.

What Changed in 2023

Oman replaced its old labour law with a new one, Royal Decree 53/2023, which took effect on 31 July 2023. Article 61 of that law sets out the gratuity rules.

The change was significant. Under the old law, expatriate gratuity was calculated on a tiered scale. Under the new law, it is a single, more generous formula. Here is the difference.

The old formula (service before 31 July 2023):

• 15 days of basic salary for each of the first three years of service
• 30 days, which is one month, of basic salary for each year after that

The new formula (service from 31 July 2023 onward):

• One full month of basic salary for every year of service, from the very first year

So the new law roughly doubles what an employee earns for their first three years, since 15 days became a full month.

The Part Everyone Gets Wrong: The Transition Split

Here is the rule that trips people up.

If an employee started before 31 July 2023 and kept working after it, you cannot just pick one formula. Their service is split at that date. The time before 31 July 2023 is calculated with the old formula. The time from 31 July 2023 onward is calculated with the new formula. Then you add the two together.

The Ministry of Labour confirmed this split in a clarification, so it is not a grey area. It is how it must be done.

Worked Examples

Examples make this much clearer. These are illustrations to show the method, not legal advice.

Example 1: An employee who worked through the change

An expat employee earns a basic salary of OMR 500. They started on 1 August 2021 and leave on 31 July 2025, so four years total. Their service splits at 31 July 2023.

• Before the new law (1 Aug 2021 to 31 July 2023, two years): this falls in the first three years, so the old formula gives 15 days, half a month, per year. That is 0.5 x 500 x 2 = OMR 500.
• From the new law (1 Aug 2023 to 31 July 2025, two years): the new formula gives one month per year. That is 1 x 500 x 2 = OMR 1,000.
• Total gratuity: OMR 1,500.

Example 2: An employee hired after the change

An expat employee earns a basic salary of OMR 600. They were hired in 2024 and leave after three full years. All of their service falls under the new formula.

• Three years at one month per year: 600 x 3 = OMR 1,800.

Much simpler, because there is no split to worry about.

Other Things Worth Knowing

A few more points that affect the final number:

• Partial years count. Gratuity is paid pro-rata for fractions of a year, not just whole years.
• There is no maximum cap on gratuity in Oman.
• An employee dismissed for serious misconduct under Article 41 of the labour law may lose the entitlement.
• Oman does not reduce gratuity for resignation the way some Gulf countries do. Whether the employee resigns or the contract ends, the entitlement is generally the same.

There is also a bigger change on the horizon. A savings system for expatriate workers under the Social Protection Law is expected to come in by around July 2026. Once it starts, future end-of-service benefits for expats are planned to move into that system instead of accruing as a lump sum. Service built up before then is still settled under the current gratuity rules.

Why This Is Hard to Do by Hand

The split calculation is exactly the kind of thing spreadsheets get wrong. Someone has to remember the 31 July 2023 date, apply two different formulas, prorate the partial years, and use the correct basic wage. Do that across dozens of employees, each with a different start date, and mistakes are almost guaranteed.

This is where payroll software earns its place. NoorHR tracks each employee’s service before and after the transition date and applies the right formula to each period automatically, then combines them for the final settlement, with a full breakdown your finance team can check. You can see how it handles this and the rest of Oman compliance on the NoorHR page for organizations in Oman.

The goal is simple. Pay people exactly what they are owed, with a record that holds up if anyone ever questions it.

One note before you act on any of this. Gratuity rules are set by the Ministry of Labour, and details like eligibility and the upcoming savings system can change. Always confirm the current rules with the Ministry of Labour or a qualified advisor before finalizing a settlement.

Work with Masirat Technology

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