TaxSavvyQA

Accruing gratuity every month

Should we set aside end of service gratuity monthly instead of paying it all at exit?

The situation

Gratuity under Art. 54 is at least three weeks of last basic wage per year of service after one year.

The law

  • Art. 54, Labour Law No. 14 of 2004: Gratuity of at least three weeks of last basic wage for each year after one full year of service, pro rata for part years

What it means for you

For a worker on QAR 5,200 basic, one year of gratuity is 5,200 x 12 / 52 x 3 = QAR 3,600, so the monthly accrual is QAR 300. Booking it monthly gives true monthly costs and avoids a cash shock when long serving staff leave. Auditors will also expect the provision at year end.

What to do

  1. Compute the accrual for each worker.
  2. Post it monthly in the accounts.
  3. Recompute when basic wages change.
  4. Hold cash in reserve for expected exits.

We can do this for youPayroll set-up and monthly run through the Wage Protection System (WPS): QAR 600

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