How to Gratuity Calculation in Egypt: End-of-Service Pay

If you're leaving an Egyptian job — or letting someone go — the end-of-service payout is where disputes get ugly. Here's how to gratuity calculation actually works under the Egyptian Labour Law, and where employers quietly shortchange people.

Quick answer

Egypt doesn't have a Gulf-style "gratuity" system. Under Labour Law No. 12 of 2003, indefinite-contract employees are not entitled to a lump-sum gratuity for normal resignation. What you get instead: end-of-service compensation only in specific situations — arbitrary dismissal, expiry of a fixed-term contract, or where a collective/individual contract promises it. The standard formula courts apply is two months of total wage per year of service for arbitrary dismissal, plus accrued leave, notice pay, and any contractual bonuses. Fixed-term contracts pay out the remainder of the term.

When gratuity is actually owed

The word "gratuity" gets thrown around loosely in Egypt. Frankly, most private-sector employees on indefinite contracts get zero automatic gratuity when they resign. That's the law.

You are owed an end-of-service payment in these situations:

• Arbitrary or unjustified dismissal by the employer (Labour Law No. 12/2003, Art. 122). Compensation is set by the Labour Court and is typically no less than two months of total wage per year of service.^[1]
• Fixed-term contract terminated early by the employer without valid cause (Art. 110): you get the wages for the remaining term.
• Expiry of a fixed-term contract where the individual or collective agreement provides for end-of-service pay.
• Death, disability, or reaching pension age — social insurance pays out separately via the National Organisation for Social Insurance (NOSI).
• Employer bankruptcy or closure — priority claim on the estate.

For domestic workers, agricultural workers, and public-sector employees, different rules apply. Public-sector staff fall under Civil Service Law No. 81 of 2016.

How to gratuity calculation actually works

Two variables drive the number: total wage and years of service.

Total wage under Art. 1 of the Labour Law includes basic salary plus every regular allowance, commission, and bonus tied to work — housing allowance, transport allowance, regular productivity bonuses, and social allowances. Employers love to calculate on basic salary only. That's wrong, and the Court of Cassation has said so repeatedly.^[2]

Years of service counts every full year plus a proportional fraction for partial years. Probation counts. Approved leave counts. Unpaid absence generally does not.

The arbitrary-dismissal formula the Labour Courts apply:

Compensation = (Total monthly wage) × 2 × (Years of service)

Example. Total monthly wage of EGP 15,000, seven years of service, arbitrary dismissal: 15,000 × 2 × 7 = EGP 210,000.

Add to that:

• Notice period pay: 2 months if under 10 years' service, 3 months if 10+ years (Art. 111).
• Accrued annual leave: 21 days per year after the first year, 30 days after 10 years or age 50 (Art. 47), paid at total wage.
• Contractual bonuses already earned but unpaid.

Watch out: Signing a "final settlement" (mokhalasa nihaiya) at the HR desk on your last day can waive claims you didn't know you had. Egyptian courts will sometimes set these aside if the amounts are clearly unfair, but don't count on it. Read before you sign.

Social insurance vs. gratuity — don't confuse them

This is where people get muddled. Your monthly deductions to NOSI fund your pension and end-of-service insurance benefit, which is separate from any employer-paid gratuity or dismissal compensation.

Under Social Insurance and Pensions Law No. 148 of 2019, both employer and employee contribute a percentage of the insurance wage each month. When you leave employment, retire, or become disabled, NOSI pays either a monthly pension (if you qualify) or a lump-sum reimbursement of your share of contributions.^[3]

So a departing employee in Egypt can potentially collect three things:

1. Any court-awarded or contractual end-of-service compensation from the employer.
2. NOSI lump-sum or pension entitlement.
3. Accrued leave, notice pay, unpaid wages.

The employer's obligation and the state insurance obligation don't cancel each other out.

If you resign vs. if you're dismissed

Straight up: resignation kills most of the compensation. Article 119 lets you resign with written notice — 2 months (under 10 years) or 3 months (10+ years) — but you walk away with only accrued leave, unpaid wages, and any contractual end-of-service benefit written into your contract or the company's internal regulations.

Dismissal is different. If the employer terminates without one of the grounds listed in Art. 69 (serious misconduct, repeated violations after warning, etc.) or without following the correct disciplinary procedure, the dismissal is "arbitrary" and Art. 122 kicks in.

There's a middle path most people forget: constructive dismissal. If the employer materially changes your role, cuts your pay, or makes conditions intolerable, you can resign and still sue for arbitrary-dismissal compensation under Art. 123. You'll need evidence — emails, salary slips, HR correspondence.

What to do before you file a claim

The Labour Office (Maktab al-Amal) at your governorate is the first stop. Filing is free. You submit a complaint, they call both parties for conciliation within about 21 days. Most cases settle here because employers know the Labour Court will award the full statutory amount plus court fees.

If conciliation fails, you get a referral to the Labour Court. Labour cases are exempt from court fees under Art. 78 of the Labour Law. Bring:

• Employment contract (or proof of employment if none was signed)
• Last 12 months of pay slips or bank statements showing salary
• Insurance Form 1 and Form 6 from NOSI
• Termination letter, or evidence of constructive dismissal
• Written calculation of what you're claiming

Statute of limitations: one year from the date the right accrued (Art. 698 of the Civil Code, as applied to labour claims). Miss it and you lose.

For related reading, see our guides on Egyptian employment law basics and the Labour Office complaint process.