Accurately Valuing End-of-Service Gratuities: Common Pitfalls

In Saudi Arabia, the UAE, and across the Gulf, end-of-service gratuity obligations represent a significant long-term liability for employers. Yet many organisations continue to rely on simplistic or outdated estimation methods. Common shortcomings include using static discount rates, ignoring expected salary increases, and failing to account for workforce-specific demographics such as age distribution, staff turnover patterns, and retirement behaviour.

These pitfalls can materially understate liabilities and lead to volatile financial reporting.

At Royal Falconian, we apply internationally recognised actuarial techniques, compliant with IAS 19 and local labour laws, to provide accurate and forward-looking actuarial valuations. Our models incorporate group-specific salary escalation, realistic attrition assumptions, and actuarial decrement tables tailored to the demographic profile of each employer.

This allows HR, finance, and audit teams to understand the true cost of these obligations and plan effectively for their funding and disclosure.