If you're a private sector employee in the UAE, your End of Service Gratuity is calculated using a specific formula according to the new Federal Decree-Law No. 33 of 2021, which repealed the previous Labour Law of 1980. This guide will walk you through the process of calculating gratuity in the UAE, including an explanation of common mistakes made by HR departments.
Quick Answer: How Does Gratuity Work in The UAE?
The gratuity earned by an expatriate employee who has worked for one year continuously within the UAE private sector will be based on the basic salary received by him/her during the last month. In this regard, it is calculated as 21 days of salary for each of the first five years and 30 days of salary for each year thereafter. Unpaid leave will not count towards the calculation of the period.
Want the exact figure right away? Try the free UAE gratuity calculator.
What Is Gratuity in The UAE?
Gratuity, also called end-of-service benefit, is a lump sum an employer pays a foreign employee when their employment ends. It is set out in Article 51 of the UAE labour law and works as a substitute for a pension for expatriate workers. For the wider legal framework, see our UAE Labour Law guide.
The federal rules cover employees of private-sector employers on the UAE mainland and in free zones that apply federal labour law. Some groups follow different rules, covered in the special cases section below.
UAE Gratuity Formula
Step 1: Daily basic wage = Monthly basic salary ÷ 30
Up to 5 years of service: Gratuity = Daily wage × 21 × Years of service
More than 5 years: Gratuity = (Daily wage × 21 × 5) + (Daily wage × 30 × (Years of service − 5))
Limit: Total gratuity cannot exceed two years’ pay (24 × monthly basic salary).
Dividing by 30 follows the law itself, which treats a month as 30 days and a year as 365 days for all calculations. Some employers calculate the daily wage as monthly basic × 12 ÷ 365, which gives a slightly lower figure. If your contract or company policy specifies a method, check which one applies.
Who is Eligible For Gratuity in The UAE?
You are entitled to gratuity under Article 51 if all of these apply:
- You are a foreign (non-UAE national) employee.
- You work for a private-sector employer covered by the federal labour law.
- You work full-time. Gratuity for part-time, temporary, and flexible work is set by the law’s Implementing Regulation.
- You have completed at least one year of continuous service with the same employer (or its legal successor).
The reason your employment ends does not change eligibility. Resignation, termination, contract expiry, and mutual agreement all qualify.
How to Calculate Gratuity in UAE: Step by Step
- Find your last basic salary. Use the basic salary in your contract, not your total package. Leave out housing, transport, and other allowances.
- Work out your daily wage. Divide the monthly basic salary by 30.
- Calculate your length of service. Count from your start date to your last working day, then subtract any days of unpaid leave or unpaid absence.
- Apply the rates. Multiply the daily wage by 21 for each of the first five years, and by 30 for each year after that. Pay part-years proportionally.
- Check the limit. If the result is more than two years’ pay, the gratuity is capped at that amount.
Gratuity Calculation Examples
All examples below use a monthly basic salary of AED 10,000. The daily wage is AED 333.33, so 21 days is AED 7,000 and 30 days is AED 10,000.
| Length of service | Calculation | Gratuity (AED) |
|---|---|---|
| 11 months | Less than one year | 0 |
| 1 year | 7,000 × 1 | 7,000 |
| 2 years | 7,000 × 2 | 14,000 |
| 3 years 6 months | 7,000 × 3.5 | 24,500 |
| 5 years | 7,000 × 5 | 35,000 |
| 7 years | 35,000 + (10,000 × 2) | 55,000 |
| 10 years | 35,000 + (10,000 × 5) | 85,000 |
| 30 years | 35,000 + (10,000 × 25) = 285,000, capped | 240,000 (limit) |
Example with a part-year: 6 years 4 months
Basic salary is AED 15,000, so the daily wage is AED 500.
- First five years: 500 × 21 × 5 = AED 52,500
- Remaining 1 year 4 months (1.333 years): 500 × 30 × 1.333 = AED 20,000
- Total gratuity: AED 72,500
Example with unpaid leave: 3 years, including 30 days unpaid
Basic salary is AED 12,000, so 21 days’ pay is AED 8,400. The 30 unpaid days are removed from service, leaving 3 − (30 ÷ 365) = 2.918 years.
- 8,400 × 2.918 = about AED 24,510, instead of AED 25,200 without the unpaid leave.
To check your own figures, enter your basic salary and dates in the UAE gratuity calculator.
Maximum Gratuity Limit in The UAE
The law caps total gratuity at two years’ pay. In practice, that means a maximum of 24 months of basic salary.
Because the cap is set in days of pay, it applies at the same point for every salary level. Two years’ pay equals 720 days of basic salary. The first five years earn 105 days, and each year after that earns 30, so the limit is reached only after about 25.5 years of service. For almost every employee, the cap never comes into play.
What Counts As Basic Salary For Gratuity?
The law defines basic salary as the pay stated in the employment contract for the work performed, excluding any allowances or benefits in kind. So gratuity is calculated without:
- Housing, transport, utilities and other allowances
- Commission, bonuses and overtime pay
- Benefits in kind, such as company accommodation or a car
The calculation uses your last basic salary, not an average across your career. For employees paid by piece rate, the law uses the average daily wage instead.
This is why the split between basic salary and allowances in an offer letter matters. Two employees on the same total package can receive very different gratuity if their basic salaries differ.
Resignation vs Termination: Does It Change Your Gratuity?
No. Under the current UAE labour law, the gratuity formula is the same whether you resign or your employer ends the contract. The old reductions for resigning early (one-third or two-thirds of the entitlement) were part of the 1980 law and no longer apply.
Two points on dismissal are worth knowing:
- When an employer dismisses an employee as a disciplinary penalty, the law expressly preserves the employee’s right to gratuity.
- Article 51 contains no clause cancelling gratuity for dismissal without notice under Article 44, but it does allow the employer to deduct amounts legally owed or ordered by a court. Published guidance on Article 44 cases is not consistent, so take legal advice on any specific dismissal.
What Happened To Limited And Unlimited Contracts?
Under the old 1980 law, UAE employment contracts were either limited (fixed-term) or unlimited (open-ended), and the gratuity rules differed between them. Employees who resigned from an unlimited contract before five years received only one-third or two-thirds of their gratuity.
The current law removed this distinction. All employment contracts are now fixed-term and renewable, and extensions or renewals count towards continuous service. Employers were required to convert existing unlimited contracts to fixed-term contracts within a transition period, which has since ended.
If you worked for many years under an old unlimited contract, how that earlier service is treated can depend on the transitional provisions, which allow an employer to apply the old rules for indefinite contracts. Check with HR or a legal adviser if this applies to you.
Days That Do Not Count Towards Service
Gratuity is based on actual continuous service, so some periods are excluded:
- Unpaid leave taken with the employer’s approval
- Days of absence without pay
- The optional unpaid absence of up to 45 days a mother may take after maternity leave for illness related to pregnancy or childbirth
Paid leave, including annual leave, paid sick leave and paid maternity leave, counts as normal service.
When Must Gratuity Be Paid?
- Within 14 days of the contract ending, together with unpaid salary, leave encashment and other final dues.
- If the employee dies, the employer must pay gratuity and other entitlements to the family within 10 days.
- If payment is delayed or disputed, the employee can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE). Claims under the labour law cannot be heard after two years from the end of employment.
The Alternative: UAE End-of-Service Savings Scheme
Since October 2023, private-sector employers can join a voluntary savings scheme created by Cabinet Resolution No. 96 of 2023. Instead of paying a lump sum when the employee leaves, the employer makes monthly contributions to an approved investment fund:
- 5.83% of monthly basic salary for employees with less than five years of service
- 8.33% of monthly basic salary for employees with five years or more
These rates mirror the 21-day and 30-day gratuity accrual. The employee receives the contributions plus any investment returns when employment ends. Participation is the employer’s choice, and gratuity already earned before enrolment is preserved.
Special Cases
- UAE nationals receive end-of-service benefits under the pensions and social security law, not the Article 51 formula.
- DIFC and ADGM employees follow those free zones’ own employment laws and end-of-service rules.
- Domestic workers and government employees fall outside the federal labour law and have separate rules.
- Part-time and other work patterns follow the method set in the law’s Implementing Regulation.
How HR Teams Get Gratuity Right
Most gratuity errors come from a few recurring mistakes:
- Using total salary instead of basic salary
- Applying 30 days to every year once an employee passes five years, instead of only to the years after the fifth
- Still applying old-law resignation reductions
- Forgetting to deduct unpaid leave, or to pay part-years pro rata
- Missing the 14-day payment deadline
A payroll system such as Zimyo helps avoid these by calculating gratuity from salary and attendance records, including it in full and final settlements, and giving employees visibility through self-service. Zimyo’s payroll software is used by 2,500+ organisations across 40+ countries.
Final Word
Gratuity in the UAE is based on only three variables, namely, the last basic salary, length of continuous service, and the 21- and 30-day rates. Getting this right, adjusting for any unpaid days and observing the two-year limit will give the answer. To get your gratuity amount in seconds, simply use the UAE gratuity calculator. Automate your gratuity calculations and settlements with all your employees using Zimyo for free.
This article is for general information purposes only as of September 2026, based on Federal Decree-Law No. 33 of 2021 and other regulations. It does not constitute legal advice.
Frequently Asked Questions
Q. Do I get gratuity if I resign in the UAE?
Absolutely yes. Even if you resign from your employment or your employer terminates your employment, you get an equal amount of gratuity as long as you have served for at least one year continuously.
Q. Is UAE gratuity calculated on basic or gross salary?
Based on basic salary only. Basic salary is described in law as the salary paid as per the terms and conditions of the contract, without allowances or benefits in kind.
Q. What is the maximum gratuity in the UAE?
Gratuity total should not exceed two years' salary. For the normal 21-day and 30-day gratuity rates, this maximum amount can be attained after 25.5 years of service.
Q. How much gratuity do I get for 2 years in the UAE?
42 days of basic salary: 21 days for each year. On a basic salary of AED 10,000, that is AED 14,000.
Q. How much gratuity do I get for 5 years in the UAE?
105 days for basic salary: 21 days in each of the 5 years, which will total 35,000 based on a salary of 10,000. Every additional year adds 30 days.
Q. Is gratuity calculated the same way in Dubai?
Yes, for Dubai mainland and most free zones, which follow federal law. DIFC and ADGM have their own employment laws and end-of-service rules.
