If you're leaving a job in the UAE and want a fast answer: you're entitled to 21 days of basic salary for each completed year of your first five years of service, and 30 days of basic salary for every year beyond that. You need at least one full year of continuous service to qualify. The total payout cannot exceed two years' worth of your basic salary. Gratuity is always calculated on your last basic wage, not your full package.
Gratuity in the UAE, formally known as end-of-service benefit, is a statutory payment governed by Federal Decree-Law No. 33 of 2021. Every private-sector employee who has completed at least one year of continuous service is entitled to it when their employment ends, regardless of whether they resigned or were let go.
The formula itself hasn't changed in 2026, but understanding how it applies to your specific situation, your contract type, your salary structure, and the reason for leaving, makes a significant difference to what you'll actually receive.
According to the UAE Ministry of Human Resources and Emiratisation (MoHRE), gratuity is calculated as follows:
For the first five years of service: 21 days of basic salary per year.
For every year beyond five years: 30 days of basic salary per year.
The total gratuity cannot exceed two years' basic salary. Employees with less than one year of service receive nothing.
This is where many employees get caught off guard. Basic salary is not your take-home pay. It excludes all allowances, including housing, transport, utilities, phone, and any other add-ons written into your contract. If your contract states a basic salary of AED 8,000 and a housing allowance of AED 3,000, your gratuity is calculated on AED 8,000 only.
Check your employment contract or your most recent payslip. The basic salary line item is the number you need.
Employee works for 3 years. Basic salary: AED 10,000 per month.
Daily basic salary: AED 10,000 x 12 months / 365 days = AED 328.77 per day.
Gratuity: 21 days x AED 328.77 x 3 years = AED 20,712.
Employee works for 7 years. Basic salary: AED 12,000 per month.
Daily basic salary: AED 12,000 x 12 / 365 = AED 394.52 per day.
First five years: 21 days x AED 394.52 x 5 = AED 41,425.
Years six and seven: 30 days x AED 394.52 x 2 = AED 23,671.
Total gratuity: AED 65,096.
This is a common scenario. Two full years at AED 9,000 basic salary.
Daily rate: AED 9,000 x 12 / 365 = AED 295.89 per day.
Gratuity: 21 days x AED 295.89 x 2 = AED 12,427.
You are entitled to a pro-rated gratuity for any partial year worked beyond a completed year, so even a few additional months count.
Your years of service run from your official start date to your last working day, including any notice period served. This is straightforward for most employees, but a few situations can complicate the count.
Unpaid leave days are excluded from the service calculation. If you took 30 days of unpaid leave over the course of your employment, those 30 days are deducted from your total service period. This was formally confirmed by MoHRE in 2023.
Approved paid leave, sick leave within legal limits, and public holidays are all included. The clock does not stop during those periods.
For partial years, gratuity is paid on a pro-rata basis. If you have worked four years and eight months, you receive gratuity for four full years plus eight twelfths of the annual entitlement for the fifth year.
Under the updated UAE Labour Law, all employment contracts are now meant to be fixed-term, meaning limited contracts. The Ministry of Human Resources and Emiratisation has been transitioning employees from older open-ended arrangements since 2022. If you started a new job after that transition, you're almost certainly on a limited contract.
That said, some employees are still working under legacy unlimited contracts, and the rules for those differ, particularly when it comes to resignation.
Under a limited contract, the gratuity calculation is the same whether you resign or are terminated, provided you have served at least one year and completed your notice period. The 21 and 30 day formula applies in full.
If you are still on an older unlimited contract and you choose to resign, a sliding scale reduces your entitlement:
Between one and three years of service: you receive one third of the standard gratuity amount.
Between three and five years of service: you receive two thirds of the standard amount.
Over five years: you receive the full amount.
If the employer terminates your unlimited contract rather than you resigning, you receive the full calculation regardless of how long you served.
This distinction matters. An employee on a legacy unlimited contract who resigns after two years receives significantly less than one who is terminated after the same period.
For most employees on current limited contracts, the reason for leaving no longer affects the gratuity calculation. Resign or be terminated, the formula is the same after one year of service.
The important caveat is your notice period. If you resign and fail to serve your contractual notice period, your employer may have grounds to deduct the equivalent wages from your final settlement. Serving your notice in full protects your full entitlement.
There are specific circumstances under UAE Labour Law where an employee can resign without notice and still retain full gratuity rights, including situations involving employer misconduct, salary non-payment, or unsafe working conditions. Those cases fall under Article 45 of the Labour Law.
Because gratuity is calculated on your last basic salary, any reduction to that salary shortly before your departure directly reduces your payout. This is a legal mechanism, but it can be used in ways that disadvantage employees who aren't paying attention.
Ahmed Odeh, Managing Partner at MIO and Partners, advises employees to be cautious before signing any salary-reduction addendum close to the end of employment. If the basic wage is validly reduced before termination, it lowers the gratuity calculation. However, if the reduction was imposed specifically to defeat statutory entitlements, an employee may have grounds to challenge it.
Before signing any contract amendment that reduces your basic salary, consider how it will affect your gratuity calculation, particularly if you're within a year or two of leaving.
An employer cannot withhold gratuity simply because a dispute exists, because they're unhappy with the employee's performance, or because the employee resigned. Gratuity is a statutory entitlement once the legal conditions are met.
However, lawful deductions do exist. An employer may reduce the final amount to recover outstanding loans made to the employee, to reclaim documented overpayments, or to satisfy damages confirmed by a court judgment. These deductions must follow procedures set out in the Labour Law and cannot be applied arbitrarily.
What this means practically: keep records of any loans or advance payments from your employer throughout your tenure. Surprises at settlement time are rarely in your favour.
Under Article 29 of the UAE Labour Law, all wages and end-of-service gratuity must be paid within 14 days of the contract end date. This is a hard deadline, not a guideline.
If payment is delayed beyond 14 days, you have the right to file a labour complaint with MoHRE. The Ministry will first attempt an amicable resolution before referring the matter to court. Keep all documentation: your contract, your payslips, your resignation letter or termination notice, and any correspondence about your final settlement.
Do not sign a clearance document, waiver, or any form confirming that all dues have been received unless payment has actually been made, or the document explicitly preserves your right to claim any shortfall. Once you sign a clean final settlement, reclaiming anything becomes significantly harder.
Since 2023, the UAE has offered an optional alternative to the traditional gratuity model for private-sector workers. Under this scheme, employers contribute to savings and investment funds on the employee's behalf each month, rather than accumulating a lump-sum liability payable at the end of employment.
Participation is at the employer's discretion. If your employer has enrolled in the scheme, your end-of-service benefit accumulates differently from the standard formula described above. Check with your HR department to confirm which system applies to your employment.
Take your last basic monthly salary, multiply it by 12, divide by 365 to get your daily rate, then multiply by 21 days for each of your first five years and 30 days for every year beyond that. The total cannot exceed two years of basic salary. You need a minimum of one year of service to qualify.
The formula remains: 21 calendar days of basic salary per year for the first five years, and 30 calendar days per year for service beyond five years. Gratuity is based solely on your last basic salary, not your full package. Unpaid leave days are excluded from your service calculation. Partial years are paid on a pro-rata basis.
UAE gratuity is governed by Federal Decree-Law No. 33 of 2021. The policy requires all private-sector employers to pay end-of-service gratuity to eligible employees within 14 days of contract termination. Employees need at least one full year of continuous service to qualify. All contracts are now standardised as fixed-term under current labour law, which means resignation and termination are treated equally under the gratuity formula for most workers. The total payout is capped at two years of basic salary.
Count from your official start date to your last working day, including any notice period you served. Subtract any unpaid leave days taken during your employment. The remaining figure is your qualifying service period. Partial years beyond a completed year are included on a pro-rata basis: eight months beyond year four, for example, counts as eight twelfths of one year's entitlement.
No. Gratuity is calculated exclusively on your basic salary. Housing, transport, utility, phone, and any other allowances written into your contract are excluded from the calculation.
File a labour complaint with MoHRE if payment hasn't been made within 14 days of your contract end date. Do not sign any final settlement document before receiving payment, or unless the document explicitly preserves your right to claim any outstanding amount.
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