How gratuity is calculated in the UAE
End-of-service gratuity is a lump sum your employer pays when your employment ends, as long as you completed at least one year of continuous service. For private-sector expatriates it is set by Article 51 of Federal Decree-Law No. 33 of 2021 (the UAE Labour Law). The formula has not changed under the current law:
| Length of service | Gratuity per year |
|---|---|
| Less than 1 year | Nothing |
| 1 to 5 years | 21 days of basic salary per year |
| More than 5 years | 21 days per year for the first 5 years, then 30 days per year for the rest |
Step-by-step example
Suppose your basic salary is AED 6,000 per month and you worked 7 years and 3 months:
- Daily basic wage = 6,000 × 12 ÷ 365 = AED 197.26
- First 5 years: 5 × 21 = 105 days × 197.26 = AED 20,712.33
- Remaining 2.25 years: 2.25 × 30 = 67.5 days × 197.26 = AED 13,315.07
- Total gratuity = AED 34,027.40
Part-years count pro rata once you pass one full year. The total is capped at two years' wages - AED 144,000 in this example, so the cap rarely bites before roughly 21 years of service.
Rules people often miss
- Basic salary only. Housing, transport, utilities and other allowances are excluded. Two people with the same total package can get very different gratuities if their basic shares differ.
- Unpaid absence does not count. Days of absence without pay are subtracted from your service period before the calculation.
- Resigning no longer costs you gratuity. Under the old law, resigning from an unlimited contract before 5 years reduced the payout. That system ended in February 2022 - see limited vs unlimited contracts.
- Your employer must pay within 14 days of the contract ending, together with any outstanding wages, and may deduct amounts you owe the company.
- Part-time and other work models get gratuity pro-rated by working hours (Cabinet Resolution No. 1 of 2022, Article 30).
- DIFC is different. The Dubai International Financial Centre replaced gratuity with the DEWS workplace savings scheme. Some other free zones have their own arrangements.
- UAE nationals are covered by the GPSSA pension system instead of gratuity.
The optional Savings Scheme
MOHRE now offers employers a voluntary alternative: instead of accruing gratuity, the employer pays a monthly contribution (5.83% of basic salary under 5 years of service, 8.33% above) into an approved investment fund, and the employee receives the contributions plus returns. If your employer joined, gratuity already accrued before enrolment must still be settled under the traditional formula.
Sources
- UAE Government Portal - end of service benefits for the private sector
- Ministry of Human Resources and Emiratisation (MOHRE)
Run your own numbers with the UAE gratuity calculator.
This guide is general information, not legal advice. Employment cases differ - confirm your entitlements with MOHRE (hotline 80060) or a qualified lawyer.