End-of-service gratuity is a lump sum your employer pays when your employment ends, as long as you have completed at least one year of continuous service. Federal law sets it and there is only one formula, but the details trip people up, mainly the question of which part of your salary actually counts. That is where most disputes start.
If you only want the number, use our UAE gratuity calculator. If you want to know where that number comes from, the rest of this explains it.
The formula
Gratuity comes under Article 51 of Federal Decree-Law No. 33 of 2021, the UAE Labour Law that has applied since 2 February 2022. The maths is simple once you have your daily wage.
Your daily wage is your basic monthly salary divided by 30. You earn 21 days of that daily wage for each of your first five years of service, and 30 days for each year after that. Add up the days, multiply by the daily wage, and you have your gratuity.
Once you pass the one-year mark, any extra time counts pro-rata, so four and a half years is paid as four and a half years.
Worked examples
Three years at AED 10,000 basic. The daily wage is AED 333.33. Three years at 21 days each comes to 63 days. 63 times AED 333.33 gives a gratuity of AED 21,000.
Eight years at AED 15,000 basic. The daily wage is AED 500. The first five years give 105 days (5 x 21) and the next three give 90 days (3 x 30), for 195 days in total. 195 times AED 500 gives AED 97,500.
It is worked out on basic salary, not your full package
This is the one people get wrong most often. Gratuity uses only your basic wage, the figure your contract labels “basic salary.” Housing, transport and other allowances do not count, even when they make up a big share of what you actually take home. If your contract is vague about where basic ends and allowances begin, sort that out before you reach your final settlement.
Who qualifies?
Any full-time private-sector employee who finishes at least one year of continuous service qualifies. Under twelve months earns nothing. Probation, annual leave and sick leave all count towards your service. Unpaid leave does not, and it gets taken off the total.
Resignation and termination now pay the same
The old law let employers dock part of your gratuity if you resigned from an unlimited contract. That penalty is gone. Whether you resign or get terminated, the gratuity is the same once you have completed your qualifying year. The one exception is dismissal for one of the serious reasons listed in Article 44, which can forfeit the entitlement.
The two-year cap
Your total gratuity cannot go above two years’ wage, no matter how long you have worked. It rarely comes into play, but it matters once tenures get long.
Cases that change the calculation
Part-time and flexible contracts are paid pro-rata, based on the ratio of your contracted hours to full-time hours, under Cabinet Resolution No. 1 of 2022. Any unpaid leave is stripped out of the service period first. The DIFC and ADGM free zones run their own end-of-service systems rather than the federal rules. And some employers now use the voluntary Savings Scheme under Cabinet Resolution No. 96 of 2023, where contributions into a fund replace the traditional gratuity.
When it must be paid
Employers have to settle all end-of-service dues, gratuity included, within 14 days of the employment ending.
Calculate yours
To get your figure without doing the sums by hand, use the UAE gratuity calculator. Put in your basic salary and your dates, and it applies the formula, the one-year threshold and the two-year cap for you.
For employers, gratuity is just one part of offboarding. The same process covers visa cancellation, the final WPS run and the end-of-service settlement. ClearPass HR Solutions handles that whole workflow as part of payroll. Talk to a specialist to see how it would fit your business.
FAQ
How do you calculate gratuity in the UAE?
Take 21 days of basic salary for each of your first five years of service and 30 days for each year after that, using a daily wage of basic salary divided by 30. Add up the days, multiply by the daily wage, and cap the result at two years’ wage. You need at least one year of service to qualify.
Is gratuity based on basic or gross salary?
Basic salary only. Allowances are excluded.
Do you get gratuity if you resign?
Yes. It is the same amount as termination, as long as you have completed one year of service.
What is the maximum gratuity in the UAE?
It cannot be more than two years’ wage.
How many days of gratuity do you get per year?
21 days of basic salary per year for the first five years, then 30 days per year after that.