UAE Gratuity Explained: How End-of-Service Pay Is Calculated

End-of-service gratuity is one of the most valuable parts of a private-sector job in the UAE, and one of the most misunderstood. It is a lump sum your employer owes you when your contract ends, calculated from your length of service and your basic salary. Done right, it can be worth many months of pay.

The rules sit in Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations and its Executive Regulations, enforced by the Ministry of Human Resources and Emiratisation (MOHRE). This article explains the formula as of 2026, works through real numbers, and covers the changes that matter most: what happens when you resign and how the alternative savings scheme works.

You can calculate your own figure instantly with our gratuity calculator. For wider context, see our labour law guide.

Who is entitled to gratuity?

You qualify if you worked for the same employer for at least one year of continuous service. The law covers private-sector employees on the mainland and in most free zones. Some places have their own rules, notably the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). UAE nationals in the private sector are covered by pension contributions to the General Pension and Social Security Authority (GPSSA) rather than gratuity. Federal and local government staff follow separate pension or end-of-service regimes.

The formula

Gratuity is based on basic salary only: the fixed wage excluding housing, transport, bonuses and other allowances. The law then sets two bands.

Years of service	Gratuity entitlement
First 5 years	21 days of basic pay for each year
Beyond 5 years	30 days of basic pay for each additional year

Four more rules complete the picture:

• Pro rata. Part-years count proportionally. Three years and six months is 3.5 years.
• Cap. Total gratuity cannot exceed two years' pay, that is 24 months of basic salary.
• Unpaid leave is excluded. Days of unpaid leave are subtracted from your service period.
• Daily wage. The standard method divides monthly basic salary by 30 to get one day's pay.

The step-by-step method is:

1. Divide monthly basic salary by 30 to get the daily wage.
2. Work out service in years, subtracting unpaid leave.
3. Multiply the daily wage by 21 for each of the first five years, and by 30 for each year after.
4. Check the result against the cap of 24 months of basic pay.

Worked examples

Example 1: three years, simple case

Fatima earns a total package of AED 14,000, of which AED 8,000 is basic salary. She leaves after exactly three years.

• Daily wage: AED 8,000 divided by 30 = AED 266.67
• Entitlement: 3 years x 21 days = 63 days
• Gratuity: 63 x AED 266.67 = AED 16,800

Her allowances of AED 6,000 are ignored. If her contract had shown a basic salary of AED 10,000, she would receive AED 21,000 instead, which is why the split in your offer letter matters. Use the salary breakdown tool to see yours.

Example 2: seven and a half years

Omar earns a basic salary of AED 12,000 and has worked 7 years and 6 months.

• Daily wage: AED 12,000 divided by 30 = AED 400
• First 5 years: 5 x 21 = 105 days
• Remaining 2.5 years: 2.5 x 30 = 75 days
• Total: 180 days x AED 400 = AED 72,000

That equals six months of basic pay.

Example 3: unpaid leave

Priya has a basic salary of AED 10,000 and was employed for four years, but she took 60 days of unpaid leave.

• Daily wage: AED 10,000 divided by 30 = AED 333.33
• Service: 4 years is 1,460 days, less 60 days = 1,400 days, or 3.836 years
• Entitlement: 3.836 x 21 = 80.55 days
• Gratuity: 80.55 x AED 333.33 = about AED 26,850

Without the unpaid leave, she would have received 84 days, or AED 28,000. Practical advice: if you plan a long unpaid break, ask HR what it does to your end-of-service date.

Example 4: the two-year cap

Khalid has a basic salary of AED 15,000 and has served 30 years.

• First 5 years: 105 days
• Next 25 years: 750 days
• Uncapped total: 855 days, equal to 28.5 months of basic pay
• Cap: 24 months x AED 15,000 = AED 360,000

The cap applies once service passes roughly 25 and a half years, so for most employees it never bites.

Resignation versus termination under the current law

Under the older law, resigning before five years cost you part of your gratuity: one third for service between one and three years, and two thirds between three and five. That penalty is gone under the 2021 law. Whether you resign or your employer ends your contract, you are generally entitled to gratuity for completed service at the same rates, as long as you have at least one year of continuous service and you follow the notice rules.

Important points:

• You must still give the notice period in your contract, which is between 30 days and 90 days under the law, or the employer may claim compensation.
• If your contract is terminated for serious misconduct, the employer can dismiss you without notice, and gratuity disputes in that situation are more complicated. Take advice from MOHRE or a lawyer.
• Leaving before one year means no gratuity.
• Under the 2021 law, contracts are fixed-term (up to three years, renewable), and the gratuity formula is the same whether a contract is renewed or simply ends.

When must you be paid?

The employer must settle all final dues, including gratuity, salary owed and unused annual leave, within 14 days of the end of the employment relationship. If it does not, you can file a complaint with MOHRE through the website at mohre.gov.ae or its call centre on 600 590 000. Keep copies of your contract, payslips, resignation letter and any correspondence.

The alternative savings scheme

Since 2023 the UAE has offered an optional alternative to the traditional lump sum. Under the voluntary investment-based scheme, the employer pays monthly contributions into a fund run by an approved provider, instead of holding the gratuity as a liability on its books. The published contribution rates are linked to the same entitlement: roughly 5.83% of basic salary for employees in their first five years and 8.33% afterwards, though you should confirm the current percentages on the MOHRE website. The savings can grow or fall with investment results, and are paid out when you leave.

Points to check if your employer offers it:

• Whether you must opt in, and whether you can opt out.
• What the fund invests in and what the fees are.
• Whether your employer still guarantees the statutory minimum if returns are poor.
• What happens to your savings if you move employers.

The DIFC has a separate scheme, the DIFC Employee Workplace Savings plan (DEWS), which applies to DIFC employers instead of the traditional gratuity.

Practical tips

• Check the basic salary line in your contract, not just the headline package.
• Keep a record of any unpaid leave and your exact start date.
• Run the figure yearly with the gratuity calculator so there are no surprises.
• Remember that your final payment may also include unused leave and other dues.
• If you are moving to another emirate or planning to relocate, read our moving to the UAE checklist.

Frequently asked questions

Is gratuity calculated on basic or total salary?

On basic salary only. Housing, transport and other allowances are excluded, so a higher basic proportion means a higher gratuity.

Do I get gratuity if I resign?

Yes, under Federal Decree-Law 33 of 2021 you are generally entitled to gratuity for your completed service if you have at least one year. The old reduction for resigning before five years no longer applies.

Is there a maximum gratuity?

Yes. The total cannot exceed two years of basic pay, or 24 months.

Does unpaid leave reduce my gratuity?

Yes. Unpaid leave days are not counted as service, so they reduce the service period used in the formula.

How long does my employer have to pay?

Final dues must be paid within 14 days of your employment ending. If you are not paid, complain to MOHRE.