UAE Gratuity Guide · Updated August 2026
How to Calculate Gratuity in the UAE: Formula, Examples and Current Rules
What end-of-service gratuity is worth under the law in force today — and why several of the rules people still quote were repealed in 2022.
Quick answer
UAE end-of-service gratuity is paid on basic salary only, after at least one year of continuous service. You earn 21 days' basic pay for each of the first five years and 30 days for each year after that, proportioned for part years. The total cannot exceed the wage of two years, and it is payable within 14 days of the contract ending.
Want the number rather than the method? Our UAE Gratuity Calculator works it out from your basic salary and length of service, and shows the arithmetic.
Key takeaways
- Gratuity is based on basic salary — housing, transport, utilities and furniture allowances are excluded.
- Nothing is payable below one year of continuous service.
- 21 days per year for years one to five; 30 days per year thereafter.
- Total gratuity cannot exceed the wage of two years.
- Unpaid absence does not count towards service.
- The limited-versus-unlimited contract rules were abolished in 2022 and no longer affect the calculation.
Who qualifies
End-of-service gratuity is payable to private-sector employees who complete at least one year of continuous service. Below one year there is no gratuity entitlement at all — although any annual leave you have accrued is still paid out separately, which is worth checking on the leave salary calculator.
Above one year, the UAE Government states that a worker is entitled to gratuity proportionate to the time served. Part years are normally calculated proportionately rather than rounded down to completed years — though the five-year step described below does move the figure.
The rates
| Length of service | Entitlement |
|---|---|
| Less than 1 year | No gratuity |
| Years 1 to 5 | 21 days' basic pay for each year of work |
| Beyond 5 years | 30 days' basic pay for each year following the first five |
| Maximum | The wage of two years |
| Basis | Basic salary, excluding allowances |
| Payable | Within 14 days of the contract ending |
Turning the days into money
The entitlement is expressed in days, so a daily wage is needed to convert it. The official guidance sets the day counts and states the basic-salary basis, but does not itself prescribe the arithmetic for converting a monthly salary into a daily one. The widely used approach — and the one our calculator applies — is basic monthly salary ÷ 30, consistent with the 30-day month the annual leave entitlement is expressed in. A contract, company policy or alternative scheme may provide a more favourable benefit than the statutory minimum, so it is worth reading yours.
Basic salary, not total salary
This is where most estimates go wrong. The UAE Government states that gratuity calculations use basic salary only, excluding allowances for housing, transportation, utilities and furniture.
For an employee on AED 8,000 basic plus AED 6,000 of allowances, gratuity is built on the 8,000. On a package of AED 14,000 that feels like a shortfall — but it is the structure of the contract, not a mistake in the payroll. If you are negotiating a package, the split between basic and allowances has a direct effect on what you leave with years later.
Worked examples
Example 1 — four years of service
Basic AED 8,000, 4 years
Daily wage = 8,000 ÷ 30 = AED 266.67
Days earned = 21 × 4 = 84 days
Gratuity = 84 × 266.67 = AED 22,400
Example 2 — crossing the five-year mark
Basic AED 8,000, 8 years
First 5 years = 21 × 5 = 105 days
Years 6 to 8 = 30 × 3 = 90 days
Total = 195 days × 266.67 = AED 52,000
The higher 30-day rate applies only to service beyond five years. It does not retrospectively upgrade the first five, which is the most common misreading of the rule.
Example 3 — a part year
Basic AED 6,000, 3 years and 7 months
Daily wage = 6,000 ÷ 30 = AED 200
Days = (21 × 3) + (21 × 7 ÷ 12) = 63 + 12.25 = 75.25 days
Gratuity = 75.25 × 200 = AED 15,050
The two-year cap
The total gratuity cannot exceed the wage of two years, however long the service. On the 30-day basis, two years is 720 days of pay. The first five years use 105 of those days, leaving 615, which at 30 days a year covers a further 20.5 years — so the cap is reached at roughly 25 years and 6 months of service. Beyond that, additional years add nothing.
One point here is genuinely unsettled.The law caps the benefit at "the wage of two years" without stating whether that means two years of basic wage or two years of total wage. Our calculator applies the basic-wage reading, which is the more conservative of the two.
It only matters for very long service — below roughly 25 and a half years the cap never comes into play. If it applies to you, take advice on your own facts.
Unpaid absence
Days of unpaid absence are not included in the service calculation. A long period of unpaid leave therefore reduces the service used to work out the gratuity. Ordinary paid annual leave is unaffected.
Deductions and when you get paid
The employer must pay outstanding wages, entitlements and gratuity within 14 days of the contract ending, and may deduct amounts the employee owes — typically a confirmed staff loan or a salary advance. Deduction is not a general right of set-off; a disputed amount is a matter for MOHRE rather than unilateral withholding, and it is reasonable to ask for the settlement broken down component by component before signing anything.
Gratuity is usually one line in a larger figure. Our final settlement calculator combines it with leave encashment, pending salary and deductions.
Outdated gratuity rules that no longer apply
A large amount of UAE gratuity guidance online — including some published by software vendors and law firms — still describes the previous legal regime. The UAE Government states that Federal Decree-Law No. 33 of 2021 took effect on 2 February 2022, replaced Federal Law No. 8 of 1980, and "abolished the ‘unlimited’ type of contracts and admitted only limited or fixed-term contracts".
So if a calculator or article does any of the following, it is working from a repealed law:
- Asks whether your contract is limited or unlimited. That category was abolished in 2022. Every contract is fixed-term now.
- Reduces gratuity to one third or two thirds on resignation. That scale belonged to the unlimited-contract rules under the 1980 law.
- Cites "Article 120". That is an article of Federal Law No. 8 of 1980, not of the law in force.
This matters commercially, not just academically. An employee working from the old one-third rule after three years of service would expect roughly a third of what the current law provides.
How resignation specifically affects the amount under the current law is not addressed on the government guidance page we rely on here, so we do not state a figure for it. Confirm your own position with MOHRE or a qualified adviser.
What this guide does not cover
- Part-time and other work models, which are treated differently under the law. This guide describes the system that applies to expatriate full-time private-sector employees under the federal Labour Law.
- UAE and GCC nationals, who are covered by pension and social insurance schemes rather than by the gratuity calculation.
- Free-zone employers operating their own employment regulations, such as DIFC and ADGM, which have separate end-of-service rules.
- Employers participating in an alternative end-of-service savings scheme in place of accruing gratuity.
Run your own numbers → Enter your basic salary and length of service, and the calculator shows the days earned, the daily wage and the total, with the arithmetic on screen.
Frequently asked questions
What is the formula for gratuity in the UAE?
Daily wage multiplied by the number of days earned. You earn 21 days of basic pay for each of the first five years of service and 30 days for each year after that. The daily wage is worked out from the basic monthly salary, and the total is capped at two years' wage.
Is gratuity calculated on basic salary or total salary?
Basic salary only. The UAE Government states that allowances for housing, transportation, utilities and furniture are excluded from the gratuity calculation. An employee on AED 8,000 basic plus AED 6,000 of allowances has gratuity built on the 8,000.
Do I get gratuity if I have worked less than one year?
No. One year of continuous service is the minimum. Below that there is no gratuity entitlement, though any accrued annual leave is still paid out.
How is gratuity calculated for part of a year?
Proportionately. The UAE Government states that a worker who completes one year of continuous service receives gratuity proportionate to the time served, so a period of three years and seven months earns 21 days for each of the three full years plus a proportionate amount for the seven months.
What is the maximum gratuity in the UAE?
The total gratuity cannot exceed the wage of two years. On the 30-day basis commonly used, that is 720 days of pay, which is reached at roughly 25 years and 6 months of service. Beyond that point additional service does not increase the gratuity.
Does unpaid leave count towards gratuity?
No. Days of unpaid absence are not included in the service calculation, so a long period of unpaid leave reduces the service used to work out the gratuity.
When must gratuity be paid?
Within 14 days of the termination of the contract, along with any other outstanding wages and entitlements. The employer may deduct amounts the employee owes, such as a staff loan or salary advance, before paying.
Do the old limited and unlimited contract rules still apply?
No. Federal Decree-Law No. 33 of 2021 took effect on 2 February 2022, replaced Federal Law No. 8 of 1980, and abolished unlimited contracts — only fixed-term contracts exist now. Any gratuity calculation that asks whether your contract is limited or unlimited, or that reduces gratuity to a third or two thirds on resignation, is working from the repealed law.
Is gratuity taxed in the UAE?
The UAE does not levy personal income tax on employment income, so UAE personal income tax is not deducted from gratuity. Lawful employment-related deductions may still apply, and another country may tax the amount if you are tax resident there.
Estimate for guidance only — this is not legal advice. Entitlements vary by contract and by the circumstances of the exit, and the law is amended from time to time. Confirm your position with MOHRE or a qualified adviser before relying on a figure.
Primary source: Federal Decree-Law No. 33 of 2021, summarised by the UAE Government on end-of-service benefits and employment laws and regulations. Reviewed August 2026.
Calculating gratuity by hand every time someone leaves?
Avance HRMS holds each employee's service dates, basic salary and outstanding advances, so an end-of-service figure comes out as a breakdown both sides can check rather than a single disputed number.