UAE HR guide
UAE Gratuity Calculation: Complete Guide with Worked Examples
Published · Last reviewed
Need the answer now?
Use Namya's free UAE Gratuity Calculator to estimate an employee's end-of-service gratuity in seconds.
What is UAE end-of-service gratuity?
End-of-service gratuity is a lump sum an employer pays when an employee's contract ends. For full-time foreign employees in the UAE mainland private sector, the entitlement is set by Article 51 of Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, as amended. Employees qualify once they have completed at least one year of continuous service.
Getting the UAE gratuity calculation right matters: it is usually the largest single payment in a final settlement, errors lead to disputes and MOHRE complaints, and accurate figures help you budget for a growing team.
Different rules can apply to employees in the DIFC and ADGM free zones, domestic workers, UAE and GCC nationals covered by pension schemes, and employers that have joined an approved alternative end-of-service savings scheme. This guide covers the standard mainland calculation only.
How UAE gratuity is calculated
- 21 days of basic salary for each of the first five years of service.
- 30 days of basic salary for each additional year after five years.
- Based on the employee's last basic salary, excluding allowances.
- Daily basic salary is the monthly basic salary divided by 30.
Basic salary vs total salary
Basic salary is the fixed wage in the employment contract before allowances. Total salary adds housing, transport and other allowances. Gratuity uses basic salary only, which is why the split between basic pay and allowances in a contract has a direct effect on the amount due.
Fractions of a year
Once the first full year is completed, part years count proportionately. An employee with three and a half years' service receives 3.5 × 21 = 73.5 days.
Unpaid absence
Days of unpaid absence are excluded from the period of service, which reduces the entitlement.
The statutory maximum
Total gratuity cannot exceed two years' wage, equal to 24 months of basic salary.
Worked example: four years of service
Employee details
- Monthly basic salary
- AED 10,000
- Monthly allowances
- AED 5,000
- Total monthly salary
- AED 15,000
- Completed service
- 4 years
- Unpaid absence
- 0 days
Calculation
- Daily basic salary
- AED 10,000 ÷ 30 = AED 333.33
- Gratuity entitlement
- 4 × 21 = 84 days
- Gratuity
- AED 10,000 ÷ 30 × 84
- Total gratuity
- AED 28,000
The AED 5,000 monthly allowances are excluded because gratuity is based on basic salary only.
Calculate Your Employee's GratuitySecond example: seven years of service
- Monthly basic salary
- AED 12,000
- First five years
- 5 × 21 = 105 days
- Additional two years
- 2 × 30 = 60 days
- Total entitlement
- 165 days
- Daily basic salary
- AED 12,000 ÷ 30 = AED 400
- Total gratuity
- AED 66,000
Comparing both examples
| Detail | Example 1 | Example 2 |
|---|---|---|
| Monthly basic salary | AED 10,000 | AED 12,000 |
| Service | 4 years | 7 years |
| Daily basic salary | AED 333.33 | AED 400 |
| Entitlement | 84 days | 165 days |
| Total gratuity | AED 28,000 | AED 66,000 |
Frequently asked questions
Is UAE gratuity based on basic salary or total salary?
Basic salary. Under Article 51 of Federal Decree-Law No. 33 of 2021, gratuity is calculated on the employee's last basic wage. Housing, transport and other allowances are excluded.
Does an employee qualify after one year?
Yes. A full-time employee becomes entitled once they have completed at least one year of continuous service. Below one year, no statutory gratuity is due.
Does resignation affect gratuity?
Under the current law, no. The former law reduced gratuity for employees who resigned with less than five years' service; Decree-Law 33 of 2021 removed those reductions, so resigning employees receive the same statutory calculation.
What happens after five years of service?
Each year of service beyond the first five earns 30 days of basic salary instead of 21.
Does unpaid leave reduce gratuity?
Yes. Days of unpaid absence are not counted towards the period of service used to calculate gratuity.
What is the maximum gratuity payment?
Total gratuity cannot exceed two years' wage (24 months of the employee's basic salary).
Do DIFC and ADGM have different rules?
Yes. The DIFC and ADGM free zones have their own employment laws. The DIFC uses the DEWS workplace savings scheme for most employees, and ADGM has its own end-of-service provisions. This guide covers the UAE mainland private sector only.
Keeping gratuity records accurate with Namya
Accurate gratuity starts with accurate records. Namya helps UAE SMEs keep employee records, start dates, basic salaries and allowances, leave history and documents together in one place, so the figures you need at the end of a contract are easy to find. Namya does not currently calculate gratuity automatically; use our free UAE gratuity calculator for estimates. Payroll & WPS is coming soon.
Related: UAE annual leave calculator · UAE HR · Platform · Pricing
Official sources
- Federal Decree-Law No. 33 of 2021 (UAE Legislation)
- End of service benefits (u.ae)
- Ministry of Human Resources & Emiratisation (MOHRE)
Disclaimer: the examples are illustrative. Individual entitlements depend on the employment contract, the applicable law or free-zone rules and each employee's circumstances. This guide is not legal advice.