End-of-Service Gratuity in the UAE: How It Is Calculated

Published · by JOBB GROUP FZE

End-of-service gratuity is the lump sum a UAE private-sector employer pays an expatriate employee when their employment ends. Under Article 51 of Federal Decree-Law No. 33 of 2021 (the UAE Labour Law), it is worth 21 days of basic wage for each of your first five years of service and 30 days of basic wage for each year after that, provided you have completed at least one year of continuous service.

The idea is simple, but the details decide the final figure: which salary counts, how partial years and unpaid leave are treated, and how a monthly salary becomes a “day’s wage”. This guide walks through the calculation step by step, with worked examples. It reflects the law and official UAE government guidance checked in November 2026.

Before you calculate: four eligibility checks

  1. Are you covered by the federal Labour Law? Gratuity under Article 51 applies to private-sector employees. If your employer is in the DIFC or ADGM financial free zones, different rules apply (see the section on free zones below).
  2. Are you an expatriate? UAE nationals receive end-of-service benefits under the pensions and social security legislation instead (Article 51, clause 1).
  3. Have you completed one year of continuous service? Below one year there is no gratuity at all. Once you pass one year, parts of later years count proportionally.
  4. Is your employer in the optional savings scheme? If your employer has enrolled you in the voluntary alternative end-of-service scheme, your benefit for the enrolled period comes from that fund rather than this calculation (see below).

Step 1: Find your last basic wage

Gratuity is calculated on your last basic wage, not your total salary (Article 51, clause 5). Housing, transport and other allowances are excluded. Look at your employment contract or latest payslip: the basic wage is usually shown as a separate line. If you are paid by piece rate rather than a monthly, weekly or daily wage, the law uses your average daily wage instead.

This is why the basic salary figure in a job offer matters as much as the total package: two offers with the same total pay can produce very different gratuity if their basic salaries differ.

Step 2: Work out your total service

Count from your start date to your last working day. Then make two adjustments:

  • Subtract unpaid absence. Days of absence from work without pay are not included in the service period (Article 51, clause 4). MoHRE has confirmed publicly that unpaid leave days are not counted for gratuity.
  • Add renewals. If your contract was renewed or extended with the same employer, the renewed period counts as continuous service (Article 8).

Express the result in years, including any part year. For example, 7 years and 6 months is 7.5 years.

Step 3: Convert the basic wage into a daily wage

The law states gratuity in “days of wage” but does not set out a formula for converting a monthly salary into a daily figure. In practice you will see two methods:

Method Daily wage For a basic salary of AED 6,000
Monthly basic ÷ 30 Treats every month as 30 days AED 200.00
Monthly basic × 12 ÷ 365 Spreads the annual basic over the calendar year AED 197.26

The difference is small (about 1.4%) but adds up over a long career. Employers and online calculators may use either. If your employer’s figure differs from yours, ask which method was used before you assume there is an error, and check your figure with MoHRE if the gap is significant.

The examples below use the ÷ 30 method so the arithmetic is easy to follow.

Step 4: Apply 21 days and 30 days

  • For each of the first five years: 21 × daily wage.
  • For each year beyond five: 30 × daily wage.
  • For a part year, apply the same rate in proportion (Article 51, clause 3).

Step 5: Check the cap and any deductions

  • Cap: total gratuity cannot exceed two years’ wage (Article 51, clause 6). In practice this only affects people with very long service.
  • Deductions: the employer may deduct amounts you owe it under the law or a court judgment, such as an unpaid loan (Article 51, clause 7). It cannot simply withhold gratuity because you resigned.

Worked examples

These examples use invented figures to show the method. They are not advice on any individual case.

Example 1: Three years, no unpaid leave

Basic salary AED 6,000 a month. Service: exactly 3 years.

  • Daily wage: 6,000 ÷ 30 = AED 200
  • Gratuity: 21 days × 3 years × AED 200 = AED 12,600

Example 2: Seven and a half years

Basic salary AED 10,000 a month. Service: 7 years 6 months (7.5 years).

  • Daily wage: 10,000 ÷ 30 = AED 333.33
  • First five years: 21 × 5 × 333.33 = AED 35,000
  • Remaining 2.5 years: 30 × 2.5 × 333.33 = AED 25,000
  • Total: AED 60,000, well below the two-year cap

Example 3: A partial year and unpaid leave

Basic salary AED 4,500 a month. Calendar service: 2 years 3 months (about 821 days), including 30 days of unpaid leave.

  • Counted service: 821 − 30 = 791 days, about 2.17 years
  • Daily wage: 4,500 ÷ 30 = AED 150
  • Gratuity: 21 × 2.17 × 150 ≈ AED 6,830

Without the unpaid leave the figure would have been about AED 7,090. Thirty unpaid days cost this employee roughly AED 260 of gratuity.

Example 4: Eleven months

Basic salary AED 8,000. Service: 11 months. No gratuity is due, because one year of continuous service has not been completed. Other dues, such as unpaid salary and accrued annual leave, are still payable.

Resignation and termination: does it change the amount?

The current law contains no reduction for resignation: Article 51 sets the same entitlement whether the contract ends by resignation, by the employer, by mutual agreement or on expiry, once you have one year of continuous service.

What resignation does affect is your notice period. Under Article 43, you must give the notice set in your contract (at least 30 and no more than 90 days) or pay a notice allowance. And if you are dismissed without notice for one of the specific reasons in Article 44, the termination is lawful, but your accrued gratuity is still governed by Article 51 and its deduction rules.

Part-time and other work patterns

Article 51 covers full-time workers. For other work patterns, the implementing regulation applies. According to the UAE Government portal, a part-time worker’s gratuity is a percentage of the full-time benefit: the number of working hours in your contract per year, divided by the annual hours of an equivalent full-time contract, multiplied by 100. That percentage is then applied to the gratuity a full-time worker would receive.

For example, if your contract sets 1,040 working hours a year and the full-time equivalent is 2,080 hours, you would receive 50% of the full-time gratuity. These hour figures are illustrative; use the numbers in your own contract.

When must gratuity be paid?

Your employer must pay your wages and all entitlements, including gratuity, within 14 days of the end of the contract (Article 53). If it is not paid, you can file a complaint with MoHRE. Disputes worth AED 50,000 or less can be decided by MoHRE itself, and claims must be brought within two years of the end of employment (Article 54).

The voluntary alternative end-of-service scheme

Cabinet Resolution No. 96 of 2023 introduced an optional savings scheme, and MoHRE began implementing it in November 2023. Instead of paying gratuity as a lump sum at the end, a participating employer pays monthly contributions, calculated on basic salary, into an investment fund licensed by the Securities and Commodities Authority.

  • Participation is voluntary for employers, on the mainland and in free zones. Employees chosen by an employer that joins are included.
  • Published guidance on the scheme sets minimum employer contributions of 5.83% of monthly basic salary for employees with under five years’ service and 8.33% for those with more.
  • Employees can add voluntary contributions of up to 25% of their total annual salary.
  • Funds offer capital-preserving, risk-based and Sharia-compliant options.
  • Gratuity earned before the employer joined the scheme is not lost; savings are paid out when the employment ends.

If your payslip shows an end-of-service fund contribution, ask HR which periods are covered by the fund and which by traditional gratuity.

Free zones: DIFC and ADGM work differently

  • ADGM: the ADGM Employment Regulations 2024 apply, and ADGM states that the federal Labour Law does not apply there. Its gratuity rate is the same (21 days’ basic wage for each of the first five years and 30 days after that, for employees with at least one year of service), but ADGM sets a floor: basic wage for the calculation cannot be less than 50% of annual wages. Employers may offer a pension or savings scheme instead of gratuity, in writing.
  • DIFC: under the DIFC Employment Law No. 2 of 2019, as amended by DIFC Law No. 4 of 2020, traditional end-of-service gratuity was replaced from 1 February 2020 by monthly employer contributions to a qualifying savings scheme, such as the DIFC Employee Workplace Savings plan (DEWS). Gratuity accrued under the earlier arrangement was preserved.

If you work in another free zone, check your contract and your free zone authority’s rules.

A quick checklist before you sign your final settlement

  • Is the basic wage used the one on your latest payslip?
  • Are your start and end dates correct, and is any unpaid leave correctly counted?
  • Which daily-wage method was used?
  • Are accrued, unused annual leave days paid separately?
  • Are any deductions explained in writing and backed by a loan agreement or judgment?
  • Will the payment arrive within 14 days of your last day?

Keep the settlement letter and payslips as PDFs; if you need to combine or shrink them for a complaint or a new employer, the free PDF tools can merge and compress files in your browser. And if you are moving on, update your resume in the builder while your achievements are fresh.

Frequently asked questions

Is gratuity calculated on total salary or basic salary?

Basic salary only, the last basic wage you received (Article 51, clause 5). ADGM sets its own floor, described above.

Do I get gratuity if I resign after one year?

Yes. The current law does not reduce gratuity for resignation, provided you have completed one year of continuous service.

Does unpaid leave reduce my gratuity?

Yes. Unpaid days of absence are excluded from your service period.

Is there a maximum?

Yes. Total gratuity cannot exceed two years’ wage.

This article is general information based on Federal Decree-Law No. 33 of 2021 and official UAE government guidance, checked in November 2026. It is not legal advice. For a specific case, contact MoHRE or a qualified UAE lawyer.

Sources

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