UAE end-of-service gratuity is 21 days’ basic salary for each of the first five years, then 30 days’ basic salary for each year after that, capped at two years’ total wage. It is calculated on basic salary only — not your total package — and you qualify after one full year of continuous service.
Since Federal Decree-Law No. 33 of 2021 took effect in February 2022, resigning no longer reduces your entitlement. That is the single biggest change most people have not caught up with.
Gratuity at a Glance
| Rule | Detail |
|---|---|
| Governing law | Federal Decree-Law No. 33 of 2021 |
| Minimum service | 1 year of continuous service |
| First 5 years | 21 days’ basic salary per year |
| After 5 years | 30 days’ basic salary per year |
| Calculation base | Basic salary only |
| Maximum | 2 years’ total wage |
| Payment deadline | Within 14 days of the contract end date |
| Tax | None — gratuity is tax-free in the UAE |
The Formula
Work out your daily wage first, then multiply by the right number of days:
Daily wage = basic monthly salary ÷ 30
Gratuity = daily wage × 21 days × years (first 5 years), plus daily wage × 30 days × years (beyond year 5)
Worked example: 3 years of service
Basic salary AED 10,000 per month:
- Daily wage: AED 10,000 ÷ 30 = AED 333.33
- Days earned: 21 × 3 years = 63 days
- Gratuity: 333.33 × 63 = AED 21,000
Worked example: 10 years of service
Basic salary AED 12,000 per month:
- Daily wage: AED 12,000 ÷ 30 = AED 400
- First 5 years: 21 × 5 = 105 days
- Next 5 years: 30 × 5 = 150 days
- Total: 255 days × AED 400 = AED 102,000
The two-year cap in that example would be AED 288,000, so the full AED 102,000 is payable.
Basic Salary, Not Total Package
This is where most disputes start. Gratuity is calculated on the basic salary stated in your MOHRE-registered contract. Excluded from the calculation:
- Housing allowance
- Transport allowance
- Utilities allowance
- Bonuses and commissions
- Overtime pay
- Any other supplementary payment
If your package is AED 20,000 but your basic is AED 10,000, your gratuity is built on AED 10,000. Worth checking your contract now rather than at your exit interview.
Does Resigning Reduce Your Gratuity?
No — not under the current law. The old system reduced gratuity by one-third or two-thirds for employees who resigned from unlimited contracts before five years. Unlimited contracts were phased out and all private-sector contracts became fixed-term from February 2023.
Today, if you complete one year of continuous service and serve your notice period properly, you receive the full calculated amount whether you resign or are terminated.
Note: Plenty of gratuity calculators online still apply the old one-third and two-thirds reductions for ‘unlimited contracts’. Those contracts no longer exist. If a calculator asks you to choose between limited and unlimited, treat its output with caution.
When Gratuity Can Be Reduced or Withheld
Employers may make lawful deductions from your final settlement, including:
- Outstanding loans or salary advances
- Amounts payable under a court judgment
- Compensation for damages caused by the employee, following due process
- Salary in lieu of notice if you did not serve the required period
What an employer cannot do is withhold gratuity because they are unhappy with your performance, because a dispute exists, or because you resigned. Dismissal for serious misconduct under Article 44 is the main circumstance in which entitlement is genuinely forfeited.
When You Must Be Paid
Employers must settle all wages and end-of-service entitlements within 14 days of the contract end date. If that deadline passes, you can file a complaint with MOHRE, which will usually attempt an amicable settlement before referring the matter to court.
Before You Sign the Final Settlement
Ask for a written breakdown of the settlement before signing any clearance or waiver. Avoid signing an ‘all dues received’ document unless payment has actually landed, or the document explicitly preserves your right to claim a shortfall.
One more thing worth knowing: because gratuity is based on your last basic wage, agreeing to a salary reduction shortly before leaving can significantly cut your payout. Think carefully before signing a reduction addendum near the end of employment.
What Else Is in Your Final Settlement
Gratuity is one component. A complete final settlement usually includes:
- Any unpaid salary up to your last working day
- Encashment of accrued but unused annual leave (calculated separately from gratuity)
- End-of-service gratuity
- Notice period pay, where applicable
- Minus any lawful deductions
Gratuity in Free Zones and DIFC
Most free zones follow the federal gratuity rules, but two important exceptions exist. DIFC operates the DEWS savings plan instead of traditional end-of-service gratuity, where the employer makes monthly contributions into a funded scheme. ADGM has offered employees a choice between traditional gratuity and a savings alternative since April 2025.
If you work in either financial centre, your entitlement is calculated differently and the 21/30-day formula above does not apply in the same way. Check your contract and your employer’s scheme documentation.
The Voluntary Savings Scheme
Cabinet Resolution No. 96 of 2023 introduced an optional alternative to traditional gratuity. Under it, employers make monthly contributions into an approved investment fund rather than accruing a lump sum liability.
Participation is voluntary for employers. For employees, the practical difference is that your benefit accumulates and potentially grows in a fund rather than being calculated from your final basic salary — which can be an advantage if you expect your salary to fall, and a disadvantage if you expect it to rise sharply.
Gratuity for Domestic Workers
Domestic workers are covered by Federal Decree-Law No. 9 of 2022 rather than the main labour law. The rate is 14 days of basic wage per year of service, with the same one-year minimum.
For a domestic worker earning AED 2,000 per month over four years, the calculation is (2,000 ÷ 30) × 14 × 4, which comes to approximately AED 3,733.
How Employers Should Provision for It
If you run a business, gratuity is a liability that accrues quietly from each employee’s first year. A common approach is monthly provisioning: (21 ÷ 365) × basic salary for each month accrued in the first five years.
For an employee on AED 10,000 basic, that is roughly AED 575 per month set aside. Businesses that skip this end up facing a six-figure cash outflow when a long-serving employee resigns. If you are setting up a company, factor this in alongside VAT registration and other compliance costs.
Related Reading
Understanding your gratuity is one part of a wider picture. Our guide to UAE labour law covers notice periods, annual leave and termination rules that all affect your final settlement. If you are weighing a move, high-paying jobs in the UAE and the Dubai cost of living breakdown give useful context on what a package is actually worth.
Frequently Asked Questions
How is gratuity calculated in the UAE?
Divide your basic monthly salary by 30 to get a daily wage. Multiply by 21 days for each of the first five years of service, and by 30 days for each year beyond five. The total is capped at two years’ wage.
Is gratuity based on basic salary or total salary?
Basic salary only, as stated in your MOHRE-registered contract. Housing, transport, bonuses and overtime are all excluded.
Do I get gratuity if I resign in the UAE?
Yes. Under Federal Decree-Law No. 33 of 2021, resignation after one year of continuous service earns the full entitlement. The old reductions for resigning were abolished.
How much gratuity after 5 years in the UAE?
For a basic salary of AED 10,000: daily wage AED 333.33, multiplied by 21 days multiplied by 5 years, which is AED 35,000.
What is the maximum gratuity in the UAE?
Total gratuity is capped at two years’ wage, regardless of how long you have worked.
How long does an employer have to pay gratuity?
Within 14 days of the contract end date. Beyond that, you can file a complaint with MOHRE.
Is gratuity taxable in the UAE?
No. There is no personal income tax in the UAE, and gratuity is paid free of any deduction.
Do I get gratuity if I worked less than a year?
No. One full year of continuous service is the minimum threshold for any entitlement.
Figures verified against official sources in August 2026. UAE fees and rules change often — always confirm the current amount with the relevant authority before you pay or travel.
