How to calculate end-of-service gratuity in the UAE?
Gratuity for a full-time expatriate worker with at least one year of continuous service is based on last basic salary: 21 days' pay for each of the first five years and 30 days' pay for each year after that. The total cannot exceed two years' wages [1].
Key takeaways
- You need at least one year of continuous full-time service to qualify; under one year there is no gratuity [1].
- Years one to five earn 21 days' salary per year; each year after the first five earns 30 days' salary [1].
- Only the last basic salary counts. Housing, transport and similar allowances are left out [1].
- The total is capped at two years' wages, and unpaid absence days do not count as service [1].
- Employers must pay within 14 days of the contract ending, and may deduct sums the worker owes [1].
Who is entitled to end-of-service gratuity in the UAE?
Full-time expatriate workers in the private sector are entitled once they have completed one year of continuous service. The UAE Government portal says a worker with less than one year of service is not entitled to any gratuity pay, and that days of unpaid absence are not included when service is counted [1].
If you have served more than one full year, you are also entitled to gratuity for fractions of a year, in proportion to the time served [1]. Emiratis working in the private sector are treated differently: their end-of-service benefits follow the legislation on pensions and social security in the UAE [1].
Part-time workers and other work models are covered by Article 30 of Cabinet Resolution No. 1 of 2022. The contracted working hours per year are divided by the full-time hours per year and multiplied by 100 to give a percentage, which is then applied to the full-time gratuity. Gratuity does not apply to temporary employment lasting less than one year [1].
How is end-of-service gratuity calculated?
You start from the daily basic wage, pay 21 days per year for the first five years, add 30 days per year for any service beyond that, and then check the total against the two-year cap [1]. The rule by length of service is summarised below.
| Length of service | Gratuity |
|---|---|
| Less than 1 year | No gratuity |
| 1 year or more, up to 5 years | 21 days' salary for each year of work |
| Beyond 5 years | 21 days' salary for each of the first 5 years, plus 30 days' salary for each year after that |
| Any length of service | Total gratuity cannot exceed the wage of 2 years |
Follow these steps:
- Check eligibility. Confirm the worker is full-time and has at least one year of continuous service, after removing any days of unpaid absence [1].
- Take the last basic salary. Use the last wage the worker was entitled to, namely the basic salary, with no allowances [1].
- Establish the daily basic wage. The rule is expressed in days of salary. The portal page does not set out how to convert a monthly salary into a daily wage, so confirm the method with MOHRE or a lawyer for your case.
- Multiply the first five years. Daily basic wage x 21 x the number of years, up to five [1].
- Multiply the years beyond five. Daily basic wage x 30 x each year after the first five [1].
- Add the two amounts and apply the cap. If the total is above two years' wages, the payable figure is limited to two years' wages [1].
Which salary counts when calculating gratuity?
Only the last basic salary counts. The UAE Government portal says gratuity is calculated on the last wage the worker was entitled to, namely the basic salary, and so it does not include allowances such as housing, transportation, utilities or furniture [1].
In practice this means two employees on the same total package can receive different gratuity if one has a larger share of pay classed as allowances. Check the salary breakdown in the employment contract and on payslips before estimating a figure.
What does a worked example look like?
Illustrative example only. The wage below is made up and does not describe a real person. It shows how the verified rule is applied.
Assume a full-time expatriate worker whose daily basic wage is AED 200, with 7 years of continuous service and no unpaid absence. The daily wage is stated directly, so no salary conversion is needed.
- First five years: 21 days x 5 years x AED 200 = 105 days x AED 200 = AED 21,000.
- Two years beyond the first five: 30 days x 2 years x AED 200 = 60 days x AED 200 = AED 12,000.
- Total: 21,000 + 12,000 = AED 33,000.
- Cap check: the total must not exceed the wage of two years. Compare AED 33,000 with two years of this worker's wage; if it is higher, the payable figure is limited to the cap.
Your own figure will differ with your salary, service length and contract terms.
When and how is gratuity paid?
The employer must pay all outstanding wages, other entitlements and gratuity within 14 days of the termination of the contract [1]. The employer may deduct from the gratuity any amounts the worker owes [1].
Renewed contracts and older unlimited contracts
Any extension or renewal of the employment contract is added when calculating the end-of-service benefits, so service builds up across renewals [2]. The same page explains that unlimited contracts are to be converted into fixed-term contracts within one year of the effective date of the existing contract, a period the Cabinet may extend, and that the decree-law also applies to unlimited contracts made under Federal Law No. 8 of 1980 [2].
The voluntary Savings Scheme
MOHRE has launched a voluntary alternative to traditional gratuity, called the Savings Scheme. Employers who join contribute monthly to an approved investment fund, and the employee receives the contributions plus returns within 14 days after employment ends. The scheme applies to private sector and free zone employers and employees. Once staff are enrolled, the employer must stop applying the traditional system for them and must settle any gratuity accrued before enrolment [1].
Where do the limits of this guide lie?
Individual contracts, free-zone rules and changes in the law can alter the result. If you work in a free zone, confirm which rules apply to your employer. Before relying on a figure, confirm it with MOHRE or a qualified lawyer. This article is general information, not legal advice.
How GCC Filings can help
GCC Filings Bookkeeping LLC is a Dubai accounting and tax firm. Its WPS payroll management services page describes WPS-compliant payroll management with automated SIF generation, leave tracking and gratuity calculations. If you would rather not work out each leaver's figure by hand, you can ask GCC Filings about the payroll management service for your business.
If you also need help with related compliance, see our guides on how to register for VAT in the UAE and what PRO services are in Dubai, or browse all GCC Filings services, or read more on the GCC Filings blog.
Contact: phone +971 4 557 4802, email [email protected]. Office 2403, East Wing, Latifa Towers, Sheikh Zayed Road, Dubai.
Frequently asked questions
Is gratuity calculated on basic salary or total salary in the UAE?
Gratuity is calculated on the last basic salary the worker was entitled to. According to the UAE Government portal, it does not include allowances such as housing, transportation, utilities or furniture. Check your contract to see which part of your pay is classed as basic salary [1].
How many years do I need to work to get gratuity in the UAE?
A full-time worker needs at least one year of continuous service. Someone who has served less than one year is not entitled to any gratuity. Days of unpaid absence are not counted as service. Once the first year is complete, part years are paid in proportion to the time served [1].
Is there a limit on how much gratuity I can receive?
Yes. The UAE Government portal states that, in all cases, the total gratuity shall not exceed the wage of two years. So even a very long career cannot push the end-of-service payment above that ceiling, whatever the 21-day and 30-day figures add up to [1].
How long does an employer have to pay gratuity?
Employers must pay all outstanding wages, other entitlements and gratuity within 14 days of the termination of the contract. The employer may deduct any amounts the worker owes from the gratuity. Keep the termination date and the final settlement figures in writing so the 14-day period can be checked [1].
Do renewed contracts reset my years of service for gratuity?
No. The UAE Government portal says any extension or renewal of the employment contract is added when calculating an employee's end of service benefits. Your years of service therefore continue to build across renewals with the same employer, rather than starting again each time a contract term is renewed [2].
Do UAE nationals receive gratuity under the same formula?
No. End-of-service benefits for Emiratis working in the private sector follow the legislation regulating pensions and social security in the UAE, not the 21-day and 30-day gratuity formula used for expatriate workers. Employers with Emirati staff should confirm the correct scheme with the relevant authority [1].
Sources
- UAE Government (u.ae). End of service benefits for workers in the private sector, 2026. https://u.ae/en/information-and-services/jobs/Sector-of-employment/employment-in-the-private-sector/end-of-service-benefits-for-employees-in-the-private-sector
- UAE Government (u.ae). Employment contracts: duration and models in the private sector, 2026. https://u.ae/en/information-and-services/jobs/Sector-of-employment/employment-in-the-private-sector/employment-contracts-duration-and-models-in-the-private-sector