Key takeaways
- 21 days’ basic wage for each of the first five years, then 30 days for each year after that. Capped at two years’ wage in total.
- Basic salary only. Housing, transport, utilities and furniture allowances are excluded — which in a typical UAE package can halve the figure people expect.
- One year of continuous service is the threshold. Below it, nothing. Above it, fractions of a year are paid proportionately.
- Resigning does not reduce it. The current published position describes full gratuity in both bands. The one-third and two-thirds reductions people still quote belong to the old law and the unlimited contracts it governed.
- Payable within 14 days of the contract ending, along with all other entitlements.
Gratuity is the largest single sum most people receive when a UAE job ends, and it is calculated on a figure most people cannot state accurately: their basic salary rather than their package.
This guide sets out the calculation exactly as published, the deductions and exclusions that are permitted, the part-time formula almost nobody publishes, and an honest account of the resignation question — because there is a great deal of outdated material circulating and it is costing people money in both directions.
Sources throughout are Federal Decree-Law No. 33 of 2021, its Executive Regulations under Cabinet Resolution No. 1 of 2022, and the Official Portal of the UAE Government.
The calculation
| Service | Entitlement |
|---|---|
| Less than 1 year | No gratuity |
| More than 1 year, less than 5 | Full gratuity — 21 days’ salary for each year of work |
| More than 5 years | Full gratuity — 30 days’ salary for each year following the first five |
| Fractions of a year | Payable proportionate to the time served, once one year of continuous service is complete |
| Ceiling | In all cases, the total shall not exceed the wage of two years |
Note how the two bands stack. The first five years are calculated at 21 days each; years six onward at 30 days each. A ten-year employee does not get 30 days for all ten — they get 21 days × 5, plus 30 days × 5.
The formula, plainly
| Step | Calculation |
|---|---|
| 1. Daily basic wage | Monthly basic salary ÷ 30 |
| 2. First five years | Daily wage × 21 × years (up to 5) |
| 3. Years beyond five | Daily wage × 30 × years beyond 5 |
| 4. Add the fraction | Proportionate for any part-year |
| 5. Apply the cap | Total must not exceed two years’ wage |
| 6. Apply deductions | Amounts owed to the employer may be deducted |
We maintain a free UAE gratuity calculator that runs this for you. But do the arithmetic by hand once as well — understanding which number goes where is what lets you check a settlement rather than accept it.
This is where most of the disappointment comes from, and it is decided years before anyone leaves.
Gratuity is calculated on basic salary — the published position excludes allowances such as housing, transportation, utilities and furniture.
UAE packages are routinely structured with basic as a minority of the total. Someone on AED 20,000 a month whose basic is AED 8,000 accrues gratuity on 8,000, not 20,000. Over five years that is a difference of well over AED 100,000 in entitlement.
Two practical consequences. First, if you are negotiating an offer, the basic-to-allowance split is a term worth discussing — two identical packages can be worth very different amounts at exit. Second, if you are calculating what you are owed, take the basic figure from your contract, not the number that lands in your account.
The resignation question — and why you keep seeing two answers
This deserves its own section, because it is the most contested point in UAE employment and the internet is full of confident contradictions.
What the current published position says
The Official Portal describes the entitlement for full-time contracts as full gratuity pay in both bands — 21 days per year for more than one but less than five years’ service, and 30 days per year for service beyond five. No reduction for resignation is stated.
Where the other answer comes from
Under the previous framework — Federal Law No. 8 of 1980 — a worker resigning from an unlimited contract before completing five years received a reduced gratuity: roughly one third for one to three years’ service, and two thirds for three to five.
That regime is the source of almost every page you will find quoting fractions. And the tell is in the wording: those pages refer to unlimited contracts, a category that Federal Decree-Law No. 33 of 2021 removed — all private sector contracts became fixed-term.
Does it mention “unlimited contracts”? If yes, it is describing the pre-2022 law, whatever date is on the page.
Does it say “full gratuity”? The current portal wording does.
Is it citing Decree-Law 33 of 2021, or Law 8 of 1980? The instrument named tells you which era you are reading about.
We are setting this out rather than simply asserting an answer because you will encounter the contradiction elsewhere and deserve to know why it exists.
And where a material sum turns on it, the definitive answer for your specific contract is one phone call: MoHRE’s call centre on 600590000, which also operates on WhatsApp at the same number. Ask before you sign a settlement, not after.
What is not in doubt
Two situations where the entitlement is expressly protected, regardless of how the employment ended:
- Article 39 disciplinary termination. Termination of service as a disciplinary penalty is stated to preserve the worker’s right to end-of-service benefits. Employers who treat a disciplinary exit as forfeiting gratuity are wrong.
- Article 45 resignation on employer breach. A worker who terminates without notice because the employer failed its obligations — having notified MoHRE 14 working days beforehand — retains their end-of-service entitlements.
Our guide to notice periods and Articles 42 to 47 covers both routes and the procedure each requires.
Worked examples
Every figure below uses basic salary. If you are checking your own case, take the basic figure from your contract.
Example 1 — three years, basic AED 8,000
| Step | Working | Result |
|---|---|---|
| Daily basic wage | 8,000 ÷ 30 | AED 266.67 |
| Days accrued | 21 × 3 years | 63 days |
| Gratuity | 266.67 × 63 | AED 16,800 |
| Cap check | Two years’ wage = 192,000 | Not reached |
Example 2 — eight years, basic AED 12,000
This one shows the two bands stacking.
| Step | Working | Result |
|---|---|---|
| Daily basic wage | 12,000 ÷ 30 | AED 400 |
| First five years | 21 × 5 | 105 days |
| Years six to eight | 30 × 3 | 90 days |
| Total days | 105 + 90 | 195 days |
| Gratuity | 400 × 195 | AED 78,000 |
Had all eight years been calculated at 30 days, the figure would be AED 96,000. The difference — AED 18,000 — is the effect of the first five years being valued at 21 days rather than 30. This is the single most common error in DIY calculations.
Example 3 — the allowance trap
Two people, identical total package of AED 20,000 a month, identical four years of service.
| Person A | Person B | |
|---|---|---|
| Total monthly package | AED 20,000 | AED 20,000 |
| Basic | AED 8,000 | AED 14,000 |
| Allowances | AED 12,000 | AED 6,000 |
| Daily basic wage | 266.67 | 466.67 |
| Days (21 × 4) | 84 | 84 |
| Gratuity after 4 years | AED 22,400 | AED 39,200 |
A difference of AED 16,800 on identical pay, decided entirely by how the contract was drafted. Over ten years the gap widens considerably.
This is why the basic-to-allowance split belongs in an offer negotiation. It affects nothing month to month and a great deal at the end.
Example 4 — a part-year
Fractions of a year are payable in proportion, once the first full year is complete. Six years and four months, basic AED 10,000:
| Step | Working | Result |
|---|---|---|
| Daily basic wage | 10,000 ÷ 30 | AED 333.33 |
| First five years | 21 × 5 | 105 days |
| Year six | 30 × 1 | 30 days |
| Four months of year seven | 30 × (4 ÷ 12) | 10 days |
| Total days | 105 + 30 + 10 | 145 days |
| Gratuity | 333.33 × 145 | AED 48,333 |
Example 5 — the two-year cap in action
The cap only bites on very long service. At 21 days per year for five years and 30 days per year thereafter, you reach two years’ wage — 720 days at a 30-day month — after roughly 25 years.
| Service | Days accrued | Capped? |
|---|---|---|
| 10 years | 105 + 150 = 255 | No |
| 20 years | 105 + 450 = 555 | No |
| 25 years | 105 + 600 = 705 | No — just under |
| 30 years | 105 + 750 = 855 | Yes — capped at 720 |
In practical terms: if you have served more than about 25 years with one employer, check the cap. Below that, it will not affect you.
What counts as service — and what does not
The service period is not simply the gap between your joining date and your last day.
| Period | Counts toward gratuity? |
|---|---|
| Probation | Yes — probation forms part of the service period. It only becomes payable once the one-year threshold is passed. |
| Notice period worked | Yes — the employment relationship continues throughout notice, with all its entitlements. |
| Paid annual leave | Yes |
| Paid sick leave | Yes |
| Days of absence without pay | No — expressly excluded from the service period |
| Unpaid leave (study, extended personal) | No — falls within absence without pay |
Because probation forms part of the service period, someone who completes a six-month probation and then works another seven months has thirteen months of service, not seven. They are over the one-year threshold and gratuity is due.
Employers occasionally calculate from confirmation date rather than joining date. Check which date has been used. Our probation period guide sets out the rules in full.
The unpaid leave arithmetic
Absence without pay is deducted from the service period, not from the payment. If you took two months of unpaid leave across a four-year employment, your service period is three years and ten months — and gratuity is calculated on that.
The effect is small in most cases, but keep your own record. Employers reconstructing years-old leave data from payroll do not always get it right, and the burden of showing you were not absent is harder to discharge than keeping a note at the time.
Part-time and non-standard contracts
Decree-Law 33 of 2021 introduced several work models beyond the traditional full-time job — part-time, temporary, flexible and others. Gratuity applies, but it is pro-rated by a formula that is rarely published.
Step 1. Divide the number of working hours in your contract per year by the number of working hours in the full-time contract per year, then multiply by 100. That gives you a percentage.
Step 2. Apply that percentage to the gratuity a full-time worker would receive for the same length of service.
Worked part-time example
A worker on 1,040 contract hours a year where the full-time equivalent is 2,080 hours, with three years’ service and a full-time-equivalent basic of AED 9,000:
| Step | Working | Result |
|---|---|---|
| Percentage | (1,040 ÷ 2,080) × 100 | 50% |
| Full-time gratuity | (9,000 ÷ 30) × 21 × 3 | AED 18,900 |
| Part-time gratuity | 50% × 18,900 | AED 9,450 |
Note the two figures you need before you can run this: your contracted annual hours, and the full-time annual hours at the same employer. Both should appear in the contract or be obtainable from HR. If your employer cannot state the full-time comparator, the percentage cannot be computed — ask for it in writing.
Gratuity is a feature of the employment relationship. Someone working under a freelance permit is not an employee of the entities they invoice, and no gratuity accrues from those engagements.
The same applies to anyone on a self-sponsored residence route who contracts for services rather than working under an employment contract. Our guide to UAE work permit types sets out which permits create an employment relationship and which do not.
Payment: when it must reach you, and what may be taken out
The 14-day rule
The employer must pay all wages and entitlements — including gratuity — within 14 days of the date the contract ends.
This is a hard deadline, not a target. It runs from the end of the contract, which is the last day of employment after any notice period, not the date you handed in a resignation.
What may be deducted
The employer may deduct from the gratuity any amounts legally owed by the worker. In practice that typically means:
- Outstanding staff loans or salary advances
- Amounts due under a documented agreement between the parties
- Sums established as owed through the proper process
What it does not mean is an open licence. A deduction should be identifiable, documented and something you agreed to or that arises from a legal obligation — not a figure appearing for the first time on a settlement sheet.
Final settlements often arrive as a single number with a signature line. Before signing, ask for an itemised statement showing:
- The basic salary figure used
- The service period in years, months and days, and the joining and leaving dates
- The days accrued in each band — 21-day and 30-day — shown separately
- Any unpaid-leave days excluded, and the dates
- Each deduction, itemised with its basis
- Other components: unused annual leave, notice pay, outstanding salary, air ticket if contractual
A correct settlement survives that request without difficulty. Reluctance to itemise is itself informative.
And do not sign a general release under time pressure. If a figure is disputed, say so in writing before signing rather than signing and objecting afterwards.
The full final settlement — gratuity is one component
| Component | Basis |
|---|---|
| End-of-service gratuity | 21/30 days per year on basic wage |
| Unpaid salary | Days worked in the final period, at full wage |
| Unused annual leave | Cash for the balance of accrued leave not taken |
| Notice pay | Where notice was not worked and compensation is due instead |
| Repatriation ticket | Where provided for in the contract |
| Overtime and allowances | Any outstanding amounts due |
| Less any amounts legally owed by the worker | |
Check each line separately. Errors cluster in unused annual leave — where the accrual is often understated — and in the basic salary figure carried into the gratuity calculation.
If your gratuity is not paid
Non-payment of end-of-service benefits is a labour claim, and the route is the same as for any other unpaid entitlement.
| Step | Action |
|---|---|
| 1 | Write to the employer with your calculation, the basic figure and service dates you have used, and the 14-day deadline. Keep it factual. Send it by email so it is timestamped. |
| 2 | If unresolved, file a labour complaint with MoHRE — through the MoHRE app, the website, or the call centre on 600590000. |
| 3 | MoHRE attempts amicable settlement between the parties. |
| 4 | Where settlement fails, the matter proceeds to the competent court. |
Our step-by-step walkthrough of the process, the documents to prepare and what to expect at each stage is in the guide to filing a MoHRE complaint.
Assemble these while you still have access to your work email and HR portal — access is usually cut on the last day:
- Signed employment contract showing the basic salary figure
- Offer letter and any salary revision letters
- Payslips for the final twelve months
- Joining date evidence — visa stamping, first payslip, contract date
- Leave records, particularly any unpaid leave
- Resignation or termination letter and the acknowledgement
- Any written settlement offer received
Email them to a personal address. This costs ten minutes and is the difference between a straightforward claim and a difficult one.
Gratuity is paid after the contract ends. A dispute about it is not a reason to stop attending during notice — unexplained absence has its own consequences, including the absconding route.
Where the employer’s own breach is the issue, Decree-Law 33 of 2021 provides a specific procedure under Article 45: notify MoHRE, allow 14 working days, and if the employer does not remedy the position you may terminate without notice while retaining your entitlements. Use that route rather than simply stopping. See our absconding guide for what an unexplained absence triggers.
Full accrual reference table
The day count is the part of the calculation that does not depend on your salary. Find your years of service, take the day count, and multiply by your daily basic wage. That is the whole calculation.
| Years | Days at 21 | Days at 30 | Total days | Months of basic (approx.) |
|---|---|---|---|---|
| 1 | 21 | — | 21 | 0.7 |
| 2 | 42 | — | 42 | 1.4 |
| 3 | 63 | — | 63 | 2.1 |
| 4 | 84 | — | 84 | 2.8 |
| 5 | 105 | — | 105 | 3.5 |
| 6 | 105 | 30 | 135 | 4.5 |
| 7 | 105 | 60 | 165 | 5.5 |
| 8 | 105 | 90 | 195 | 6.5 |
| 9 | 105 | 120 | 225 | 7.5 |
| 10 | 105 | 150 | 255 | 8.5 |
| 12 | 105 | 210 | 315 | 10.5 |
| 15 | 105 | 300 | 405 | 13.5 |
| 20 | 105 | 450 | 555 | 18.5 |
| 25 | 105 | 600 | 705 | 23.5 |
| 30 | 105 | 750 | 855 → capped at 720 | 24.0 |
The final column is the most useful sanity check available. Gratuity at three years is worth about two months of basic salary; at ten years, about eight and a half months. If a settlement figure is wildly away from that ratio, something in the calculation is wrong.
Value table by basic salary
Total gratuity in AED, by basic monthly salary and completed years of service.
| Basic | 2 yrs | 3 yrs | 5 yrs | 8 yrs | 10 yrs | 15 yrs |
|---|---|---|---|---|---|---|
| AED 3,000 | 4,200 | 6,300 | 10,500 | 19,500 | 25,500 | 40,500 |
| AED 5,000 | 7,000 | 10,500 | 17,500 | 32,500 | 42,500 | 67,500 |
| AED 8,000 | 11,200 | 16,800 | 28,000 | 52,000 | 68,000 | 108,000 |
| AED 10,000 | 14,000 | 21,000 | 35,000 | 65,000 | 85,000 | 135,000 |
| AED 15,000 | 21,000 | 31,500 | 52,500 | 97,500 | 127,500 | 202,500 |
| AED 20,000 | 28,000 | 42,000 | 70,000 | 130,000 | 170,000 | 270,000 |
| AED 30,000 | 42,000 | 63,000 | 105,000 | 195,000 | 255,000 | 405,000 |
Read across your basic salary row, not your package row. Someone on a AED 20,000 package with an AED 8,000 basic reads the 8,000 row.
The legal architecture — so you can verify any of this
One of the reasons bad information persists on this topic is that people quote conclusions without citing instruments. Here is the structure, so you can check any claim — including ours — against a source.
| Instrument | Status | What it governs |
|---|---|---|
| Federal Law No. 8 of 1980 | Superseded | The previous labour law. Source of unlimited/limited contracts and the resignation reduction fractions. Anything quoting these is describing the old regime. |
| Federal Decree-Law No. 33 of 2021 | In force | The current employment law. Removed unlimited contracts; introduced the work models; sets out end-of-service benefits, notice, and termination. |
| Cabinet Resolution No. 1 of 2022 | In force | Executive Regulations — the operational detail, including the part-time pro-rating method. |
| The Official Portal (u.ae) | Government publication | The government’s own plain-language statement of the provisions and the calculation. |
| Free zone employment regulations | Varies | A small number of free zones, chiefly the financial ones, apply their own employment regime. |
Search the page for the words “unlimited contract”. If they appear as a live category rather than a historical reference, the article has not been updated since 2022 — whatever date is displayed on it. Unlimited contracts were removed by Decree-Law 33 of 2021.
This single check will filter out most of the outdated material circulating on gratuity, notice periods and labour bans.
Articles that touch end-of-service
| Provision | Relevance to gratuity |
|---|---|
| Article 39 — disciplinary penalties | Termination as a disciplinary penalty preserves the right to end-of-service benefits |
| Article 43 — notice | The relationship continues through notice, so service continues to accrue |
| Article 45 — termination without notice by the worker | Where the employer is in breach and MoHRE has been notified, entitlements are retained |
| End-of-service provisions | 21/30 days, basic wage, two-year cap, one-year threshold, exclusion of unpaid absence, permitted deductions |
| Payment provision | All entitlements payable within 14 days of the contract ending |
We cite article numbers where the provision is clearly attributable and describe the provision without a number where it is not, rather than guessing. If you need a definitive citation for a legal filing, take it from the gazetted text or from qualified counsel — not from any website, ours included.
Running a gratuity calculation properly — the practitioner’s method
If you are a PRO, an HR coordinator, or a business owner who has to produce final settlements, the calculation itself is the easy part. What causes disputes is the input data. This is the order we work in.
| Step | What you establish | Where it comes from |
|---|---|---|
| 1. Joining date | The first day of employment, not confirmation | Signed contract; first payslip; visa stamping date |
| 2. Last day | The date the contract ends, after any notice | Termination or resignation letter plus notice terms |
| 3. Unpaid absence | Total days of absence without pay in the period | Leave register; payroll deduction records |
| 4. Net service period | Step 2 minus Step 1, minus Step 3 | Calculated — express in years, months, days |
| 5. Basic salary | The current basic, and any revisions | Contract and every salary revision letter |
| 6. Day count | 21 × first five years, 30 × remainder, plus the fraction | Calculated |
| 7. Gross gratuity | (Basic ÷ 30) × day count | Calculated |
| 8. Cap test | Is the total above two years’ wage? | Calculated |
| 9. Deductions | Amounts legally owed, each with a documented basis | Loan agreements; signed acknowledgements |
| 10. Net figure and statement | Itemised, showing every step above | Produced for the employee |
A settlement presented as a single number invites challenge. The same figure presented with joining date, service period, day count by band, basic salary used and each deduction itemised is usually accepted without argument — because the employee can verify it.
The itemised statement is not a courtesy. It is the cheapest dispute-avoidance measure available to an employer, and it takes five minutes to produce.
The salary-revision question
Where basic salary has changed during employment, the figure to use is the basic at the end of service — the calculation is run on the wage as it stands, not averaged across the years.
This means a promotion shortly before departure increases the whole accrued entitlement, and a salary reduction decreases it. If a basic salary reduction is being proposed, understand that it reaches backwards through every year of accrued service, not just the months ahead. That is a term worth negotiating rather than accepting as an administrative change.
Where gratuity sits in the exit sequence
Gratuity is one stage in a longer process, and the order matters — particularly for anyone leaving the country.
| Stage | What happens |
|---|---|
| 1. Notice | Served and worked, or compensated. Service continues to accrue throughout. |
| 2. Last working day | The contract ends. The 14-day clock starts. |
| 3. Final settlement | Gratuity, unpaid salary, unused leave, notice pay, ticket where contractual — less permitted deductions. |
| 4. Labour card cancellation | The employer cancels the work permit through MoHRE. |
| 5. Residence visa cancellation | Processed with the immigration authority. |
| 6. Grace period | Time to exit or transfer to a new sponsor before overstay begins. |
These are two separate obligations. Payment is due within 14 days of the contract ending. Cancellation is a procedural step the employer must complete regardless.
Employers occasionally hold one against the other — withholding cancellation until a release is signed, or withholding payment until an exit is confirmed. Neither is a legitimate condition. If it happens, raise it with MoHRE rather than negotiating from a weak position, and be aware that an uncancelled visa starts accruing consequences of its own. See our guides to employment visa cancellation and what happens when a visa expires.
Four scenarios, worked end to end
Scenario A — the resignation after four years
Sales executive. Joined March 2022, resigns March 2026. Package AED 18,000; basic AED 7,000. Thirty days’ notice, worked. No unpaid leave. Twelve days of annual leave untaken.
| Line | Working | AED |
|---|---|---|
| Service period | 4 years exactly, notice included | — |
| Day count | 21 × 4 | 84 days |
| Daily basic | 7,000 ÷ 30 | 233.33 |
| Gratuity | 233.33 × 84 | 19,600 |
| Unused leave (12 days) | On the applicable wage basis | Add separately |
| Deductions | None documented | 0 |
The point: this employee resigned. Under the current published provisions the gratuity is full — 84 days, not 56 or 28. Had they accepted a “two-thirds because you resigned” figure of AED 13,067, they would have lost AED 6,533 to a rule that governed a contract type which no longer exists.
Scenario B — the long server
Operations manager. Eleven years and five months’ service. Basic AED 16,000, revised upward from AED 12,000 two years ago. One month of unpaid leave taken in year six.
| Line | Working | Result |
|---|---|---|
| Gross period | 11 years 5 months | — |
| Less unpaid leave | −1 month | 11 years 4 months |
| First five years | 21 × 5 | 105 days |
| Years 6–11 | 30 × 6 | 180 days |
| Four months | 30 × (4 ÷ 12) | 10 days |
| Total | 105 + 180 + 10 | 295 days |
| Daily basic | 16,000 ÷ 30 — current basic, not averaged | 533.33 |
| Gratuity | 533.33 × 295 | 157,333 |
The point: the calculation runs on the current basic of 16,000, not the 12,000 that applied for most of the service. And the one month of unpaid leave costs roughly 2.5 days of accrual — about AED 1,333 — not a month of gratuity.
Scenario C — terminated at fourteen months
Administrator. Six-month probation, then eight further months. Terminated by the employer. Basic AED 4,500. Employer’s position: “you were only confirmed eight months ago, so no gratuity.”
| Line | Working | Result |
|---|---|---|
| Service period | Probation counts — 6 + 8 | 14 months |
| Threshold | Over one year | Entitled |
| First year | 21 × 1 | 21 days |
| Two months | 21 × (2 ÷ 12) | 3.5 days |
| Daily basic | 4,500 ÷ 30 | 150 |
| Gratuity | 150 × 24.5 | 3,675 |
The point: the employer’s position is wrong. Service runs from the joining date; probation forms part of it. The correct answer is not “nothing” — and the fraction of a year is payable too.
Scenario D — the disciplinary exit
Six years’ service, basic AED 11,000, terminated as a disciplinary penalty. Employer’s position: gratuity is forfeited.
Termination of service as a disciplinary penalty under Article 39 is stated to preserve the worker’s right to end-of-service benefits. The calculation runs normally: (21 × 5) + (30 × 1) = 135 days, at AED 366.67 a day, giving AED 49,500.
The point: a disciplinary termination affects the manner of the exit — and may affect notice — but the published provision preserves the end-of-service entitlement. If gratuity is being withheld on this basis, the employer is not applying the law as published, and it is a MoHRE matter.
For employers: provisioning, compliance and the cost of getting it wrong
Gratuity is an accruing liability. It is incurred every month an employee works and paid in a single sum, often years later, frequently when several people leave at once. Businesses that do not provision for it discover the exposure at the worst possible moment.
Calculating your accrued liability
The monthly accrual for a full-time employee under five years’ service is straightforward:
| Step | Working |
|---|---|
| Annual accrual | (Basic ÷ 30) × 21 |
| Monthly accrual | Annual accrual ÷ 12 |
| Rule of thumb | Roughly 5.8% of basic salary per month for the first five years |
| Beyond five years | Roughly 8.3% of basic salary per month |
For a team of twenty on an average basic of AED 9,000, that is roughly AED 10,400 a month accruing — about AED 125,000 a year of liability building quietly on the balance sheet. Businesses that treat gratuity as a cost that appears when someone resigns are mis-stating their position, and the correction usually arrives as a cash-flow problem.
Run a schedule monthly with one row per employee: joining date, current basic, service to date, days accrued, and the value at today’s basic. Total it. That number is your end-of-service liability.
Two things fall out of doing this. You know what a round of departures would cost, and you catch the data problems — missing joining dates, unrecorded unpaid leave, unlogged salary revisions — years before they become a dispute at exit.
The three records that decide every dispute
Nearly every gratuity dispute we see turns on one of three pieces of missing paperwork:
| Record | What goes wrong without it |
|---|---|
| The signed contract with the basic figure | The parties cannot agree what the basic salary is, and the calculation cannot be run |
| Salary revision letters | The current basic is disputed; the employee claims a higher figure than payroll shows |
| The leave and unpaid-absence register | Unpaid absence cannot be evidenced, so it cannot be deducted from the service period |
All three are trivial to maintain and impossible to reconstruct. An employer who cannot produce them is in a weak position regardless of the merits.
What non-payment actually costs
Withholding a settlement is rarely a saving. The realistic sequence is a MoHRE complaint, an amicable settlement attempt, and where that fails, referral to the competent court — with management time consumed at every stage, the sum still owed, and a labour file that now carries a complaint against it.
Set against a correctly calculated payment made within 14 days, the arithmetic almost never favours the delay. Where cash flow is the real constraint, the honest conversation with the employee about timing is a far better position than silence followed by a complaint.
Checking your own settlement in ten minutes
You do not need a lawyer to do a first-pass check. Work through this in order.
| # | Check | What to look for |
|---|---|---|
| 1 | Which basic figure did they use? | Compare to your contract and latest revision letter. This is the single biggest source of error. |
| 2 | Which joining date? | It should be your first day, not your confirmation date. |
| 3 | Which last day? | The end of the contract after notice, not the day you resigned. |
| 4 | Is the day count split correctly? | 21 days for the first five years, 30 thereafter — not 30 across the board, and not 21 across the board. |
| 5 | Is the part-year included? | Fractions are payable proportionately once one year is complete. |
| 6 | Does the ratio look right? | Use the months-of-basic column in the reference table above. Three years ≈ two months of basic; ten years ≈ eight and a half. |
| 7 | Any unpaid leave deducted? | Check the days claimed against your own record. |
| 8 | Is every deduction itemised? | Each should name what it is and where it comes from. |
| 9 | Is unused annual leave included? | A separate line from gratuity, and commonly understated. |
| 10 | Are you within 14 days? | If not, the deadline has passed and you can say so. |
Put it in writing before you sign anything. A short, factual email — here is the basic figure in my contract, here are my joining and leaving dates, here is my day count, here is the figure I calculate — resolves most discrepancies at HR level, because most of them are errors rather than positions.
Where it is a position rather than an error, you have created a dated record of your objection, which matters if the matter goes to MoHRE.
Planning ahead: what actually changes your gratuity
Three decisions have a material effect, and all three are made long before anyone leaves.
| Decision | Effect |
|---|---|
| The basic-to-allowance split at offer stage | The largest lever available. Two identical packages can differ by tens of thousands at exit. Costs nothing to negotiate at offer stage; impossible to change retrospectively. |
| Crossing the five-year line | Years six onward accrue at 30 days rather than 21 — a 43% higher rate. If you are at four years and ten months, the arithmetic of staying two more months is worth checking. |
| Accepting a basic salary reduction | Reaches backwards through every accrued year, because the calculation runs on the basic at the end of service. A reduction presented as temporary is not temporary in its effect on gratuity. |
None of this is a reason to stay in a job you should leave. But these are the numbers, and people are entitled to make the decision knowing them rather than discovering them afterwards.
Receiving the money — the practical end
Two things trip people up at the point of payment, and both are avoidable with a little planning.
Tax
The UAE does not levy personal income tax on employment income, and gratuity is not taxed at source here. The corporate tax introduced for businesses does not change that position for an individual receiving an end-of-service payment.
What we cannot tell you is your position at home. Some countries tax their residents on worldwide income, some treat a lump sum differently from salary, and some have a double taxation agreement with the UAE that affects the outcome. If you are returning to a country that taxes residents on foreign income, take advice there before the payment lands rather than after — the timing of receipt relative to your change of residence status can matter, and it is one of the few things you can still control.
Getting paid after you have left
Settlements are usually paid into the account salary was paid into. If that account is closed — or frozen, which banks sometimes do when a salary transfer stops — the payment can fail and the resolution takes weeks from outside the country.
Keep the account open until the settlement has actually cleared. If you must close it, give the employer written alternative bank details before your last day and get an acknowledgement.
Also settle any UAE loans or credit cards. Outstanding facilities can complicate both the account and the exit, and a settlement paid into an account with a linked liability may not stay there.
Keep the paperwork
Once paid, keep the itemised settlement statement, the bank credit advice and the cancellation paperwork together. If you return to the UAE later, or a question arises about the service period at a future employer, that file answers it in minutes. Employers do not keep records indefinitely, and reconstructing a settlement from five years ago without your own copy is close to impossible.
The eight mistakes that cost people money
| Mistake | What it costs | Fix |
|---|---|---|
| Calculating on total package | Overestimates by 40–60% in a typical package; leads to a dispute that cannot be won | Use the basic figure from the contract |
| Applying 30 days to all years | Overestimates long service by tens of thousands | 21 days for the first five years, 30 thereafter |
| Assuming resignation forfeits it | People accept nothing, or a fraction, when full gratuity is described in the current provisions | Check the era of any source quoting fractions |
| Counting from confirmation, not joining | Loses the probation months — sometimes the whole entitlement | Service runs from the joining date |
| Ignoring the fraction of a year | Loses the part-year after the first full year | Part-years are payable proportionately |
| Accepting undocumented deductions | Variable, sometimes substantial | Ask for each deduction itemised with its basis |
| Signing the release before checking | Makes later challenge harder | Object in writing first, then sign |
| Leaving without the documents | Turns a clear claim into a weak one | Email contract, payslips and leave records to yourself before your last day |
Situations worth knowing about
Multiple contracts with the same employer
Where employment has run continuously under successive contracts with the same employer — a renewal, a conversion from one contract type to another under Decree-Law 33 of 2021, or a change of job title — the service is continuous and gratuity accrues across the whole period.
What breaks continuity is an actual end of service with a settlement paid, followed by a fresh start. If your employment simply carried on and paperwork was reissued, your joining date is the original one. Check which date has been carried into the calculation.
Transfers between group companies
Moving from one entity to another within the same group is legally a move between employers, even where nothing changes day to day. Whether service carries across depends on what was agreed at the point of transfer.
If a transfer is being proposed to you, get the treatment of accrued service in writing before the move. Afterwards, the leverage is gone. Either the receiving entity recognises your original joining date, or the transferring entity settles gratuity to the transfer date. One or the other should be documented.
Free zones with their own employment regimes
Most UAE free zones apply the federal labour law, and everything in this guide applies. A small number — the financial free zones in particular — operate their own employment regulations, and end-of-service arrangements there can work differently, including through mandatory savings schemes rather than a lump sum at exit.
If your visa is issued by a financial free zone, confirm the arrangement that applies to you with that authority directly rather than assuming the federal calculation. Our guide to free zone versus mainland visas sets out how the two routes differ.
Death in service
Where employment ends by reason of the worker’s death, the accrued end-of-service entitlement forms part of the estate and is payable to the legal heirs, alongside other outstanding dues. Distribution follows the applicable succession rules.
Families in this position should raise it with MoHRE early — there are procedural steps involving the estate and the employer that are easier addressed at the outset than months later.
Company closure or insolvency
Where a business closes, employees’ entitlements do not disappear — but recovering them becomes a claim rather than a payment. File with MoHRE promptly. Time matters more here than in an ordinary dispute, because you may be one of several claimants against limited assets.
Frequently asked questions
Is gratuity calculated on basic salary or total salary?
Basic salary. The published position excludes allowances such as housing, transportation, utilities and furniture. In a typical UAE package where basic is 40–60% of the total, this roughly halves the figure people expect.
Do I get gratuity if I resign?
The current published position describes full gratuity pay in both service bands — 21 days per year for more than one but less than five years, and 30 days per year beyond five — without stating a reduction for resignation.
The one-third and two-thirds reductions still widely quoted come from Federal Law 8 of 1980 and applied to unlimited contracts, a category removed by Decree-Law 33 of 2021. If a source mentions unlimited contracts, it is describing the previous regime.
Where a material sum turns on this, confirm your specific position with MoHRE on 600590000 before signing a settlement.
How much gratuity for 3 years in UAE?
21 days’ basic wage per year × 3 = 63 days. On a basic of AED 8,000 that is (8,000 ÷ 30) × 63 = AED 16,800. Substitute your own basic figure — the day count of 63 stays the same.
How much gratuity for 5 years?
21 × 5 = 105 days. On a basic of AED 10,000: (10,000 ÷ 30) × 105 = AED 35,000. The 30-day rate begins from year six, not year five.
How much gratuity for 10 years?
(21 × 5) + (30 × 5) = 105 + 150 = 255 days. On a basic of AED 10,000: (10,000 ÷ 30) × 255 = AED 85,000.
Applying 30 days to all ten years would give AED 100,000 — a AED 15,000 overestimate, and the most common error in DIY calculations.
Do I get gratuity if I worked less than one year?
No. One year of continuous service is the threshold. Below it there is no gratuity entitlement, though other dues — outstanding salary, accrued annual leave — remain payable.
Does probation count toward gratuity?
Yes. Probation forms part of the service period. Someone who completes six months’ probation and works seven months more has thirteen months of service and is over the threshold. Service runs from the joining date, not the confirmation date.
Is gratuity paid if I’m terminated for a disciplinary reason?
Termination of service as a disciplinary penalty under Article 39 is stated to preserve the worker’s right to end-of-service benefits. An employer treating a disciplinary exit as forfeiting gratuity is not applying the law as published.
When must gratuity be paid?
Within 14 days of the date the contract ends, together with all other wages and entitlements. The clock runs from the last day of employment after notice, not from the resignation date.
Can my employer deduct from my gratuity?
The employer may deduct amounts legally owed by the worker — typically documented loans or advances. Each deduction should be identifiable and have a stated basis. Ask for the itemisation before signing.
Does unpaid leave reduce my gratuity?
Yes, indirectly. Days of absence without pay are not included in the service period, so the period on which gratuity is calculated is shorter. Two months of unpaid leave across four years gives a service period of three years and ten months.
Is there a maximum gratuity?
Yes — the total must not exceed two years’ wage. At 21 days for five years and 30 days thereafter, that ceiling is reached at roughly 25 years of service. Below that it will not affect you.
How does gratuity work for part-time employees?
Divide your contract’s annual working hours by the full-time contract’s annual working hours, multiply by 100 for a percentage, then apply that percentage to the full-time gratuity for the same service. You need your employer to state the full-time comparator — ask for it in writing.
Does the notice period count toward gratuity?
Yes. The employment relationship continues throughout notice with all its entitlements, so the notice period adds to service. Gratuity is calculated to the last day of employment, not the date notice was given.
What if I don’t agree with the settlement figure?
Put your own calculation in writing first, showing the basic figure and service dates you have used. If it is not resolved, file a labour complaint with MoHRE, which attempts amicable settlement before the matter proceeds to court. Do not sign a general release while disputing the figure.
Related guides
- Notice periods under UAE labour law — Articles 42 to 47, and the routes that preserve your entitlements
- Annual leave entitlement — the other cash line in your final settlement
- Probation period rules — why your joining date matters
- Filing a MoHRE complaint — the process if your settlement is not paid
- Cancelling an employment visa — what happens after the settlement
- Labour bans explained — what does and does not follow a resignation
Sources
- Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations, and the amendments to it
- Cabinet Resolution No. 1 of 2022 — Executive Regulations of Decree-Law 33 of 2021
- The Official Portal of the UAE Government (u.ae) — provisions for end of service benefits; calculations for gratuity pay
- Ministry of Human Resources and Emiratisation (MoHRE) — call centre 600590000
This guide is general information based on published UAE government sources, current at the date shown above. It is not legal advice. Employment law is applied to the facts of each case, and free zones with their own employment regulations may differ. For a binding position on your own contract, contact MoHRE on 600590000 or take qualified legal advice. We update our guides when the underlying provisions change.
