UAE End-of-Service Gratuity Explained (2026 Rules)

By Michale · · UAE · Figures from dated official sources

In short

UAE gratuity is 21 days of basic wage for each of the first five years of service and 30 days for every year after that, paid once you have completed at least one year and capped at two years' total wage. Since the 2022 Labour Law, resignation and termination earn the same amount. On AED 10,000 basic, seven years earns AED 55,000.

UAE End-of-Service Gratuity Explained (2026 Rules)

If you work in the UAE private sector, end-of-service gratuity is usually the largest single payment you will receive from an employer. This guide explains how Federal Decree-Law No. 33 of 2021 (the Labour Law in force since 2 February 2022) sets the amount, which part of your salary counts, how the two-year cap works, what happens if you resign, and how unpaid leave changes the sum. By the end you will be able to check a final settlement yourself, and you will know which figures to challenge if they look wrong.

Open the UAE gratuity calculator →

Who is entitled to gratuity

Article 51 of the Labour Law gives gratuity to any full-time employee who has completed at least one year of continuous service. Below one year nothing is owed, whatever the reason the job ended. Unpaid salary, unused annual leave and notice pay are still due in that case; only the gratuity itself falls away.

Since the 2022 reform the old distinction between “limited” and “unlimited” contracts has gone, and the formula is the same for resignation and termination. Employers in DIFC and ADGM run their own employment regulations and savings schemes, and employers who have opted into the voluntary savings scheme replace the gratuity formula for enrolled staff. Everyone else, including most free-zone employees, is on the federal formula below.

The formula: 21 days, then 30 days

Gratuity accrues in two bands, both measured in calendar days of basic wage. The daily wage is the last monthly basic salary divided by 30.

Service Accrual Days per year Cumulative days
Under 1 year Nothing 0 0
Years 1 to 5 21 days of basic wage per year 21 105 at year 5
Year 6 onwards 30 days of basic wage per year 30 255 at year 10
Cap (Art. 51(3)) Two years’ total wage — 720 days of basic

Incomplete years are paid pro rata. Two and a half years earns 21 × 2.5 = 52.5 days; seven years and three months earns 105 days for the first five years plus 30 × 2.25 = 67.5 days for the rest. The gratuity calculator works from your start and last working dates, so the fraction is handled for you.

Basic salary, not total salary

Gratuity is calculated on the last basic wage only. Housing allowance, transport allowance, commission and other benefits are excluded. This is the single most important detail in the whole calculation and the reason many UAE contracts carry a low basic and high allowances: an employee on AED 15,000 a month with a basic of AED 6,000 accrues gratuity on AED 6,000.

Check the basic figure on your contract and on your MOHRE-registered offer letter rather than on your payslip total. If your basic has been increased recently, the new figure applies to the whole service period, because the law uses the last basic wage, not an average. The UAE salary calculator shows how the basic/allowance split changes both take-home pay and the end-of-service accrual.

Resignation versus termination

Under the current law the answer is simple: once you have completed one year, resigning and being terminated produce the same gratuity. The reductions for resigning early on a limited contract under the old Federal Law No. 8 of 1980 no longer exist. The “reason” selector in the calculator changes only the explanatory note, not the number.

Two things do still differ. The notice period of 30 to 90 days (Article 43) applies in both directions, and pay in lieu of notice is calculated on full salary, not basic. And an employee dismissed for one of the gross-misconduct grounds in the law can lose entitlement; that is a question for a labour lawyer, not a calculator.

Unpaid leave and the two-year cap

Unpaid leave and breaks in service

Days of unpaid leave are not counted as service. If you took 60 days of unpaid leave during a four-year stint, the gratuity is calculated on four years less 60 days. Paid annual leave, paid sick leave and maternity leave count as service in full. When checking a settlement, ask the employer to show the service period they used and compare it with your own record of unpaid absences.

The cap

Article 51(3) caps total gratuity at two years’ wage. The calculator applies this as 24 months of basic, which is 720 days. Since the first five years earn 105 days and every later year 30, the cap is only reached after roughly 25 and a half years with the same employer, so for most people it never applies. It matters for long-serving staff and in any calculation that uses an average or total wage rather than basic: if a settlement shows the cap applying after ten or fifteen years, the wage basis is probably wrong.

Worked examples

Three years, AED 6,000 basic salary

Daily wage = 6,000 ÷ 30 = AED 200. All three years fall in the first band, so days = 21 × 3 = 63. Gratuity = 200 × 63 = AED 12,600. The cap is 24 × 6,000 = AED 144,000, so it does not apply.

Seven years, AED 10,000 basic salary

Daily wage = 10,000 ÷ 30 = AED 333.33. First five years: 333.33 × 21 × 5 = AED 35,000. Years six and seven: 333.33 × 30 × 2 = AED 20,000. Gratuity = AED 55,000, which is 5.5 months of basic. The cap is AED 240,000, so it does not apply.

The same employee on AED 10,000 basic would receive AED 45,000 after six years and AED 85,000 after ten, which matches the quick-reference table on the calculator page.

Adding the rest of the final settlement

Gratuity is one line of the final settlement. Unused annual leave is paid out on the basic wage under Article 29(9); after one year you accrue 30 days a year, and between six and twelve months two days a month. Use the annual leave calculator to find the balance and the leave salary calculator to value it. Add any unpaid salary, notice pay in lieu and contractual bonuses. Article 53 requires everything to be paid within 14 days of the end of the contract.

What people get wrong

  • Using gross salary. Allowances are excluded. On a low-basic contract the gratuity can be less than half of what a gross-salary calculation suggests.
  • Applying the old resignation penalty. Many online tables still show one-third or two-thirds gratuity for resigning within five years. That was the 1980 law; it does not apply to any contract ended since February 2022.
  • Counting unpaid leave as service. It is deducted.
  • Expecting gratuity under one year. Eleven months earns nothing, however the employment ended.
  • Assuming free-zone rules match federal law. DIFC and ADGM differ; other free zones generally follow the federal formula.
  • Forgetting the ILOE scheme is separate. Unemployment insurance pays after involuntary job loss and has no effect on gratuity.

Frequently asked questions

Is UAE gratuity taxed?

There is no personal income tax in the UAE, so the amount is paid in full. Expatriates from countries that tax worldwide income should check their home rules on foreign termination payments.

How much gratuity do I get after five years?

105 days of basic wage: AED 17,500 on a basic of AED 5,000, AED 35,000 on AED 10,000, AED 52,500 on AED 15,000.

Does a salary increase in my last month raise my gratuity?

Yes. The law uses the last basic wage for the entire service period, so a higher final basic increases the whole calculation.

Can my employer pay gratuity late?

Article 53 sets a 14-day deadline after the contract ends. Unpaid gratuity can be claimed through MOHRE and the labour courts; claims under AED 100,000 are usually exempt from court fees.

What if I worked part-time or on a reduced-hours contract?

Part-time employees accrue end-of-service benefits pro rata to their working hours under the Cabinet Resolution implementing the law. Confirm the proportion used with the employer.

Sources