UAE Gratuity Calculation Under the New Labour Law

End-of-service gratuity is the lump sum your employer owes you when you leave a private-sector job in the UAE. The labor law in force since February 2022 made the rules simpler than they used to be, yet the final figure still catches people out, because it runs on basic salary alone and not on your full package. This guide shows exactly how the calculation works, walks through real numbers, and points out where employees quietly lose money.

A UAE private-sector employee who completes at least one year of continuous service earns 21 days of basic salary for each of the first five years, then 30 days for each year after that. The calculation uses basic salary only, and the total is capped at two years of pay.

Check Which Law Governs Your Job Before You Calculate

Confirm which system covers your job before you run any numbers, because two financial free zones do not use the federal formula at all.

Mainland companies and most free zones follow the federal gratuity rules administered by the Ministry of Human Resources and Emiratisation. The Dubai International Financial Centre and the Abu Dhabi Global Market run their own end-of-service systems. If you work in either, the 21 and 30 day formula below does not apply to you, and you should read the free-zone section first.

One more boundary. UAE and GCC nationals in the private sector are covered by the state pension system through the General Pension and Social Security Authority, not by gratuity. The rest of this guide is written for expatriate employees, who make up almost the entire private-sector workforce.

Who Qualifies for Gratuity Under the Current Rules

You qualify for gratuity once you have completed one full year of continuous service with the same employer. Below one year, the entitlement is zero, whatever the reason you leave.

Continuous service runs from your start date to your last working day. Paid leave counts toward that period. This includes annual leave, sick leave, maternity leave, and public holidays. Unpaid leave does not count and is subtracted from the total. Your probation period counts once you complete it and stay on.

To qualify you need to meet all of the following:

• You have completed at least one continuous year with the same employer.
• You are an expatriate employee in the private sector, not a national covered by the pension system.
• You are on a MOHRE-registered employment contract.
• You did not lose your entitlement through the narrow misconduct route explained further down.

Free-zone employees qualify on the same terms, unless their zone runs a savings plan instead, which again is covered below.

The Gratuity Formula and How the Numbers Work

The formula is fixed and mechanical once you have two inputs, your last basic salary and your length of service. The official UAE government guide to end-of-service benefits sets it out under Article 51 of the labour law.

The formula is:

Gratuity = (basic salary / 30) x gratuity days x years of service

Gratuity days means 21 for years within the first five, and 30 for each year beyond the fifth. Work through it in six steps.

1. Find your last basic salary. Use the basic figure written into your MOHRE contract, not the total package. Housing, transport, bonuses, and other allowances are excluded, and those allowances often make up 40 to 50 percent of a Gulf salary, which is the single biggest reason people overestimate what they are owed.
2. Count your full years of continuous service, then subtract any unpaid leave.
3. Apply 21 days of basic salary for each of the first five years.
4. Apply 30 days of basic salary for every year after the fifth.
5. Pro-rate any part-year you worked beyond your first complete year.
6. Check the result against the two-year cap.

A note on the daily rate. The law treats a calendar month as 30 days under Article 67, so the standard daily rate is your basic salary divided by 30. Some employers use an annualised method instead, basic salary times 12 divided by 365, which gives a slightly lower daily figure. The law does not force one method, so ask which your employer applies before you check their sum.

Three worked examples make the pattern clear.

Three years of service. Basic salary AED 10,000. Daily rate is 10,000 divided by 30, which is AED 333.33. Gratuity is 21 days times 3 years times 333.33, which comes to AED 21,000.

Three years and six months. Basic salary AED 12,000. Daily rate is AED 400. The three full years earn 21 times 3 times 400, which is AED 25,200. The extra half year is pro-rated, 21 times 0.5 times 400, which is AED 4,200. Total gratuity is AED 29,400. This is the step most people miss, the part-year still counts once you are past the one-year mark.

Thirty years of service, hitting the cap. Basic salary AED 8,000. The first five years earn 21 times 5, which is 105 days. The next 25 years earn 30 times 25, which is 750 days. That is 855 days at a daily rate of AED 266.67, working out to AED 228,000. But the two-year cap is 24 months of basic salary, which is AED 192,000. So the payable amount is AED 192,000, not the full calculated figure.

If you would rather not do this by hand, use an end of service calculator UAE that runs the same formula, applies the 21 and 30 day split, and caps the result for you. Use it to get your number in seconds, then walk through the steps above to confirm it against your contract.

What the New Labour Law Changed About Gratuity

Federal Decree-Law No. 33 of 2021, in force since 2 February 2022 and amended by laws 14 of 2022, 20 of 2023, and 9 of 2024, rewrote several rules that used to shrink people’s payouts. The biggest change is that resigning no longer costs you money.

Under the old law, an employee who resigned before five years on an unlimited contract received only one-third or two-thirds of the calculated gratuity. That penalty is gone. Any document still referring to Article 120 or to unlimited contracts is out of date.

Resignation and Termination Now Pay the Same Gratuity

Resigning and being terminated produce the same gratuity figure. The calculation does not care how the job ended, only that you completed one year of continuous service.

There is one thing to watch on resignation. If you fail to serve your required notice period, usually 30 to 90 days as set in your contract, your employer can deduct salary in lieu of that notice from your final settlement, and that deduction can come out of your gratuity. Serving the full notice protects the whole payout. The 21 and 30 day formula itself stays identical either way.

Situations That Reduce, Delay, or Forfeit Your Gratuity

Most exits pay out cleanly. A handful of situations change the result, and knowing them prevents both underpayment and a false expectation.

Resigning Before One Year Means No Gratuity

If you leave before completing 12 months of continuous service, you receive no gratuity, whether you resign or are dismissed. Your employer must still settle unpaid wages and any accrued leave, but gratuity does not begin to accrue until the one-year mark.

Gross-Misconduct Dismissal Rarely Erases Gratuity Now

Under the old law, dismissal for gross misconduct wiped out gratuity entirely. Under the current law, dismissal on the misconduct grounds listed in Article 44 generally does not forfeit gratuity, provided you met the one-year service requirement. This is a genuine shift, and older articles that say otherwise are relying on the repealed rules.

The caveat matters. In extreme proven cases involving theft, fraud, or assault, a court can still order forfeiture, and an employer may pursue a separate claim to recover documented losses. If you are dismissed under Article 44, get legal advice rather than assuming your gratuity is either safe or lost.

Unpaid Leave Shortens the Service Used in the Sum

Only paid service counts toward gratuity. If you took extended unpaid leave, those days are removed from your total service before the calculation runs. Maternity and sick leave still count toward service even where part of the period was unpaid.

No Contract Clause Can Sign Away Your Gratuity

Gratuity is a statutory right. A clause in your contract that waives or caps it below the legal amount is void and unenforceable. An employer also cannot deduct training or recruitment costs from your gratuity without a court judgment specifically ordering it.

When and How Your Gratuity Must Be Paid

Your employer must pay your gratuity and all other final dues within 14 days of your last working day, under Article 53. Miss that window and you can file a complaint immediately.

The stakes for employers rose sharply under the 2024 amendment, Federal Decree-Law No. 9 of 2024, which lifted penalties for labour violations to as much as AED 1,000,000 per violation. That higher ceiling makes a miscalculated or late gratuity a real financial risk for the company, not a minor slip.

One item people forget. Unused annual leave is paid out separately, on top of gratuity, as its own line in the final settlement. It is not folded into the gratuity figure, so check that both appear on your settlement statement.

What to Do If Your Employer Will Not Pay

If your gratuity is unpaid after 14 days, or the amount looks wrong, there is a free and structured route to recover it. Work through it in order.

1. Ask HR for a written final settlement statement showing the breakdown of gratuity, leave encashment, notice, and any deductions.
2. Verify the maths yourself. Confirm they used basic salary only, pro-rated your part-year, and applied no old-law resignation cut.
3. File a complaint with MOHRE through its app, website, or a Tasheel centre. Filing is free, and MOHRE tries to mediate within 14 days.
4. If mediation fails, MOHRE now issues a binding, enforceable decision for any claim under AED 50,000, a power it gained on 1 January 2024 under Federal Decree-Law No. 20 of 2023. Larger claims are referred to the labour court.
5. Keep every document. Your contract, pay slips, bank statements, and the settlement statement all support your claim.

Do not sit on it. The 2024 amendment extended the deadline to file a labour claim to two years from the date the entitlement fell due, but that is still a hard cutoff, and the clock does not stop while you wait.

The Savings Scheme as an Alternative to Lump-Sum Gratuity

Some employers no longer hold gratuity as a lump sum owed at the end. They join the voluntary Savings Scheme instead, and invest monthly contributions on your behalf.

Launched in late 2023 under Cabinet Resolution No. 96 of 2023 and run through MOHRE, the scheme replaces the traditional model for enrolled staff. When you leave, you take the accumulated contributions plus any investment returns, rather than a formula-based lump sum.

Employers Contribute a Fixed Percentage of Basic Salary Each Month

Under the scheme, the employer pays a monthly contribution into an approved fund, set at 5.83 percent of your basic salary for your first five years of service, and 8.33 percent after that. Those rates mirror the traditional 21 and 30 day accrual. You may also add voluntary contributions of your own on top.

Gratuity Earned Before Enrolment Is Preserved Separately

Joining the scheme does not erase what you already built up. Any gratuity accrued before your enrolment date is calculated and preserved under the traditional system, and future benefits are funded through the monthly contributions from that point on.

Participation is the employer’s choice, not yours. Once you are enrolled, ask which fund holds your money and how to track the balance.

How Gratuity Works in DIFC, ADGM, and Other Free Zones

The two big financial free zones sit outside the federal formula entirely, so the rules above do not decide your payout there.

DIFC Replaces Gratuity With the DEWS Savings Plan

Since February 2020, the Dubai International Financial Centre has used the DIFC Employee Workplace Savings plan, known as DEWS, instead of traditional gratuity. Employers contribute 5.83 percent of basic salary monthly for the first five years and 8.33 percent after that, and there is no one-year minimum, so you build a benefit from day one.

ADGM Lets Employees Choose From April 2025

Since April 2025, employees in the Abu Dhabi Global Market can choose between the standard gratuity calculation, which mirrors the federal formula, and a savings-plan alternative similar to DEWS. If you pick the savings plan, the lump-sum gratuity no longer applies to you.

Most Other Free Zones Follow the Federal Formula

Free zones such as DMCC, JAFZA, and Dubai Silicon Oasis run on the standard federal gratuity rules. The same 21 and 30 day formula, the one-year threshold, and the 14-day payment deadline all apply exactly as on the mainland.

Gratuity Questions Employees and Employers Still Ask

Is UAE gratuity taxed?

No. The UAE has no personal income tax, so your gratuity is paid in full with nothing withheld. The amount you calculate is the amount you receive, before any legitimate contractual deductions such as unserved notice.

Does a mid-employment pay rise change my gratuity?

Yes. Gratuity is worked out on your last basic salary applied across all your years of service, so a raise lifts the entire calculation, and a pay cut lowers it. This is why your final basic salary figure matters more than what you earned in earlier years.

Does my probation period count toward the one year?

Yes, once you complete probation and continue in the role. Probation is part of continuous service, so a six-month probation followed by six more months on the job takes you to the one-year threshold.

What is the two-year cap measured against?

Basic salary. The maximum gratuity you can receive is 24 months of your basic salary, using the same basic figure that drives the calculation itself. For a basic salary of AED 10,000, the most you can ever be owed is AED 240,000.

How is gratuity worked out for part-time or reduced hours?

It is pro-rated by hours. Divide your contracted annual hours by the full-time equivalent, turn that into a percentage, and apply it to the gratuity a full-time employee would earn on the same salary and service.

Work Out Your Figure Before Your Last Day

Two things decide almost every UAE gratuity dispute. Whether you crossed the one-year line, and whether the sum was run on basic salary rather than your total package. Get both right and the rest is arithmetic.

Before you resign or sign a settlement, calculate your own number, confirm the basic salary on your contract, and make sure any part-year is counted. If the figure your employer offers falls short and cannot be explained by unserved notice or unpaid leave, the free MOHRE route is there to recover the difference. Run your figure through the gratuity calculator first, so you walk into that conversation knowing exactly what you are owed.