How to calculate gratuity in the UAE, with worked examples

Who qualifies for gratuity in the UAE

Article 51 of Federal Decree-Law No. 33 of 2021, the UAE Labour Law in force since 2 February 2022, gives gratuity to foreign full-time workers with one year or more of continuous service: uninterrupted work for the same employer or its legal successor.

• UAE nationals. Their end-of-service benefits follow the pensions and social security law instead.
• Under one year. No gratuity is due, however the job ends.
• Domestic workers and government staff. The Labour Law excludes them; domestic workers fall under Federal Decree-Law No. 9 of 2022.
• DIFC and ADGM. These financial free zones apply their own employment laws, covered below.

The gratuity formula, step by step

Gratuity uses your basic wage: the contract wage without allowances or benefits in kind. The UAE government portal lists housing, transport, utilities and furniture allowances as excluded.

• 1. Find your last basic wage. Piece-rate workers use the average daily wage instead.
• 2. Work out the daily rate. The law doesn't give a daily-wage formula, but Article 67 counts a month as 30 days and a year as 365 days. We use monthly basic wage ÷ 30; some payroll systems use annual basic pay ÷ 365.
• 3. Count your service. Leave out days of unpaid absence. After one full year, part years count in proportion.
• 4. Apply the rates. 21 days' basic wage for each of the first five years, then 30 days' for each year after.
• 5. Check the cap. The total can't exceed two years' wage. On a 30-day month, the formula reaches 24 months' basic pay only after 25.5 years.

For a quick estimate, use our gratuity calculator.

Worked examples of UAE gratuity

At annual basic pay ÷ 365, the AED 10,000 example comes to AED 59,178.08 instead. If your employer's figure differs, ask which daily rate and service dates it used.

Part-time work, deductions and the 14-day deadline

Article 30 of the Executive Regulation (Cabinet Resolution No. 1 of 2022) covers part-time and job-sharing workers: divide your contract's annual hours by full-time annual hours and apply that percentage to the full-time gratuity. On half the hours, you get 50%. Temporary work, and work lasting less than a year, carries no gratuity.

Article 51 lets the employer deduct amounts due by law or a court judgment. Article 29 of the regulation lists loan repayments and overpayments, pension and insurance contribution repayments, penalties under the establishment's penalty list, court-judgment debts, and repair costs for damage you caused through a mistake or breach of instructions. For penalties and damage costs, the employer must follow the legal procedure and can't deduct amounts that fell due more than three months earlier, unless agreed otherwise.

Article 53 requires wages and all other entitlements within 14 days of the contract ending. If a worker dies, the family must be paid within 10 days (Article 15).

We prepare final settlement documents, WPS payroll files and MOHRE work permit cancellations through our HR and payroll services; our visa cancellation guide covers what follows.

Resignation, dismissal and disputes

Resigning doesn't reduce gratuity under the current law: Article 51 applies at the end of service, whatever the reason. The previous law, Federal Law No. 8 of 1980, was repealed, so check that any rule you read is based on the 2021 law.

Leaving early can cost notice pay. Under Article 43, a party that doesn't observe the notice period owes a "warning allowance" equal to the worker's wage for the notice period or the part not worked. Dismissal doesn't remove gratuity either: Article 39 lists dismissal as a penalty "while preserving" the right to gratuity.

If dues aren't paid, either side can file with MOHRE, which tries to settle and decides claims of up to AED 50,000; larger claims that don't settle go to court. We're not a law firm, but our labour complaint support helps you prepare the complaint and documents.

The voluntary savings scheme, DIFC and ADGM

Cabinet Resolution No. 96 of 2023 lets private-sector employers, free zones included, pay into an investment fund monthly instead of building up gratuity. Employers apply to MOHRE and contract with a fund licensed by the Securities and Commodities Authority (SCA).

The scheme is voluntary for employers but mandatory for the workers an employer selects.

In the DIFC, a funded savings plan replaced gratuity from 1 February 2020, with DEWS as the default scheme. ADGM's Employment Regulations 2024 keep 21 and 30 days' basic wage after one year, but employers can offer a pension or savings scheme in writing instead. For the wider rules, read our UAE labour law guide.