How UAE gratuity is calculated
End-of-service gratuity is a lump sum your employer owes you when you leave, and it is set by federal law rather than by your contract. Your contract can be more generous than the law, but it cannot be less.
The formula
The calculation has three steps:
- Find your daily wage. Divide your monthly basic salary by 30. A basic salary of AED 10,000 gives a daily wage of AED 333.33.
- Apply the two tiers. You earn 21 days' wage for each of your first five years, then 30 days' wage for every year after that.
- Apply the ceiling. The total can never exceed two years' wage, however long you stayed.
A worked example
Take someone on a basic salary of AED 10,000 who worked for seven years exactly. Their daily wage is AED 333.33.
- First 5 years: 5 × 21 × 333.33 = AED 35,000
- Remaining 2 years: 2 × 30 × 333.33 = AED 20,000
- Total: AED 55,000
The ceiling here is AED 240,000 (24 × 10,000), so it doesn't bite. In practice the cap only matters after roughly 25 years of service.
Basic salary, not total salary
This is where most people get an unpleasant surprise. Gratuity is calculated on basic salary alone — housing, transport, phone and any other allowances are excluded. If your AED 20,000 package is split into AED 8,000 basic plus AED 12,000 allowances, your gratuity is worked out on the AED 8,000. Check your offer letter for the split.
Does resigning reduce it?
Under the old law, resigning from an unlimited contract before five years cut your gratuity to a third or two-thirds. The 2021 decree-law removed that distinction: resignation and termination now produce the same entitlement. The main way to lose gratuity entirely is dismissal for one of the gross-misconduct grounds in Article 44.
Free zones are different
DIFC and ADGM operate their own employment regimes. DIFC in particular replaced the traditional lump sum with the DEWS scheme, where employers make monthly contributions to a funded plan instead. If you work in either, this calculator will not apply to you.
Sources
The rules above come from Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, in force since 2 February 2022, and its implementing regulations. Please verify against the primary source before relying on any figure:
- Ministry of Human Resources and Emiratisation (MOHRE)
- u.ae — official UAE government portal, end-of-service benefits
Written and maintained by Mohammed Jamil. Spotted an error in the maths or the law? Email [email protected] and I'll correct it.