Key points
- Employees with at least one year of continuous service are entitled to gratuity.
- 21 days of basic wage for each of the first five years, then 30 days for each extra year.
- Only the basic wage counts; allowances are excluded.
- The total cannot be more than two years' basic wage.
- Final dues must be paid within 14 days after the contract ends.
Who is entitled to gratuity?
Under Federal Decree-Law No. 33 of 2021 on the regulation of labour relations, a full-time employee in the private sector who completes at least one year of continuous service is entitled to an end-of-service gratuity when the contract ends.
Under the current law, employees are entitled whether they resign or the employer ends the contract. The old reductions for resigning under unlimited contracts were removed when all contracts became fixed-term.
The formula
- Years 1 to 5: 21 days of basic wage for each year
- Year 6 onwards: 30 days of basic wage for each year
- Part years: paid in proportion to the time worked
- Maximum: two years' basic wage in total
The daily wage is usually worked out as annual basic salary ÷ 365. Some employers use monthly basic ÷ 30. Days of unpaid leave are not counted as service.
Worked examples
All examples use a basic salary of AED 6,000 a month and the 365-day method (daily wage AED 197.26).
| Service | Days of wage | Gratuity |
|---|---|---|
| 11 months | 0 | AED 0 |
| 3 years | 3 × 21 = 63 | AED 12,427.40 |
| 5 years | 5 × 21 = 105 | AED 20,712.33 |
| 7 years | 105 + 2 × 30 = 165 | AED 32,547.95 |
| 25 years | 105 + 20 × 30 = 705 | AED 139,068.49 |
| 30 years | 105 + 25 × 30 = 855, capped at 24 months | AED 144,000.00 |
Check your own figures with our free gratuity calculator.
What counts as basic wage?
Gratuity uses the last basic wage in the employment contract. Housing, transport, phone, education and other allowances are not included, and neither are overtime or commission unless they form part of the basic wage.
When must gratuity be paid?
The employer must pay all end-of-service dues, including gratuity, unpaid salary and leave encashment, within 14 days after the contract ends. The employer can deduct amounts the employee legally owes.
Some employers have joined the optional end-of-service savings scheme, where monthly contributions are invested instead of paying gratuity at the end. Employees of those employers follow the scheme's rules.
Calculate gratuity for your whole team
Ledgerline ERP keeps each employee's joining date, basic salary and unpaid leave, shows the gratuity accrued to date, and prepares the final settlement with gratuity, leave encashment and notice pay when someone leaves. Salaries are paid through WPS.
Frequently asked questions
Does gratuity apply in free zones?
Most free zones follow the federal Labour Law rules on gratuity. DIFC and ADGM have their own employment laws and end-of-service arrangements, so check the rules for your free zone.
Is gratuity paid to part-time employees?
Part-time employees are covered by the Labour Law, and their gratuity is calculated in proportion to the hours they work. Check the details with MOHRE for your contract type.
Can an employer refuse to pay gratuity?
An employer can only withhold gratuity in limited cases set out in the law, and can deduct amounts the employee owes. Employees can raise a complaint with MOHRE if dues are not paid.
Is gratuity taxable in the UAE?
There is no personal income tax in the UAE, so employees do not pay tax on their gratuity.
This guide is general information, not tax or legal advice. Rules change, so check the latest guidance from the Federal Tax Authority, the Ministry of Finance or MOHRE, or speak to a registered adviser.