How is Gratuity Calculated in UAE 2024?

How Gratuity in UAE Is Calculated (2024 Rules)

If you're an employee on a private-sector contract in the UAE, your end-of-service gratuity is one of the few things the law actually guarantees you. Most people get the math wrong — usually in the employer's favour. Here's how it really works.

Quick answer

Gratuity in UAE is calculated on your last basic salary (not the gross). You earn 21 days' basic pay per year for the first five years of service, and 30 days' basic pay per year for every year after that. You need at least one full year of continuous service to qualify. The total is capped at two years' worth of basic pay. The rules apply to all private-sector staff on full-time MOHRE (Ministry of Human Resources and Emiratisation) contracts under Federal Decree-Law No. 33 of 2021.^[1]

The formula, with real numbers

Take your last basic salary — the figure on your contract, not your total package with housing and transport allowances. That distinction is where most clients lose money.

Daily wage = basic salary ÷ 30.

For each of your first 5 years: 21 × daily wage. For each year after that: 30 × daily wage.

Worked example. Basic salary AED 10,000. Service: 7 years.

• Daily wage: 10,000 ÷ 30 = AED 333.33
• First 5 years: 5 × 21 × 333.33 = AED 35,000
• Years 6 and 7: 2 × 30 × 333.33 = AED 20,000
• Total gratuity: AED 55,000

Partial years count on a pro-rata basis once you've crossed the one-year mark. So 7 years and 4 months gives you the full 7 years plus 4/12 of a year at the 30-day rate.

Frankly, if your basic salary is suspiciously low compared to your allowances, ask why. Employers sometimes structure pay this way specifically to shrink the gratuity liability. Legal — but worth negotiating before you sign.

Resignation vs termination — does it still matter?

Under the old 1980 Labour Law it mattered enormously. Resign before 5 years and you lost a chunk of your gratuity on a sliding scale. That regime is gone.

Federal Decree-Law No. 33 of 2021, which took effect on 2 February 2022, scrapped the sliding scale for unlimited contracts and moved everyone to fixed-term contracts. Article 51 now gives you the full gratuity regardless of whether you resigned or were terminated, as long as you completed one year of continuous service.^[1][2]

The only standard disqualifier is dismissal under Article 44 — gross misconduct, which is a narrow list (assault, drunkenness on duty, disclosing trade secrets, and a few others). Don't let an employer tell you "you resigned, so you get less." That's the old law talking.

Watch out: Unpaid leave doesn't count toward your service period. Neither do days you were absent without authorisation. If you took a 3-month sabbatical, expect that to shave the calculation.

What counts as "basic salary"

This is where the fights happen. The law is clear that gratuity is calculated on basic wage only — not allowances for housing, transport, education, mobile, or anything else listed separately on your payslip.^[1]

Check your offer letter. If it says "Basic: AED 6,000, Housing: AED 3,000, Transport: AED 1,000, Total: AED 10,000," your gratuity will be built on AED 6,000 — not AED 10,000. That's a 40% haircut on what you might have assumed.

Commission and bonus payments are generally excluded too, unless your contract explicitly makes them part of basic wage (rare, and employers will resist it).

One quirk worth knowing: if you're on the new DEWS or similar savings scheme in the DIFC (Dubai International Financial Centre) or ADGM (Abu Dhabi Global Market) free zones, gratuity works differently — employers contribute monthly to a regulated savings plan instead of paying a lump sum on exit. Check which regime you're under before you do any math.

When you should get paid, and what to do if you don't

Article 53 of the Labour Law requires the employer to settle all end-of-service entitlements — gratuity, unpaid leave, notice pay, anything else owed — within 14 days of the contract ending.^[1]

Miss that deadline and you have options. File a labour complaint with MOHRE through the call centre (800 60) or the app. MOHRE will mediate first. If that fails within roughly 14 days, they refer the case to the Labour Court, and the filing fees are waived for claims under AED 100,000.

In my experience, most employers pay once a MOHRE complaint is filed — they don't want the file open. The ones who drag it to court are usually either insolvent or genuinely disputing the calculation. If it's the latter, get the dispute pinned down in writing before you sign any final settlement, because signing a receipt marked "full and final" can close off claims later.

Key dates: - 1 year minimum service to qualify - 14 days post-termination to receive payment - 1 year from end of service to file a labour claim (Article 54)

Common mistakes that cost employees money

A few patterns I see again and again:

Signing a settlement before checking the math. Once you sign and accept payment, unwinding it is painful.

Accepting "we'll pay your gratuity into the new job's account" arrangements. No. Your old employer owes you. Get paid, then start fresh.

Forgetting that unpaid leave reduces your service period — but paid annual leave does not.

Letting the visa cancellation happen before payment lands. Cancel the visa after the money is in your account, not before. Once you're outside the country with no visa, chasing AED 50,000 becomes a much bigger headache.

For more on related entitlements, see our guides under employment law.

Citations

^[1] Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, Articles 44, 51, 53, 54. UAE Ministry of Human Resources and Emiratisation. ^[2] Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021.

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