How UAE gratuity is calculated: formula and worked examples
End-of-service gratuity is the payment a private-sector employee in the UAE receives after at least one year of continuous service. This guide shows the formula and works through two examples.
The formula
- Use basic salary only. Allowances, overtime and bonuses are not included.
- Daily wage = monthly basic salary ÷ 30.
- For each of the first five years: 21 days of wages.
- For each year after five: 30 days of wages.
- Part years count in proportion.
- The total cannot be more than 24 months of basic salary.
- Less than one year of service: no gratuity.
This follows Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (Article 51). It applies to private-sector employees on the UAE mainland. Free zones and some contracts have their own rules.
Example 1: three and a half years
Basic salary AED 4,000 a month; 3.5 years of service.
| Step | Working | Result |
|---|---|---|
| Daily wage | 4,000 ÷ 30 | AED 133.33 |
| Gratuity days | 3.5 × 21 | 73.5 days |
| Gratuity | 73.5 × 133.33 | AED 9,800 |
Example 2: eight years
Basic salary AED 6,000 a month; 8 years of service.
| Step | Working | Result |
|---|---|---|
| Daily wage | 6,000 ÷ 30 | AED 200 |
| First five years | 5 × 21 = 105 days | 105 days |
| Next three years | 3 × 30 = 90 days | 90 days |
| Gratuity | 195 × 200 | AED 39,000 |
| Cap check | 24 × 6,000 = 144,000 | Not reached |
Things people get wrong
- Using total salary instead of basic salary.
- Forgetting that unpaid leave days are normally taken out of the service period.
- Applying the five-year step wrongly: the 30-day rate applies only to years after the fifth.
- Paying the gratuity but not the other final dues, such as unused leave and unpaid salary.
Gratuity is only one line of the final settlement
When an employee leaves, the company usually owes more than gratuity: unused annual leave, salary up to the last working day, notice pay in some cases, and any agreed flight ticket, less loans or advances. BizTracker UAE prepares all of these on one statement.
Want a quick number? Use the free UAE gratuity calculator.
Frequently asked questions
Is gratuity calculated on basic or total salary?
On basic salary only.
Is there a maximum gratuity?
Yes. The total cannot exceed 24 months of the employee's basic salary.
Do part years count?
Yes, in proportion, once the employee has completed one year of service.
Does resigning change the amount?
For private-sector staff the standard formula applies whether the employee resigns or is terminated, except in the gross misconduct case under Article 44.
This guide is general information, not legal advice. Rules can change and special cases exist; confirm with the relevant authority or a qualified adviser.