Quick Answer
End-of-service gratuity in the UAE is calculated on basic salary only: 21 days’ basic pay for each of the first five years of service, and 30 days’ basic pay for each year after that, capped at two years’ total salary. Since Federal Decree-Law No. 33 of 2021 came into effect, the old split between limited and unlimited contracts no longer changes the calculation, every contract is treated the same way, whether you resign or your employer ends your contract, as long as you completed at least one full year of service. If your employer does not pay within 14 days of your last working day, you can file a labour complaint with MOHRE.
Published: 20 August 2026
Gratuity is one of the largest single payments most employees in the UAE ever receive from an employer, and it is also one of the most miscalculated. Getting the formula wrong, using gross salary instead of basic salary, or not knowing the deadline for a complaint can cost an employee thousands of dirhams. This guide breaks down exactly how the calculation works today, walks through worked examples, and explains what to do if your employer does not pay what you are owed.
The Law Behind Your Gratuity
Gratuity entitlement is set out in Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, the current UAE Labour Law, which replaced the older Federal Law No. 8 of 1980. It has since been updated by further amendments, including Federal Decree-Law No. 14 of 2022, No. 20 of 2023, and No. 9 of 2024, which refined various employer and employee obligations without changing the core gratuity formula. MOHRE (the Ministry of Human Resources and Emiratisation) administers and enforces these rules for private-sector employees in the mainland and most free zones (DIFC and ADGM run their own separate end-of-service regimes).
Important change to know: the old distinction between “limited” (fixed-term) and “unlimited” contracts, which used to reduce gratuity for an employee who resigned from an unlimited contract, was abolished when the current law took effect in February 2022. Every private-sector contract is now treated as a fixed-term contract for legal purposes, and gratuity is calculated the same way regardless of whether you resigned, your contract expired, or your employer ended it, as long as the basic eligibility conditions below are met.
Who Is Eligible for Gratuity
You are entitled to end-of-service gratuity if:
– You have completed at least one full year of continuous service with the same employer.
– Your employment ended through resignation, contract expiry, or termination by the employer (including for reasons unrelated to misconduct).
You are generally not entitled to gratuity if:
– Your total service was less than one full year.
– You were dismissed for the specific gross-misconduct reasons listed in Article 44 of the Labour Law (for example, proven fraud, serious breach of safety rules, or unauthorised disclosure of confidential information), in which case gratuity can be forfeited.
The 21-Day / 30-Day Formula, Step by Step
Gratuity is calculated in two tiers based on total years of service:
| Years of service | Gratuity rate |
|---|---|
| First 5 years | 21 days’ basic salary for each year of service |
| Each year beyond 5 years | 30 days’ basic salary for each additional year of service |
| Total gratuity payable | Cannot exceed 2 years’ total basic salary, regardless of tenure |
Step 1: Find your daily wage.
Daily wage = Monthly basic salary ÷ 30
Step 2: Calculate days owed.
– For each of the first 5 years: 21 days
– For each year after year 5: 30 days
– Add a proportional amount for any partial year completed after your first full year
Step 3: Multiply days owed by your daily wage.
Total gratuity = Total days owed × Daily wage
What Counts as “Basic Salary”
This is the single most common mistake employees make. Gratuity is calculated only on the basic salary stated in your MOHRE-registered employment contract, not your total monthly package. The following are excluded from the calculation:
– Housing allowance
– Transport or car allowance
– Utilities allowance
– Bonuses and commissions
– Overtime pay
– Any other supplementary allowance or benefit
If your offer letter or contract does not clearly separate basic salary from allowances, check your MOHRE contract record directly, since that is the figure used for the calculation, not whatever your payslip lists as gross pay.
Worked Examples
Example 1: 3 Years of Service
An employee with a basic monthly salary of AED 9,000 resigns after exactly 3 years.
- Daily wage: AED 9,000 ÷ 30 = AED 300
- Days owed: 3 years × 21 days = 63 days
- Gratuity: 63 × AED 300 = AED 18,900
Example 2: 7 Years of Service
An employee with a basic monthly salary of AED 10,000 leaves after 7 years.
- First 5 years: 5 × 21 = 105 days
- Remaining 2 years: 2 × 30 = 60 days
- Total days: 165 days
- Daily wage: AED 10,000 ÷ 30 = AED 333.33
- Gratuity: 165 × AED 333.33 = AED 55,000
Example 3: 10 Years of Service (Approaching the Cap)
An employee with a basic monthly salary of AED 12,000 completes 10 years.
- First 5 years: 5 × 21 = 105 days
- Next 5 years: 5 × 30 = 150 days
- Total days: 255 days
- Daily wage: AED 12,000 ÷ 30 = AED 400
- Gratuity: 255 × AED 400 = AED 102,000
Since two years’ basic salary would be AED 288,000, this employee is well under the cap and receives the full calculated amount.
Example 4: Partial Year
An employee with a basic monthly salary of AED 8,000 completes 4 years and 6 months.
- Full years: 4 × 21 = 84 days
- Partial year (6 months = half of a year at the 21-day rate): 10.5 days
- Total days: 94.5 days
- Daily wage: AED 8,000 ÷ 30 = AED 266.67
- Gratuity: 94.5 × AED 266.67 ≈ AED 25,200
Common Mistakes That Cost Employees Money
Employees and even HR teams miscalculate gratuity more often than you would expect. The most frequent errors are:
- Using gross salary instead of basic salary. A payslip often lists a single “salary” figure that already blends basic pay with housing and transport allowances. If your MOHRE contract shows a separate basic salary line, that lower figure, not your gross pay, is what the law requires for the calculation.
- Applying the wrong daily-wage divisor. Some employers mistakenly divide by 30.4 or by the actual number of calendar days in a given month. The law uses a flat 30-day divisor for every month, regardless of whether that month has 28, 30, or 31 days.
- Forgetting the two-tier rate change at year five. It is common to see an employer apply 21 days for the entire tenure, even for years beyond the fifth. Only the first five years use the 21-day rate; every year after that uses 30 days.
- Ignoring the two-year salary cap. For very long-serving employees, especially those with 15 or more years at one employer, the calculated days can exceed two years’ basic salary. The law caps the payout at that level regardless of the raw calculation.
- Miscounting partial years. A partial year only counts once you have passed your first full year of service. Employers sometimes either drop the partial year entirely or apply the wrong per-day rate to it, both of which shortchange the employee.
- Confusing gratuity with other end-of-service dues. Gratuity is separate from your unused annual leave balance, notice-period pay, and any outstanding salary. All of these should appear as separate line items in a proper final settlement, not folded into a single “end of service” number that cannot be checked.
If your final settlement letter does not show the basic salary figure used, the number of years and days calculated, and the daily rate applied, ask your HR or payroll team for that breakdown in writing before you sign any settlement acknowledgement or release form.
When Gratuity Can Be Reduced or Forfeited
- Less than one year of service: no gratuity is payable at all, regardless of the reason employment ended.
- Termination for gross misconduct under Article 44: gratuity can be forfeited entirely if the employer proves one of the specific listed grounds, such as fraud, serious safety violations, or unauthorised disclosure of trade secrets. This is a high bar; ordinary performance issues or disagreements do not meet it.
- Unpaid leave periods: time spent on unpaid leave generally does not count toward your years of service for gratuity purposes.
- Two-year cap: even with a very long tenure, total gratuity cannot exceed two years’ basic salary under the law.
How to Claim Unpaid Gratuity
- Check your final settlement. Your employer should calculate and pay gratuity along with your final salary, leave balance, and any other dues as part of your end-of-service settlement.
- Know the payment deadline. Under Article 53 of the Labour Law, your employer must settle all dues, including gratuity, within 14 days of your last working day. This 14-day clock starts from your actual last working day, not from when your visa is cancelled or your notice period technically ends.
- Request a written breakdown if your final settlement does not clearly show the basic salary figure and days used to calculate gratuity, so you can verify it against the formula above.
- File a MOHRE complaint if unpaid. If your employer does not pay within the 14-day window, you can file a labour complaint through the MOHRE app, the MOHRE website, or by calling the MOHRE contact centre. MOHRE will first attempt to mediate between you and your employer.
- Escalate to the Labour Court if mediation fails. If MOHRE mediation does not resolve the dispute, the case can be referred to the Labour Court, where MOHRE-referred labour claims are handled on an expedited basis.
Gratuity Under Free Zone Regimes (DIFC and ADGM)
If you work for a company registered in the DIFC or ADGM financial free zones, your end-of-service benefit may follow a different regime rather than the mainland Labour Law formula above. DIFC operates its own Employment Law with its own gratuity/end-of-service rules, and some DIFC employers now use the DIFC Employee Workplace Savings (DEWS) scheme instead of a traditional lump-sum gratuity. Always check your specific free zone’s employment law and your contract before applying the mainland formula.
Frequently Asked Questions
Do I get gratuity if I resign instead of being terminated?
Yes. Under the current law, resignation and termination are treated the same way for gratuity purposes, provided you have completed at least one full year of service. The old rule reducing gratuity for resignation from an unlimited contract no longer applies.
Is gratuity calculated on my basic salary or my total salary?
Basic salary only, as stated in your MOHRE-registered contract. Housing, transport, utilities, bonuses, commissions, and overtime are excluded from the calculation.
What if I worked less than one year?
You are not entitled to gratuity if your total continuous service was less than one full year, regardless of how your employment ended.
Is there a maximum amount of gratuity I can receive?
Yes. Total gratuity cannot exceed two years’ basic salary, no matter how many years you worked.
How is gratuity calculated for a partial final year?
Once you have completed at least one full year, any additional partial year is paid proportionally at the applicable daily rate for that year.
Can my employer refuse to pay gratuity?
Only in limited circumstances, mainly if you are dismissed for one of the specific gross-misconduct grounds listed in Article 44 of the Labour Law, or if you did not complete one full year of service.
How long does my employer have to pay my final settlement, including gratuity?
14 days from your last working day, under Article 53 of the Labour Law.
What should I do if my employer does not pay within 14 days?
File a labour complaint with MOHRE through the app, website, or contact centre. MOHRE will attempt mediation first, and the case can be referred to the Labour Court if mediation does not resolve it.
Does unpaid leave count toward my years of service for gratuity?
Generally no, periods of unpaid leave do not count toward the service period used in the gratuity calculation.
Do DIFC or ADGM employees follow the same gratuity formula?
No. DIFC and ADGM have their own employment law frameworks, and some DIFC employers use the DEWS savings scheme instead of the mainland Labour Law’s gratuity formula. Check your specific contract and free zone rules.
Get Your Final Settlement Right
Your gratuity is a legal entitlement, not a discretionary bonus, and the formula behind it is fixed by law: 21 days’ basic salary per year for your first five years, 30 days per year after that, capped at two years’ total basic salary. Before you sign off on a final settlement, calculate it yourself using your actual basic salary and compare it to what your employer offers.
If your employer has not paid your gratuity within 14 days of your last working day, you have the right to file a MOHRE complaint. Yalah Dubai helps employees in the UAE understand their labour rights and navigate MOHRE processes. Contact Yalah Dubai on WhatsApp at +971 52 580 2100 if you need help checking your settlement or filing a complaint.
If you run a UAE non-profit sports club or federation and are working out staff gratuity alongside your own tax position, see Qaspro Global’s guide to the UAE Corporate Tax exemption for sports entities for how that exemption works.