What is Gratuity?
Complete Guide to Gratuity Calculation in the UAE (2026)
What Is Gratuity?
Gratuity — also called end-of-service benefits — is a mandatory lump-sum payment your UAE employer must pay when your employment ends. It's governed by Federal Decree-Law No. 33 of 2021 (effective 2 February 2022), which replaced the old Federal Law No. 8 of 1980. Every private-sector employee who completes at least one year of continuous service is entitled to it.
The Gratuity Formula
Step 1: Find your basic salary - Gratuity uses basic salary only, never total package. Exclude all allowances, bonuses and commissions.
Step 2: Daily wage = Monthly basic salary ÷ 30
Step 3: First 5 years: 21 days per year. Beyond 5 years: 30 days per year.
Step 4: Gratuity = (Daily wage × 21 × years up to 5) + (Daily wage × 30 × years beyond 5)
Step 5: Cap = 24 months of basic salary.
Worked Examples:
Example 1: 3 years, AED 8,000 basic → Daily 266.67 → AED 16,800
Example 2: 7 years, AED 12,000 basic → Daily 400 → First 5 yrs: 42,000 + Years 6-7: 24,000 = AED 66,000
Example 3: 10 years, AED 20,000 basic → Daily 666.67 → First 5: 70,000 + Years 6-10: 100,000 = AED 170,000
Resignation vs Termination: Since 2 Feb 2022, no difference. Old 1/3 and 2/3 reductions abolished.
Limited vs Unlimited: Same formula for both under current law.
Special Cases: Part-time = pro-rata. Domestic workers = separate law (Federal Decree-Law No. 9 of 2022). DIFC = DEWS scheme (5.83% first 5 years, 8.33% after). ADGM = Employment Regulations 2024. Article 44 gross misconduct can void gratuity.
Notice: 30-90 days written notice. Payment within 14 days of last working day.
FAQs: Basic salary only from MOHRE contract. 1 year minimum service required. Max = 24 months basic. Not taxable in UAE. Old 1/3 rule is wrong - cite Federal Decree-Law No. 33 of 2021, escalate to MOHRE 800-60.
Sources: Federal Decree-Law No. 33 of 2021; u.ae; MOHRE. Last reviewed: October 2026. Disclaimer: general information only, not legal advice.
Gratuity Calculation Formula
Complete Guide to Gratuity Calculation in the UAE (2026)
What Is Gratuity?
Gratuity — also called end-of-service benefits — is a mandatory lump-sum payment your UAE employer must pay when your employment ends. It's governed by Federal Decree-Law No. 33 of 2021 (effective 2 February 2022), which replaced the old Federal Law No. 8 of 1980. Every private-sector employee who completes at least one year of continuous service is entitled to it.
The Gratuity Formula
Step 1: Find your basic salary - Gratuity uses basic salary only, never total package. Exclude all allowances, bonuses and commissions.
Step 2: Daily wage = Monthly basic salary ÷ 30
Step 3: First 5 years: 21 days per year. Beyond 5 years: 30 days per year.
Step 4: Gratuity = (Daily wage × 21 × years up to 5) + (Daily wage × 30 × years beyond 5)
Step 5: Cap = 24 months of basic salary.
Worked Examples:
Example 1: 3 years, AED 8,000 basic → Daily 266.67 → AED 16,800
Example 2: 7 years, AED 12,000 basic → Daily 400 → First 5 yrs: 42,000 + Years 6-7: 24,000 = AED 66,000
Example 3: 10 years, AED 20,000 basic → Daily 666.67 → First 5: 70,000 + Years 6-10: 100,000 = AED 170,000
Resignation vs Termination: Since 2 Feb 2022, no difference. Old 1/3 and 2/3 reductions abolished.
Limited vs Unlimited: Same formula for both under current law.
Special Cases: Part-time = pro-rata. Domestic workers = separate law (Federal Decree-Law No. 9 of 2022). DIFC = DEWS scheme (5.83% first 5 years, 8.33% after). ADGM = Employment Regulations 2024. Article 44 gross misconduct can void gratuity.
Notice: 30-90 days written notice. Payment within 14 days of last working day.
FAQs: Basic salary only from MOHRE contract. 1 year minimum service required. Max = 24 months basic. Not taxable in UAE. Old 1/3 rule is wrong - cite Federal Decree-Law No. 33 of 2021, escalate to MOHRE 800-60.
Sources: Federal Decree-Law No. 33 of 2021; u.ae; MOHRE. Last reviewed: October 2026. Disclaimer: general information only, not legal advice.
Frequently Asked Questions
Master the art of calculating your end-of-service benefits