Gratuity Rules in the UAE 2026 (2026 Guide)

By the UAE Gratuity Calculator Editorial Team | Reviewed for accuracy against UAE Federal Decree-Law No. 33 of 2021 | Last updated: October 2026

Gratuity is the money your employer must pay you when your job ends. It is called the end-of-service benefit. For most UAE employees, it is the largest single payment they ever receive from an employer. Many people get one to two months of pay. Some get far more.

Yet gratuity is also the payment that gets miscalculated most often. Many HR teams still apply the old resignation penalty from before 2022. Many workers confuse basic salary with total salary. And almost nobody accounts for unpaid leave correctly.

This guide sets out the gratuity rules exactly as Federal Decree-Law No. 33 of 2021 (the UAE Labour Law) defines them. Every scenario comes with a worked example in AED. By the end, you will know exactly what your employer owes you.

Gratuity Rules at a Glance

1. Who Is Eligible: The One-Year Threshold

You earn gratuity once you complete one continuous year of service with the same employer. "Continuous" is the key word. It means your service must be unbroken. Authorised paid leave does not break it. Sick leave does not break it. Maternity leave does not break it. Here is what does break it or shrink it:

• Unpaid leave: those days are subtracted from your service period
• Absence without permission: days you stay away without approval do not count
• A real break in the job (you resign, then rejoin months later): your service starts again from zero

If you have 11 months and 20 days of service, you get nothing. At exactly 12 months, the formula switches on. This sharp cut-off catches people every year. If you are thinking of resigning at 11 months, the smart money move is usually to wait a few more weeks.

2. The 21/30-Day Formula

Article 52 of the Labour Law sets a two-tier formula. It works like this:

• First five years: 21 days of basic pay for each year
• Each year after the fifth: 30 days of basic pay

"Days" here means days of your daily basic pay. You find it by dividing your monthly basic by 30.

Worked example: 4 years of service

Nadia's basic salary is AED 7,500. She completes exactly 4 years.

• Daily pay: 7,500 ÷ 30 = AED 250
• Gratuity: 21 days × 4 years × 250 = AED 21,000

Worked example: 8 years of service

Ravi's basic salary is AED 11,000. He completes 8 years.

• First 5 years: 21 × 5 = 105 days
• Next 3 years: 30 × 3 = 90 days
• Total: 195 days × (11,000 ÷ 30) = 195 × 366.67 = AED 71,500

Worked example: fractional year (2 years, 7 months, 10 days)

Omar's basic is AED 9,000. His service = 2 + 7/12 + 10/365 = 2.611 years.

• Daily pay: 9,000 ÷ 30 = AED 300
• Gratuity: 21 × 2.611 × 300 = AED 16,449

Fractions matter. Those 7 months and 10 days are worth AED 4,449 here. Never let an employer round your service down to whole years.

3. Basic Pay vs Total Salary: The Costliest Confusion

Gratuity is calculated on basic pay only. Allowances are excluded. This covers housing, transport, food, phone, and education allowances. This is where the biggest disputes start. Many contracts hide a low basic inside a high total package.

Worked example: why your contract structure matters

Two employees each earn AED 15,000 total per month. Both have 6 years of service:

• Employee A: basic AED 12,000 → gratuity = (105 + 30) days × 400 = AED 54,000
• Employee B: basic AED 8,000 (the rest in allowances) → gratuity = 135 × 266.67 = AED 36,000

Same total salary. Same service. AED 18,000 difference. When you negotiate a UAE contract, the basic salary figure is the number that decides your gratuity. Push it as high as you can within the package.

How to find your basic pay: it is written clearly in your MOHRE labour contract. MOHRE is the Ministry of Human Resources and Emiratisation. Check the Arabic/English contract in the MOHRE app. Do not rely only on the offer letter. Offer letters sometimes show only the total. If your contract lists one "salary" figure with no split, the whole amount counts as basic pay. That works in your favour. Disputes arise when the offer letter and the registered contract show different splits. The registered MOHRE contract wins.

4. The Two-Year Cap

Total gratuity cannot exceed two years' pay. This is calculated on your last basic pay. In practice, this cap only bites at very long service. You would need roughly 26+ years for the formula to hit it. At 30 days per year, 24 years = 720 days ≈ 2 years' pay. For most employees it is irrelevant. But it is the legal ceiling.

5. Unpaid Leave Deductions

Days of unpaid leave are subtracted from the service period before the formula is applied. Paid leave is not deducted. Sick leave is not deducted. Maternity leave is not deducted. Public holidays are not deducted.

Worked example

Lina has 3 calendar years of service but took 60 days of unpaid leave. Her basic is AED 10,000.

• Adjusted service: 3 − (60 ÷ 365) = 2.836 years
• Gratuity: 21 × 2.836 × 333.33 = AED 19,853
• Without the deduction it would have been AED 21,000 — the unpaid leave cost her AED 1,147

6. Death in Service: Gratuity Goes to the Family

If an employee dies during service, the gratuity is paid to their legal heirs. It does not vanish. The family should claim it through the employer. If the employer refuses, they should go through MOHRE. This sits alongside any life insurance or company death benefits. Those are separate.

7. Resignation vs Termination: No Difference Since 2022

This deserves repeating because outdated advice is everywhere online. The old resignation penalty is dead. Before February 2022, resigning with 1–3 years of service paid one-third of gratuity. With 3–5 years it paid two-thirds. Decree-Law No. 33 of 2021 applies one formula to everyone. If any source still quotes the old fractions — including your HR — it is wrong.

8. Free Zones and Special Cases

• Mainland + most free zones: the 2021 law's formula applies directly
• DIFC: it follows its own employment law with the DEWS scheme (DIFC Employee Workplace Savings). Employers pay monthly contributions instead of the traditional end-of-service gratuity
• ADGM: a similar savings-based approach under its own rules
• Domestic workers: a separate law applies — 14 days' pay per year of service, not the 21/30 formula
• Government employees: federal and local government staff follow separate HR laws, not Decree-Law No. 33

Part-Time and Flexible Workers

The 2021 law formally recognises part-time, temporary, and flexible work. Gratuity applies to these workers too. It is calculated on actual service:

• Part-time: gratuity is based on your basic pay and actual years of service, using the same formula. If you work half-days for 4 years at AED 4,000 basic, your gratuity is 21 × 4 × (4,000 ÷ 30) = AED 11,200
• Temporary contracts: each contract's service counts. If contracts run back-to-back with the same employer without real breaks, MOHRE may treat them as continuous
• Job-sharing / multiple employers: each job accrues its own gratuity separately

Salary Increases: The Whole Period Uses Your Last Pay

Gratuity is calculated on your final basic pay applied to your entire service period. This is very favourable when salaries rise over time.

Worked example: rising salary over 6 years

Priya joined at AED 6,000 basic. She rose to AED 9,000 by year 3, and AED 13,000 by year 6. She resigns after exactly 6 years.

• Days earned: (21 × 5) + (30 × 1) = 135 days
• Daily pay at final basic: 13,000 ÷ 30 = AED 433.33
• Gratuity: 135 × 433.33 = AED 58,500

If the calculation used her starting salary, it would be only AED 27,000. The AED 31,500 difference is why you should always verify which pay figure HR used. Some payroll systems mistakenly average old salaries.

The 10-Year Example: Watching the Cap

Worked example

Daniel earns AED 20,000 basic and completes 10 years:

• Days: (21 × 5) + (30 × 5) = 255 days
• Daily pay: 20,000 ÷ 30 = AED 666.67
• Gratuity: 255 × 666.67 = AED 170,000
• Two-year cap check: 2 × 12 × 20,000 = AED 480,000 — not triggered

The cap only matters at around 24+ years of service. For a 25-year veteran at AED 20,000 basic: 21×5 + 30×20 = 705 days × 666.67 = AED 470,000 — still just under the AED 480,000 cap. At 26 years the formula would exceed it. Then the cap would cut the payout to AED 480,000.

Gratuity vs Pension: What Expats Should Know

The UAE has no state pension for expatriates. Your gratuity is your retirement provision from UAE employment. Two things to understand:

1. It is a lump sum, not a pension. You receive it once at the end of service. Budget carefully. Unlike a monthly pension, you must manage it yourself.
2. DIFC/ADGM employees get monthly DEWS contributions instead. These work more like a retirement savings plan. They can be transferred between DEWS employers.

If you are planning long-term, treat each year's 21/30-day accrual as forced savings. At AED 12,000 basic, one year of service banks roughly AED 8,400–12,000 toward your eventual payout.

Reading Your Final Settlement Payslip

When HR hands you the settlement statement, verify these lines:

• Service period: your exact joining and leaving dates. Check that unpaid leave deductions are itemised, not silently applied
• Basic pay used: it must match your current contract's basic, not an older figure
• Day count: (21 × years up to 5) + (30 × years beyond 5), with fractions shown
• Leave balance: unused days × (basic ÷ 30)
• Deductions: only lawful deductions (notice pay owed, documented advances). Challenge anything vague

If any line is missing or the total does not match your own calculation, do not sign. Ask for the breakdown in writing first.

Company Takeovers and Mergers: Does Your Gratuity Survive?

When your employer is bought or merges, what happens to your earned gratuity depends on how the transfer is structured:

• Business transfer with continuity: if the new owner takes over your job without a break, your service is continuous. Your joining date for gratuity purposes stays the original one. Get this confirmed in writing from the new employer
• Termination and rehire: if the old company formally ends your contract (paying out gratuity) and the new one rehires you, service restarts. Check that the payout actually happened before you sign the new contract
• The dangerous middle: an acquisition where HR "forgets" to address earned service. If your contract is novated (transferred) to the new entity, the law preserves continuity. But document it. Five years later, nobody will remember the merger details

Worked example

Farah has 6 years with Company X at AED 14,000 basic. Company Y buys it and continues her employment seamlessly. Two years later she resigns. Her service = 8 continuous years:

• Days: (21 × 5) + (30 × 3) = 195 days
• Gratuity: 195 × (14,000 ÷ 30) = 195 × 466.67 = AED 91,000

If she had not secured written continuity, she might have been paid for only 2 years: 42 × 466.67 = AED 19,600. That is a AED 71,400 difference riding on one confirmation letter.

When Your Employer Won't Pay: Escalation Timeline

• Day 1–14 after the contract ends: this is the legal payment window. Send your written calculation to HR now
• Day 15: the payment is officially late. Send a formal demand with a 7-day deadline
• Day 22: file your MOHRE complaint (800-60 / app / Tasheel). Bring your contract, pay slips, and calculation
• Weeks 3–6: MOHRE mediation. Most straightforward underpayment cases settle here. The officer shows the employer the Article 52 formula and the file closes
• If mediation fails: the case goes to the labour court. Claims under AED 50,000 use the fast-track single-judge process. They are often decided in one or two hearings
• Judgment: it is enforceable against the company and its licence. Persistent non-payers face permit blocks and fines

The one-year filing deadline runs from the date the gratuity became due. Not from when you "felt like" pursuing it. Calendar it.

Common Scenarios

Your basic salary increased mid-service. Gratuity uses your last basic pay for the whole period. This is good news if your salary grew. Five years at rising pay, ending at AED 14,000 basic: the entire 105 days is valued at 14,000 ÷ 30, not at the earlier lower rates.

You transferred between companies in the same group. If the transfer was continuous (no break, end-of-service not settled), service may carry over. But only if it is documented. Get written confirmation that your joining date for gratuity purposes is the original date.

Your employer offers a "gratuity advance" or loan against it. There is no legal concept of advance gratuity. Any amount paid early is just a payment. Your final entitlement is still the full formula minus nothing. Do not sign documents waiving the balance.

You worked 5 years and 11 months. You get 21 × 5 + 30 × (11/12) days. The 11 months accrue at the 30-day tier because you have passed year five. That 11th month alone is worth 2.5 days' pay. Fractions always count.

Your Rights and Remedies: The MOHRE Complaint Process

Underpaid gratuity is the single most common labour complaint in the UAE. The process works like this:

1. Calculate it yourself first. Use our [gratuity calculator](https://uaegratuitycalc.org/) with your basic salary and exact service dates. Print or screenshot the result
2. Write to HR with your calculation, citing Article 52, and give a 7-day deadline
3. File with MOHRE — 800-60, the MOHRE app, or Tasheel. It is free of charge
4. Mediation — a MOHRE officer contacts the employer. This usually resolves straightforward underpayments quickly
5. Labour court — if the employer refuses, MOHRE refers the case. Gratuity claims under AED 50,000 go through the fast-track process
6. Enforcement — the judgment is executed against the company

Critical deadline: one year from the date the gratuity became due. After that, your claim can be time-barred.

Frequently Asked Questions

1. Is gratuity calculated on basic salary or total salary?

Basic salary only. Allowances are excluded by law. If your contract splits AED 20,000 into AED 10,000 basic + AED 10,000 allowances, your gratuity is based on the AED 10,000.

2. I resigned after 18 months. Do I get anything?

Yes — you passed the one-year threshold. At AED 6,000 basic: 21 × 1.5 × 200 = AED 6,300. The old law would have paid one-third (AED 2,100). The current law pays the full AED 6,300.

3. Does probation count toward the one year?

Yes, provided you stay in the job. Probation (up to 6 months) is part of your continuous service once you pass it. Six months' probation + six months confirmed = one year = gratuity unlocked.

4. My employer says gratuity is "included" in my monthly salary. Is that legal?

No. Gratuity is an end-of-service entitlement. It is calculated at the end of the relationship. An employer cannot fold it into monthly pay to avoid the lump sum. MOHRE treats such clauses as void.

5. What if I take a new job with the same employer after resigning?

Service restarts from the new joining date. The only exception is if the employer agrees in writing to recognise prior service. Always get continuity confirmed in the new contract.

6. Is gratuity taxable in the UAE?

The UAE has no personal income tax. So your gratuity is received in full. (If you are tax-resident elsewhere, check your home country's rules on foreign employment income.)

Get Your Exact Figure

Theory is useful. But your number is what matters. Enter your basic salary and service dates into our free [UAE gratuity calculator](https://uaegratuitycalc.org/). It applies Article 52's exact formula, including pro-rata fractions. That way you know precisely what your employer owes.