How Is End-of-Service Gratuity Calculated in the UAE?
UAE end-of-service gratuity is calculated on your basic salary only (never allowances): 21 days' basic pay for each of your first 5 years of service, then 30 days' basic pay for every year after that, up to a cap of two years' total salary. You need at least one full year of continuous service to qualify, and the formula is the same whether you resign or are let go, subject to the specific circumstances under Federal Decree-Law No. 33 of 2021.
Key facts
The specifics, before the explanation.
- Formula: (Basic salary ÷ 30) × 21 days × years of service (first 5 years), then × 30 days for each year after that
- Allowances (housing, transport, etc.) are excluded — gratuity is based on basic salary only
- Minimum qualifying service is 1 full year of continuous employment
- Total gratuity is capped at two years' worth of total salary, however long your tenure
- Employers must pay gratuity within 14 days of your last working day, as part of your final settlement
- Unpaid leave days are excluded from the gratuity calculation, per MOHRE guidance reported by Gulf News
What this actually means
Gratuity is the UAE private sector's version of a severance/retirement payout, and it applies to nearly every full-time employee, not just senior staff. The two-tier structure rewards longer tenure: your first five years accrue at 21 days per year, and every year beyond that accrues at the higher 30-day rate. Only basic salary counts, so if your package is heavy on housing or transport allowances, your actual payout will be noticeably lower than your total monthly pay would suggest.
The cap matters more than most people realise. However long you stay, gratuity cannot exceed two years of total salary, so extremely long tenures see the accrual rate effectively taper off. Employers are required to settle gratuity, along with any other outstanding dues, within 14 days of your employment ending, and MOHRE has separately clarified that any days you took as unpaid leave don't count toward your years-of-service calculation.
If you're negotiating an exit or comparing offers, run your own numbers off your basic salary line specifically, not your gross monthly pay, and don't assume every recruiter or employer quotes the figure correctly.
What to actually do
Rules and figures move. Confirm anything time-sensitive with the official regulator before you rely on it.
- Calculate gratuity off your basic salary line on your payslip, not your total monthly compensation
- If you're under 5 years of service, every extra month before your work anniversary is worth banking for the 21-day accrual
- Ask HR for a written final settlement breakdown before you sign any resignation paperwork
- Remember the 2-year total-salary cap if you're comparing a very long tenure against a job change
- Rates and thresholds can be amended by cabinet resolution, so verify your specific case directly with MOHRE or a UAE labour lawyer before relying on any online calculator
Frequently asked questions
Do allowances like housing count toward gratuity?
No. Gratuity is calculated on basic salary only. Housing, transport, and other allowances are excluded from the formula entirely.
What if I resign before completing one year of service?
You generally are not entitled to gratuity if you leave before completing one full year of continuous service, regardless of whether you resigned or were dismissed.
Is gratuity taxed in the UAE?
The UAE has no personal income tax, so gratuity payments are not subject to income tax. Always confirm your specific situation with a qualified advisor if you have cross-border tax obligations.
Sources
Referenced for this guide:
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