UAE Gratuity Calculator & Rules
7 min read • Updated December 2025
Understand your end-of-service benefits in the UAE. Learn how gratuity is calculated, when you're entitled to it, and how to maximize your payout.
UAE Gratuity Basics
What is Gratuity?
Gratuity (also called end-of-service benefit) is a lump sum payment made by your employer when you leave a job. It's mandated by UAE law and serves as a form of severance pay or retirement benefit. Every employee who completes at least one year of service is entitled to gratuity.
Tax-Free
Like all UAE income, gratuity is completely tax-free. The full amount goes directly to you.
Based on Tenure
The longer you work, the more you receive. Rates increase after 5 years of service.
Basic Salary Only
Calculated on base salary only—housing, bonuses, and allowances are not included.
Gratuity Rates
How much you receive per year of service.
| Service Period | Rate | Notes |
|---|---|---|
| Less than 1 year | None | No gratuity entitlement |
| 1-5 years | 21 days/year | Based on basic salary |
| After 5 years | 30 days/year | For years beyond 5 |
| Maximum cap | 2 years salary | Total cannot exceed this |
Calculation Method: Daily wage is calculated as Basic Salary ÷ 30 days. Then multiply by the days entitlement (21 or 30) and number of years.
Calculation Examples
Real examples showing how gratuity adds up.
| Scenario | Calculation | Gratuity Amount |
|---|---|---|
| 3 years, AED 15K basic | 21 × 3 × (15,000 ÷ 30) | AED 31,500 |
| 5 years, AED 20K basic | 21 × 5 × (20,000 ÷ 30) | AED 70,000 |
| 7 years, AED 25K basic | (21×5 + 30×2) × (25,000 ÷ 30) | AED 137,500 |
| 10 years, AED 30K basic | (21×5 + 30×5) × (30,000 ÷ 30) | AED 255,000 |
Basic salary only. Actual gratuity excludes housing and other allowances.
Your Gratuity Estimate
Formula for first 5 years:
Gratuity = (Basic Salary ÷ 30) × 21 × Years of Service
Formula for years beyond 5:
Gratuity = [(Basic Salary ÷ 30) × 21 × 5] + [(Basic Salary ÷ 30) × 30 × (Years - 5)]
Impact of Resignation
How leaving your job affects your gratuity entitlement.
| Situation | Impact on Gratuity |
|---|---|
| Resignation < 1 year | No gratuity |
| Resignation 1-3 years (limited contract) | 1/3 of entitlement |
| Resignation 3-5 years (limited contract) | 2/3 of entitlement |
| Resignation > 5 years | Full entitlement |
| Termination (any tenure) | Full entitlement |
| Gross misconduct termination | May forfeit gratuity |
The new UAE Labor Law (effective Feb 2022) made unlimited contracts the default. Under unlimited contracts, resignation after completing 1 year entitles you to full gratuity. The reduced gratuity rules mainly apply to limited (fixed-term) contracts when you leave before the contract end date.
Tips for Maximizing Gratuity
Negotiate Higher Basic Salary
Since gratuity is based only on basic salary, negotiate to have a higher proportion of your package as base rather than allowances.
Example:
AED 20K basic + AED 5K housing = AED 14K gratuity/year
AED 25K basic + AED 0 housing = AED 17.5K gratuity/year
+AED 3.5K/year difference
Consider Timing
If you're close to a milestone (1 year, 5 years), consider staying to reach it. The jump at 5 years is particularly significant.
5-Year Mark:
Years 1-5: 21 days per year
Years 6+: 30 days per year
+43% increase in rate
Get Unlimited Contract
Unlimited contracts provide full gratuity upon resignation after 1 year. Limited contracts have reduced gratuity if you leave before the term ends.
Since 2022, unlimited is the default contract type.
Keep Records
Maintain copies of your contract, salary certificates, and any amendments. This helps resolve disputes and ensures accurate calculation.
Document your start date, basic salary changes, and total tenure.
Frequently Asked Questions
Common questions about UAE gratuity.
Only your BASIC salary is used for gratuity calculation, not your total package. Housing allowance, transportation, bonuses, and other benefits are excluded. This is why it's advantageous to negotiate a higher proportion of your package as base salary rather than allowances—it increases your gratuity.
Yes, but the amount depends on your contract type and tenure:
- Unlimited contract: Full gratuity after 1 year, regardless of resignation
- Limited contract (resign before end): Reduced gratuity (1/3 at 1-3 years, 2/3 at 3-5 years, full after 5 years)
- Any contract after 5+ years: Full gratuity entitlement
The 2022 labor law changes made unlimited contracts the default, simplifying gratuity for most workers.
Your employer must pay gratuity within 14 days of your last working day. If they fail to do so, you can file a complaint with MOHRE (Ministry of Human Resources). In practice, it's usually processed with your final settlement, which should also include any unused annual leave and other pending payments.
No, gratuity is tax-free like all UAE income. The full calculated amount is paid to you. There are no deductions for tax, social security, or similar charges. This makes UAE gratuity more valuable than equivalent severance in taxed jurisdictions.
Yes, DIFC and ADGM have their own employment laws with slightly different gratuity rules. DIFC gratuity is broadly similar (21 days for first 5 years, 30 days thereafter) but has different caps and specific provisions. If you work in these free zones, check their specific employment regulations.
You can forfeit gratuity if terminated for gross misconduct under Article 44 of the UAE Labor Law (e.g., violence, fraud, revealing confidential information). Normal performance-based termination or resignation doesn't forfeit gratuity. If your employer claims misconduct, they must prove it—you can dispute at MOHRE.
DIFC introduced the DEWS (DIFC Employee Workplace Savings) scheme as an alternative to traditional gratuity. Employers contribute monthly to a savings plan that employees can access upon leaving. Some other free zones are considering similar schemes. Check if your employer participates.
Understand Your Full Package
Gratuity is just one part of your total compensation. See how your complete Dubai package compares.
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