Everything you need to understand your end of service benefits in the UAE.

What is end of service gratuity in the UAE?

End of service gratuity - sometimes called severance pay, end of service benefit, or simply gratuity - is a one-time lump sum that a UAE-based employer pays to an employee at the end of their employment. It is a statutory entitlement under the UAE Federal Decree-Law No. 33 of 2021 (Labour Law) and its executive regulations, and it applies to most private-sector employees who have completed at least one year of continuous service.

Gratuity is not the same as a bonus or a discretionary payment. It is a legal right linked to length of service, and it must be calculated correctly and paid within 14 days of the employment contract ending, alongside any other final settlement amounts.

Who is eligible for UAE gratuity?

You are generally eligible for end of service gratuity if you meet all of the following conditions:

• You have completed at least one year of continuous service with the same employer.
• You worked under a written employment contract registered with the UAE Ministry of Human Resources and Emiratisation (MOHRE) or the relevant free zone authority.
• You did not lose your gratuity through one of the specific exclusions in the Labour Law (for example, dismissal for cause under Article 44 may, in some interpretations, affect entitlement - always check the current rules).

Gratuity is paid in addition to any unused leave balance, unpaid wages, and other amounts owed under your contract.

The UAE gratuity formula

At its core, the calculation is simple and tied to basic wage, not total salary:

To express it as a per-day rate, take your monthly basic salary and divide by 30. That is your daily basic wage. Multiply it by the total number of gratuity days you have earned. Partial years are pro-rated proportionally.

Basic salary vs gross salary

This is the single most common source of confusion - and the one mistake that costs employees the most money. Gratuity in the UAE is calculated on basic wage only. Allowances are excluded. That typically includes:

• Housing allowance
• Transport allowance
• Telephone or utility allowance
• Schooling or education allowance
• Any other recurring or one-off allowance noted separately on your payslip

If your contract bundles "total salary" without breaking out basic and allowances, request a clear breakdown from HR. Many UAE contracts set basic wage at 50% to 60% of total salary - but the exact figure should be specified in writing.

How gratuity is calculated for the first 5 years

For each of the first 5 completed years of service, you earn 21 days of basic wage. So if you have worked 3 full years on a basic salary of AED 10,000:

Partial years within the first 5 are pro-rated. If you worked 3 years and 6 months, you earn (3 ÷ 21) + (0.5 ÷ 21) = 73.5 days of basic wage.

How gratuity is calculated after 5 years

Once you cross the 5-year mark, your annual rate increases. You still earn 21 days per year for each of the first 5 years, but every additional year beyond 5 earns you 30 days of basic wage. So a 10-year employee earns:

The combined total is capped at two years' basic wage, regardless of length of service. This cap protects employers from open-ended liabilities for very long-serving employees and is built into our calculator above.

Resignation vs termination

Under the current Labour Law (Federal Decree-Law No. 33 of 2021), the historical penalty for resigning on an unlimited contract has been removed for new-style employment contracts. Most employees on a current UAE contract now receive full gratuity regardless of whether they resign or are terminated, provided they have completed at least one year of service and the termination is not for a cause that forfeits entitlement.

However, some pre-2022 contracts and certain free-zone arrangements may still apply older rules. If your employment started before the 2022 reforms or you work in a special jurisdiction such as DIFC or ADGM, verify the specific framework that applies to you.

Unpaid leave and partial years

Unpaid leave days are excluded from the total length of service used to calculate gratuity. So if you took 60 days of unpaid leave during a 4-year contract, your effective service is 4 years minus 60 days. The calculator above handles this automatically once you enter unpaid leave days.

Partial years are calculated proportionally. A service period of 4 years and 3 months counts as 4.25 years for gratuity purposes - assuming no unpaid leave.

Does gratuity differ in Dubai, Abu Dhabi, Sharjah, Ajman, Fujairah, Ras Al Khaimah, and Umm Al Quwain?

For mainland private-sector employees, the rules are the same across all seven emirates. The UAE Federal Decree-Law No. 33 of 2021 is a federal law, which means employees in Dubai, Abu Dhabi, Sharjah, Ajman, Fujairah, Ras Al Khaimah and Umm Al Quwain all receive gratuity under the same formula: 21 days per year for the first 5 years, 30 days per year thereafter, capped at 2 years' basic wage.

What can differ between emirates is the practical experience - how MOHRE service centres operate, which courts hear disputes, and which free zones the employer falls under. The legal entitlement itself does not change based on which emirate you live or work in.

Mainland UAE vs free zones

UAE free zones generally follow the federal Labour Law, but some have their own employment frameworks. The most notable are:

• DIFC (Dubai International Financial Centre) - has its own employment law and a defined benefits / contributions scheme (DEWS) that replaces traditional gratuity for many employees.
• ADGM (Abu Dhabi Global Market) - has its own employment regulations distinct from federal Labour Law.

If you work in DIFC or ADGM, the federal gratuity formula in our calculator may not apply to you. Refer to your contract and the specific zone's employment regulations.

Final settlement vs gratuity

Gratuity is only one component of your final settlement. A typical UAE final settlement at the end of employment includes:

• Any unpaid salary up to the last working day
• Payment for accrued unused annual leave
• End of service gratuity (the lump sum from this calculator)
• Notice period compensation if applicable
• Repatriation costs if specified in the contract
• Any contractual bonuses or commissions that were earned but not yet paid

The employer is required to settle all of these within 14 days of the contract end date.

Common mistakes when calculating gratuity

• Using total salary instead of basic wage. This is the single biggest error. Always confirm what counts as "basic" on your payslip.
• Ignoring unpaid leave. Even a few weeks of unpaid leave reduces your effective service period.
• Forgetting the 2-year wage cap. Long-serving employees may hit this ceiling.
• Mixing up old and new contract rules. The 2022 reforms changed several aspects of entitlement; older interpretations no longer apply to current contracts.
• Not accounting for limited-contract notice periods. Some final-settlement issues arise from how notice was served, not from gratuity itself.

Worked examples

Example 1 - 3 years, salary AED 15,000 (basic AED 8,000)

Example 2 - 8 years, basic AED 12,000

Example 3 - 15 years, basic AED 20,000 (cap applies)

Note: in Example 3 the uncapped result is below the 2-year ceiling, so no cap is applied. Cap typically only triggers above ~22 years of service.