End-of-service gratuity is often the largest single payment you receive when leaving a UAE job, yet many employees only learn how it works on their last day. This guide explains the rules in plain language, based on Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, which came into force on 2 February 2022.
Who is entitled to gratuity?
Gratuity applies to non-UAE national employees in the private sector who complete at least one year of continuous service with the same employer. UAE and GCC nationals are generally covered by pension schemes instead. Employees of DIFC and ADGM fall under those free zones’ own employment laws, and DIFC, for example, uses a savings scheme (DEWS) for many employees.
The basic rule
- 21 days of basic wage for each of the first five years of service.
- 30 days of basic wage for each additional year.
- Part of a year counts in proportion to the time worked.
- The total may not exceed two years’ wage.
The daily wage is the monthly basic salary divided by 30. So someone on a basic salary of AED 3,000 earns AED 100 a day for gratuity purposes, or AED 2,100 for each of the first five years.
What changed with the 2021 law
Under the old law (Federal Law No. 8 of 1980), an employee who resigned after one to three years received only one third of the gratuity, and two thirds after three to five years. Those reductions no longer exist. Today, if you complete one year, you receive the full amount whether you resign, are dismissed or reach the end of a fixed-term contract. The new law also moved all employees onto limited (fixed-term) contracts, which removed the old differences between limited and unlimited contracts in gratuity calculations.
What counts as service
Your service runs from your first working day to your last. Days of unpaid leave or unauthorised absence are not counted. Paid annual leave and sick leave on pay do count. If you moved between companies in the same group, check whether your contract says service is continuous; otherwise each employer pays gratuity for its own period.
Which salary is used?
Gratuity uses your last basic salary. Housing, transport and other allowances are not included unless your contract explicitly includes them. Commission-based staff are a special case: the law uses the average of what they earned in recent months.
When must it be paid?
All end-of-service dues, including gratuity, must be paid within 14 days after the contract ends (Article 53). Late payment can be reported to MOHRE. Since 2023 some employers also offer an alternative end-of-service savings scheme approved by the Cabinet; if your employer joined it, contributions go into an investment fund instead of a lump sum paid at the end.
Can gratuity be withheld?
An employer can deduct amounts you lawfully owe, such as an outstanding loan. It cannot withhold gratuity simply because you resigned or joined a competitor. If you are dismissed for gross misconduct under Article 44, the law still recognises your gratuity entitlement, although disputes over this go to the courts.
Common mistakes
- Using total salary instead of basic salary.
- Forgetting that unpaid leave reduces service.
- Rounding service down to whole years instead of paying part years pro rata.
- Assuming resignation reduces gratuity, which was only true under the old law.
Use the gratuity calculator to check your own figure. Keep a copy of the breakdown when you discuss it with HR.
UAE gratuity calculator
End-of-service benefit based on your basic salary and years of service.