Guide · updated 31.07.2026 · 9 min read · Lucent Legal team
UAE Gratuity: How It's Calculated by Law, With Examples
Key points
- Gratuity is calculated under Article 51 of Federal Decree-Law No. 33 of 2021: 21 days of basic salary for each year of the first 5 years of service, and 30 days for each year beyond that.
- Only your basic salary from the contract counts — housing, transport, bonuses, and other allowances are excluded.
- You qualify for gratuity after at least 1 full year of continuous service; the total payout is capped at 2 years' salary.
- For contracts signed after 2 February 2022, the gratuity amount is the same whether the employer terminates you or you resign — the old reduction for resigning only still applies to unlimited contracts from before that date that haven't been converted.
- The employer must pay gratuity within 14 days of the end of employment (Article 53); full forfeiture is only possible on a narrow ground — dismissal for assault or gross misconduct that harmed the business — and in practice withholding it usually requires a court ruling.
Leaving your job, or just want to know ahead of time what you're owed before HR gives you a number that doesn't match your own math? The gratuity (end of service benefits) formula is simple on paper, but the confusion usually comes from allowances people wrongly plug into the calculation, disputed length of service, and the payout cap. Below is the actual formula from the law, what really counts toward the calculation base, and three worked, checkable examples.
Who qualifies, and when
Gratuity is an end-of-service benefit for private-sector employees on the UAE mainland and in most free zones (DIFC and ADGM are the exception — they run their own employment law and courts). You qualify after at least one full year of continuous work for the same employer. Under a year, no gratuity is owed at all, regardless of why you're leaving.
Partial years after the first full year count proportionally, by actual days worked. If your termination date is disputed (for example, the employer insists on an earlier date), that directly changes the amount — it's worth checking the exact proportion for your case through the official MOHRE calculator or with a lawyer.
The formula: 21 and 30 days
The calculation runs in two tiers, tied to length of service:
- For each year within the first 5 years — 21 days of basic salary.
- For each year of service beyond 5 years — 30 days of basic salary per year.
The daily wage used in the calculation is your basic monthly salary divided by 30, regardless of how many days are actually in a given calendar month. This rule is set out in the law's executive regulations (Cabinet Resolution No. 1 of 2022), and it's how the official MOHRE calculator computes it too.
What counts as basic salary, and what doesn't
This is the most common reason people underestimate — or overestimate — what they're owed:
- Counts: only basic salary — the fixed base rate stated in your employment contract as the core part of your pay.
- Doesn't count: housing allowance, transport allowance, any bonuses, commissions, overtime pay, and other benefits in kind.
Practical takeaway: if your take-home pay is AED 15,000 but the basic salary in your contract is AED 9,000, gratuity is calculated from that 9,000 — not the full amount. Most disputes with employers over the gratuity figure come from exactly this mix-up — check the basic salary line in your actual contract, not the number on your bank statement.
Three worked examples
| Service | Basic salary, AED/month | Calculation | Gratuity |
|---|---|---|---|
| 3 years | 6,000 | 21 days × (6,000 / 30) × 3 years = 21 × 200 × 3 | AED 12,600 |
| 7 years | 9,000 | (21 days × 5 years + 30 days × 2 years) × (9,000 / 30) = 165 days × 300 | AED 49,500 |
| 26 years | 12,000 | (21×5 + 30×21) days × (12,000 / 30) = 735 days × 400 = AED 294,000, but the 2-year cap kicks in (24 × 12,000 = 288,000) | AED 288,000 (capped) |
The first example is a typical short stint: gratuity is calculated purely at the 21-day rate, never crossing the 5-year threshold. The second shows what happens at that threshold: the first 5 years at 21 days, the remaining 2 years already at 30 days. The third illustrates the cap: uncapped, the formula would produce AED 294,000, but the law limits the payout to the equivalent of two years' basic salary.
The cap: no more than two years' salary
Regardless of length of service, the total gratuity payout can't exceed 2 years' salary (basic salary × 12 × 2). With long service (26+ years in the third example), the day-based formula almost always hits this cap, because past the 5-year mark every year adds exactly 30 days — effectively a month — of basic salary, and the accumulated total approaches the 24-month-salary limit fairly quickly.
Resignation vs. termination: new contracts vs. old ones
After the 2022 labour reform (Federal Decree-Law No. 33/2021, under which all new contracts are fixed-term, capped at 3 years), the general rule distinguishing "you were let go" from "you quit" has been removed: with at least 1 year of service, gratuity under new contracts is calculated the same way regardless of who initiated the departure.
If you're on an older unlimited contract signed before 2 February 2022 and not yet converted to the new system, some sources say the old reduction rules for resignation may still apply: roughly 1/3 of the calculated amount for 1–3 years of service and 2/3 for 3–5 years; for service beyond 5 years, the old rules gave the full amount even on resignation. This detail depends on your contract's exact date and type, not on general figures found online — worth confirming with a lawyer if your contract was never converted.
When gratuity can be forfeited
Under the current law, full forfeiture of gratuity is a narrow ground, not an automatic one — unlike the old 1980 law, where summary dismissal almost always zeroed it out. Now, according to available sources, the only ground for a complete denial of gratuity is dismissal for assault or gross misconduct that harmed the employer's business. Most other grounds for summary dismissal under Article 44 don't, by themselves, forfeit gratuity.
In practice, for an employer to withhold or offset gratuity against damages, they typically need a court ruling or a MOHRE-approved settlement — simply refusing to pay because you were dismissed for misconduct, without that basis, is unlawful. If your employer still doesn't pay gratuity after termination, the path is the same as for unpaid salary — a complaint to MOHRE (see unpaid salary).
FAQ
How do I calculate my UAE gratuity myself?
Take the basic salary from your contract, divide by 30 — that's your daily rate. Multiply by 21 for each year of service in the first 5 years, and by 30 for each year beyond that, add it up, but cap it at 2 years' salary. It's worth cross-checking against the official MOHRE calculator.
Does housing allowance count toward gratuity?
No. The calculation is based strictly on the basic salary in your contract — housing and transport allowances, bonuses, commissions, and overtime are excluded, even if they make up most of your actual take-home pay.
Am I owed gratuity if I resign?
Yes, with at least 1 year of service, under contracts signed after the 2022 reform the amount is the same as if the employer had terminated you. For older unlimited contracts not since converted, some sources say the old resignation reduction may still apply for 1–5 years of service — worth confirming based on your contract's exact date.
Is there a cap on the gratuity amount?
Yes, the total payout can't exceed 2 years' salary at the basic rate, no matter how many years you actually worked.
Can you end up with no gratuity at all?
Technically yes, but only on a narrow ground — dismissal for assault or gross misconduct that harmed the business — and withholding it usually requires a court ruling. Being dismissed "with complaints" alone, without that basis, doesn't forfeit your right to it.
What do I do if my employer doesn't pay gratuity after termination?
The same route as for unpaid salary: document the delay in writing and file a MOHRE complaint, and if the dispute exceeds AED 50,000, take it to the labour court. We can't guarantee outcomes or timelines — much depends on the documents and specifics of your case, so disputed situations are worth checking with a lawyer.
Sources
- egsh.ae — UAE Gratuity Calculator 2026: Estimate End-of-Service Pay
- uaeahead.com — UAE Gratuity Law and End-of-Service Benefits: A Comprehensive 2026 Guide
- uaeahead.com — Article 44 of UAE Labour Law: Summary Dismissal and Key Differences from Article 120
- Zoho Payroll — Gratuity by Scenario: Resignation, Termination, Death & Probation in UAE
- Khaleej Times — UAE Gratuity Calculator 2026, End of Service Pay
- u.ae — Terminating employment contracts and arbitrary dismissal (official UAE government portal)
This material is for information only and is not legal advice. UAE law changes — a lawyer will assess how it applies to your situation.