Is gratuity based on basic salary in UAE?

Yes. UAE gratuity is calculated based on your last basic wage only. Your basic salary is the core fixed component of your pay, excluding housing allowance, transport allowance, and other standard allowances. Always enter only your basic monthly salary — not your total package — into the gratuity calculator.

Are allowances included in UAE gratuity?

No. Standard allowances such as housing, transport, and other fixed allowances are generally not included in the basic wage for UAE gratuity calculation purposes. Only the basic wage component is used. This is an important distinction — many employees mistakenly enter their gross salary, which will produce an inflated estimate.

Is gratuity calculated on basic salary or CTC?

In the UAE, gratuity is calculated on basic salary only — not on CTC (Cost to Company) or total compensation. CTC is a concept more commonly used in India. In the UAE, use only your basic monthly salary for the calculation. In India, gratuity is also calculated on basic salary plus dearness allowance, not full CTC — but that is an India-specific rule. See our UAE vs India comparison.

Gratuity on Basic Salary UAE | Basic vs Gross Salary Explained

Why Basic Salary?

UAE Labour Law (Federal Decree-Law No. 33 of 2021) specifies that end-of-service gratuity is calculated based on the employee's last basic wage. "Basic wage" is defined in the law as the wage stipulated in the employment contract, excluding allowances of any nature and any other in-kind and cash benefits.

What Is Included in Basic Salary?

✓ Included

Core basic salary (as stated in your employment contract)

✗ Excluded (Generally)

Housing allowance
Transport allowance
Meal allowance
Phone/communication allowance
Overtime pay
Sales commissions (generally)
Annual bonuses (generally)
Other in-kind benefits

Common mistake: Many employees enter their total monthly transfer (gross salary) into the calculator, which includes allowances. This overstates the estimated gratuity. Always use only your basic salary component.

How to Find Your Basic Salary

Your basic salary is stated in your employment contract. Look for:

The line labelled "Basic Salary" or "Basic Wage" in your contract
Your payslip, which should show the breakdown between basic and allowances
The WPS (Wage Protection System) records if your employer is WPS-registered

What If My Salary Changed During Employment?

UAE Labour Law uses your last basic wage — the basic salary at the time your employment ends — for the gratuity calculation. If your salary increased over your career, the final, most recent basic salary is used for the entire gratuity calculation (not an average or a blended rate).

Salary Change Example

Year 1–3: Basic salary AED 8,000/month Year 4–6: Basic salary AED 10,000/month (promotion) Year 7: Basic salary AED 12,000/month (promotion) Gratuity calculation uses: AED 12,000/month for ALL years

The last basic salary applies to the entire service period.

Basic Salary vs CTC (Cost to Company)

"CTC" is a concept more commonly used in India. In the UAE, the relevant figure is always basic salary as defined in your employment contract. If your employer presents compensation as a CTC figure, you must identify the basic salary component separately for gratuity purposes.

For UAE vs India gratuity differences, see ourUAE vs India comparison page.

Example Calculations

Correct vs Incorrect Input

Monthly total transfer: AED 15,000 Basic salary: AED 8,000 ← USE THIS Housing allowance: AED 4,000 Transport: AED 1,500 Meal allowance: AED 1,500 ✓ Correct: Enter AED 8,000 as basic salary ✗ Wrong: Enter AED 15,000 (overstates gratuity) Difference for 5 years: Correct: (8,000÷30) × 21 × 5 = AED 28,000 Incorrect:(15,000÷30) × 21 × 5 = AED 52,500

⚠ Disclaimer: This calculator provides an estimate only, based on the general UAE private-sector framework under Federal Decree-Law No. 33 of 2021. It does not constitute legal advice. Individual entitlements may differ based on employment contract, applicable free-zone rules, special work models, unpaid absences, and other factors. Always verify your specific entitlement with your employer, MOHRE, or a qualified UAE employment lawyer.
Independence: Independent calculator — not affiliated with MOHRE, the UAE Government, Dubai Development Authority, or any government entity.

Official Sources

GovUAE Government Portal — u.ae MOHREMinistry of Human Resources — mohre.gov.ae

LawFederal Decree-Law No. 33 of 2021 — Article 51

Last reviewed: 2025-01-15 • Rule version: 2021-DL33 • Independent calculator — not affiliated with MOHRE, the UAE Government, Dubai Development Authority, or any government entity.

Gratuity on Basic Salary in UAE