UAE Gratuity Rules

1. Eligibility

Under the general UAE private-sector framework, an employee is entitled to an end-of-service gratuity upon completion of at least one full yearof continuous employment. This applies to full-time workers in the general private sector subject to MOHRE jurisdiction.

• Minimum: 1 complete year of continuous eligible service
• Probation: generally counts toward service if employment continues
• Both resignation and termination can trigger entitlement (subject to minimum service)
• Termination for gross misconduct (as legally defined) may affect entitlement

2. The Calculation Formula

Article 51 of Federal Decree-Law No. 33 of 2021 establishes the general calculation:

3. Basic Wage

Gratuity is calculated on the last basic wage. Standard allowances (housing, transport, meal, etc.) are generally excluded. Only the core basic salary component is used.

If basic salary changed during employment, the last (final) basic wageat the time of leaving is used. See basic salary explained.

4. Partial Years

If you have served for a period that includes months and days beyond complete years, the partial year is calculated proportionally. The formula uses days ÷ 365 for the fractional multiplier, applied at the appropriate rate (21 or 30 days depending on whether you are in the first or second period).

5. Unpaid Absence

Periods of approved unpaid leave are generally excluded from the eligible service period used for gratuity calculation. Unpaid absence reduces your effective qualifying service. Our calculator includes an optional field for this.

6. Resignation

Under Federal Decree-Law No. 33 of 2021, an employee who resigns after completing at least one year of continuous service is generally entitled to their full calculated gratuity at the standard rates. The old rules under Federal Law No. 8 of 1980 that reduced gratuity for voluntary resignation (1/3 or 2/3) no longer apply as a universal rule under the current framework. See gratuity after resignation.

7. Termination

An employee whose employment is terminated is generally entitled to gratuity on completion of at least one year's service. Termination for specific gross misconduct reasons as defined in the law may affect the entitlement. Seegratuity after termination.

8. Maximum Cap

Total gratuity payable shall not exceed the equivalent of two years' basic wageunder the standard framework. This means: monthly basic salary × 12 × 2. For a salary of AED 50,000/month, the maximum is AED 1,200,000.

9. Payment Timing

UAE Labour Law requires end-of-service entitlements to be settled within the legally prescribed timeframe after the end of employment. Delays by the employer can be reported to MOHRE. The employer must settle all entitlements as part of the final settlement.

10. Special Work Models

Federal Decree-Law No. 33 of 2021 introduced new work models: full-time, part-time, temporary, flexible, remote, and shared-work. Gratuity calculation for non-standard models (such as part-time) may differ from the standard full-time formula. Verify with MOHRE for your specific work model.

11. End-of-Service Savings Scheme

The UAE Cabinet has approved a voluntary alternative End-of-Service Savings Scheme. Employees enrolled in this scheme have their end-of-service benefits managed through investment funds with employer contributions. This scheme operates separately from traditional gratuity. Do not confuse the two systems.

12. Special Categories

• Domestic workers: Governed by a separate legal framework. Do not use the standard calculator. See domestic worker gratuity.
• Free-zone workers: Depending on the free zone, may be subject to different rules (e.g. DIFC, ADGM).
• UAE nationals: Often covered by pension schemes (GPSSA) rather than standard gratuity.
• Government employees: Subject to separate pension/benefits framework.

13. Final Settlement vs Gratuity

Gratuity is one component of a final settlement. A complete final settlement may also include unpaid salary, accrued annual leave encashment, notice-related amounts, and other entitlements — minus lawful deductions. Do not treat gratuity alone as the complete final settlement. See final settlement explained.