Understanding UAE End-of-Service Gratuity: A Complete Guide
If you've worked in the UAE for more than a year, you're entitled to an end-of-service gratuity payment when you leave your job — whether you resign, get terminated, or your contract simply ends. Most people only find out how this actually works when they're already handing in their notice. Here's what the law actually says, in plain English.
The legal basis
Gratuity in the UAE is governed by Federal Decree-Law No. 33 of 2021, which came into effect in February 2022 and replaced the older 1980 labour law. The new law standardized private sector contracts into a single fixed-term structure and simplified how gratuity is calculated — importantly, it removed the old penalty that used to reduce gratuity for employees who resigned before completing five years of service.
Who qualifies
You need at least one full year of continuous service with the same employer. Nothing accrues before that — if you leave after eleven months, you are not entitled to any gratuity under the law, regardless of the circumstances.
How the calculation works
Gratuity is based on your basic salary only — not your total salary including housing or transport allowances. The formula breaks into two tiers:
- First 5 years: 21 days of basic salary for each year of service
- Beyond 5 years: 30 days of basic salary for each additional year
The total gratuity is capped at two years' worth of salary, no matter how long you've worked.
A worked example
Say your basic salary is AED 6,000 per month and you've worked for 7 years.
Your daily wage is AED 6,000 ÷ 30 = AED 200.
For the first 5 years: AED 200 × 21 days × 5 years = AED 21,000.
For the remaining 2 years: AED 200 × 30 days × 2 years = AED 12,000.
Total gratuity: AED 33,000.
Common mistakes people make
- Using total salary instead of basic salary. This is the single most common error — gratuity uses basic salary only, while notice pay and leave salary use your full salary.
- Forgetting the cap. Very long-tenured employees sometimes calculate a number larger than two years' salary without realizing the law caps it there.
- Assuming resignation reduces gratuity. This was true under the old law for unlimited contracts, but no longer applies under the 2021 law.
- Not counting partial years. If you worked 5 years and 6 months, the 6 months still counts proportionally toward your gratuity, not just full years.
What about notice pay and leave?
Gratuity is only one part of what you're owed when you leave a job. You may also be entitled to payment for any notice period your employer doesn't ask you to work, plus payment for any unused annual leave days — both calculated using your full salary, not just basic.
Want to see your own numbers rather than work through the formula by hand? Use the calculator to get an instant breakdown of your gratuity, notice pay and leave salary together.