UAE End-of-Service Gratuity: How It Is Calculated With Examples
By Thasmiya
If you are leaving a job in the UAE, your **end-of-service gratuity** could be one of the biggest payments included in your final settlement.
For eligible private-sector employees, gratuity is calculated using your **last basic salary**, not your total monthly package. The amount mainly depends on how long you have worked continuously for the employer.
Under the UAE Labour Law, an eligible full-time foreign employee who completes at least one year of continuous service is entitled to an end-of-service benefit.
## **Who is eligible for gratuity in the UAE?**
Under the standard private-sector gratuity system, a full-time foreign employee becomes eligible after completing **one year or more of continuous service** with an employer.
UAE nationals are generally covered by the country’s applicable pension and social-security legislation rather than the standard expatriate gratuity calculation.
Employees who have completed at least one year can also receive gratuity for a **fraction of an additional year**, calculated proportionately.
Unpaid absence days are excluded when calculating the employee’s period of service.
## **Is gratuity calculated on basic salary or total salary?**
This is one of the most important points to understand.
**Gratuity is calculated using your last basic salary.**
Housing allowance, transport allowance and other components of your overall salary package are not used in the standard calculation. MoHRE specifically confirms that end-of-service gratuity is based on the employee’s last due basic wage.
For example, if your salary package is:
Basic salary: AED 5,000 Housing allowance: AED 2,500 Transport and other allowances: AED 1,500 Total salary: AED 9,000
Your gratuity calculation starts with **AED 5,000**, not AED 9,000.
## **How is UAE gratuity calculated?**
For an eligible full-time foreign worker under the standard scheme:
**First 5 years:** 21 days of basic salary for every year of service.
**After 5 years:** 30 days of basic salary for every additional year.
The total end-of-service gratuity cannot exceed the equivalent of **two years’ wage**.
## **Step 1: Calculate your daily basic salary**
Divide your monthly basic salary by 30.
For example, if your basic salary is AED 6,000:
AED 6,000 ÷ 30 = **AED 200 per day**
You can then use that daily rate to calculate the gratuity.
## **Example 1: Basic salary AED 5,000 with 2 years of service**
Monthly basic salary: AED 5,000
Daily basic salary:
AED 5,000 ÷ 30 = **AED 166.67**
Gratuity per year:
AED 166.67 × 21 = **AED 3,500**
For two years:
AED 3,500 × 2 = **AED 7,000**
**Estimated gratuity: AED 7,000**
## **Example 2: Basic salary AED 8,000 with 5 years of service**
Monthly basic salary: AED 8,000
Daily basic salary:
AED 8,000 ÷ 30 = **AED 266.67**
Gratuity for one year:
AED 266.67 × 21 = **AED 5,600**
For five years:
AED 5,600 × 5 = **AED 28,000**
**Estimated gratuity: AED 28,000**
## **Example 3: Basic salary AED 10,000 with 8 years of service**
Once an employee passes five years, the calculation has two parts.
Monthly basic salary: AED 10,000
Daily basic salary:
AED 10,000 ÷ 30 = **AED 333.33**
For the first five years:
AED 333.33 × 21 × 5 = **AED 35,000**
For the next three years:
AED 333.33 × 30 × 3 = **AED 30,000**
Total:
AED 35,000 + AED 30,000 = **AED 65,000**
**Estimated gratuity: AED 65,000**
## **Example 4: Basic salary AED 12,000 with 10 years of service**
Monthly basic salary: AED 12,000
Daily basic salary:
AED 12,000 ÷ 30 = **AED 400**
First five years:
AED 400 × 21 × 5 = **AED 42,000**
Following five years:
AED 400 × 30 × 5 = **AED 60,000**
Total:
AED 42,000 + AED 60,000 = **AED 102,000**
**Estimated gratuity: AED 102,000**
## **What if you worked for 3 years and 6 months?**
You do not necessarily lose the additional six months.
Once an employee has completed at least one continuous year, UAE Labour Law provides for gratuity on fractions of a year in proportion to the period worked.
For example, take an employee with a basic salary of AED 6,000 who worked for three years and six months.
Daily basic salary:
AED 6,000 ÷ 30 = AED 200
Annual gratuity during the first five years:
AED 200 × 21 = AED 4,200
Three full years:
AED 4,200 × 3 = AED 12,600
Additional six months:
AED 4,200 × 0.5 = AED 2,100
**Estimated gratuity: AED 14,700**
This assumes there are no excluded unpaid absence days or other factors affecting the service period.
## **What happens if you worked for less than one year?**
Under the standard gratuity system, a foreign full-time employee must complete at least **one year of continuous service**to qualify.
So, if you leave after eight or eleven months, you generally do not qualify for the standard end-of-service gratuity.
That does not mean there are no other final-settlement entitlements. Depending on the circumstances, outstanding salary, unused annual leave, notice-period amounts and other contractual payments may still be due.
## **Does resigning mean you lose your gratuity?**
Under the current UAE Labour Law framework, resignation itself does not automatically remove an eligible employee’s gratuity entitlement.
The key requirements include completing the qualifying service period and meeting the applicable legal conditions.
This is an important distinction because older UAE gratuity rules contained different calculations in some resignation situations. Employees should therefore be careful when using outdated online gratuity calculators or older articles.
## **What about unused annual leave?**
Unused annual leave is separate from gratuity.
When an employee leaves employment with unused legally accrued annual leave, the employee may be entitled to a cash payment for the unused balance. Under the current rules, the end-of-service payment for unused annual leave is calculated using the employee’s basic wage.
This amount should not be confused with the gratuity itself.
## **Can an employer deduct money from gratuity?**
Yes, certain legally payable amounts may be deducted from an employee’s end-of-service benefit under the conditions established by UAE law.
The Labour Law expressly allows qualifying deductions from end-of-service benefits for amounts legally payable by the employee.
Employees who dispute a deduction should request a detailed final-settlement calculation from their employer and, where necessary, contact MoHRE.
## **Is there a maximum gratuity amount?**
Yes.
Under the standard gratuity system, the total end-of-service benefit cannot exceed the equivalent of **two years’ wage**.
This cap is particularly relevant to employees with very long periods of service.
## **What is the alternative end-of-service savings scheme?**
The UAE also has an **Alternative End-of-Service Benefits Scheme**, which allows participating employers to move eligible employees into a savings-based system instead of relying solely on the traditional lump-sum gratuity model.
Under the alternative scheme, employers make monthly contributions based on an employee’s basic salary.
For eligible full-time employees, the basic contribution is **5.83% of monthly basic salary for service of five years or less**, increasing to **8.33% for service exceeding five years**, under the applicable scheme rules.
Employees working for an organisation enrolled in this system should therefore check whether the traditional gratuity calculation applies to their entire service period.
## **Does the same calculation apply in DIFC?**
Not necessarily.
Employees working in the **Dubai International Financial Centre (DIFC)** operate under a separate employment-law framework and the DIFC Employee Workplace Savings, or DEWS, system.
Employees in free zones or under special employment regimes should check which employment legislation and end-of-service system applies to their contract rather than automatically using the standard MoHRE calculation.
## **How to estimate your own UAE gratuity**
For service of five years or less, the basic calculation is:
**Monthly basic salary ÷ 30 × 21 × years of eligible service**
For service beyond five years:
Calculate the first five years using 21 days per year.
Then calculate every eligible year after five using 30 days per year.
Add both amounts together.
Remember to account for eligible fractions of a year and exclude unpaid absence days where required.
## **Before accepting your final settlement**
Check the **basic salary shown in your employment contract** and compare it with the figure used by your employer.
Confirm your official joining and termination dates.
Check whether unpaid absence days have been excluded.
Calculate the first five years and any additional years separately.
Check any proportionate entitlement for a partial final year.
Review unused annual leave, outstanding salary and other final-settlement items separately from gratuity.
If the calculation appears incorrect, ask your employer for a detailed breakdown before accepting the settlement.
## **Why this matters**
End-of-service gratuity can represent years of accumulated employment benefits, so even a small calculation mistake can make a significant difference.
The simplest rule to remember is: **your last basic salary matters, not your total salary package.**
For the first five years, eligible employees receive 21 days of basic wage for each year. After five years, the rate increases to 30 days for every additional year.
Understanding the calculation before leaving a job gives UAE employees a better chance of spotting mistakes and ensuring they receive the amount they are legally entitled to.
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