End-of-service gratuity in the UAE: how it is worked out

The UAE Labour Law entitles an expatriate full-time employee in the private sector with at least one year of continuous service to an end-of-service gratuity: 21 days’ basic wage for each of the first five years and 30 days’ for each later year, with part years in proportion. The total cannot exceed two years’ wage, and the employer must pay it within 14 days of the contract ending.

Key takeaways

• Gratuity is due to expatriate full-time employees with at least 1 year of continuous service; under 1 year there is none.
• It is 21 days' basic wage for each of the first 5 years and 30 days' basic wage for each year after, with part years in proportion.
• Only the last basic wage counts: housing, transport and other allowances are left out.
• The total is capped at 2 years' wage, and wages, gratuity and other dues must be paid within 14 days of the contract ending.
• Emiratis get end-of-service benefits under the pensions law, and DIFC and ADGM have their own employment laws.

On this page 13 sections

Who is entitled to a gratuity

End-of-service benefits in the UAE depend on nationality and on where the employer is licensed. Expatriates working full time for a private-sector employer receive the gratuity described here once they have a year of continuous service; Emiratis and staff in the two financial free zones fall under other rules. The rules come from Federal Decree-Law No. 33 of 2021, the UAE Labour Law, in force since 2 February 2022. It covers private-sector employers on the mainland. In the free zones it generally applies together with each free zone authority’s own employment regulations, except in DIFC and ADGM, which have separate employment laws.

Expatriate full-time employees

Article 51(2) gives the gratuity to the full-time foreign worker. The law calls it end-of-service benefits and u.ae uses both that term and “gratuity”. It is owed at the end of service, and the article does not make it depend on who ends the contract or why (see resignation and dismissal).

Less than one year of service

Minimum service for a gratuity

At least 1 year of continuous service

An expatriate full-time worker who has completed at least 1 year of continuous service is entitled to an end-of-service gratuity on termination, with fractions of a year counted in proportion; unpaid absence days are excluded from service. A worker with less than 1 year of service gets no gratuity.

Two kinds of unpaid time are left out of the service by name: unpaid leave the employer approves beyond the leave types in the law (Article 33), and the extra unpaid days a worker may take after maternity leave when she or her child is ill as a result of the pregnancy or the birth (Article 30(2)). Probation, by contrast, counts as service once the worker passes it and stays on (Article 9(2)), as the guide to probation and gratuity explains.

Emirati employees

Emiratis do not receive this gratuity. Article 51(1) gives them end-of-service benefits under the pensions and social security legislation instead, and their employer registers them in the pensions system and pays contributions each month. How that registration works is covered in Emiratisation rules for private employers.

Employees in DIFC and ADGM

The Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) are financial free zones with their own employment laws: the DIFC Employment Law (DIFC Law No. 2 of 2019) and the ADGM Employment Regulations 2024, explained in ADGM’s guidance. Each sets its own end-of-service rules, so the federal figures in this guide do not apply to employers there.

How the gratuity is calculated

Count the years of service, turn them into days of basic wage, multiply by a day’s basic wage and check the result against the cap. In three lines:

1. Days of wage = 21 × years of service up to 5, plus 30 × years of service above 5.
2. Gratuity = days of wage × a day’s basic wage.
3. The gratuity may not exceed two years’ wage, applied in this guide as 24 months of basic wage.

21 days a year for the first five years

Gratuity rate per year of service

21 days a year (years 1-5); 30 days a year (after year 5)

The gratuity is 21 days' basic wage for each of the first 5 years of service and 30 days' basic wage for each year after the first 5 years.

Five full years therefore earn 105 days of basic wage. An employee who leaves after three years has earned 63 days.

30 days a year after five years

The higher rate applies only to the years after the fifth. It does not reprice the first five: seven years of service earn 105 days for years one to five plus 60 days for years six and seven, 165 days in all.

The table applies the rule to whole years of service. The day counts are computed from the 21-day and 30-day rates, not quoted from the law.

Part years and unpaid absence

After the first full year, part years count in proportion (Article 51(3)): 4 years and 6 months of service is 4.5 years and earns 21 × 4.5 = 94.5 days. Days of unpaid absence come off the length of service before the years are counted (Article 51(4)). The gratuity calculator counts service in days and divides by 365, the length of a year in the Labour Law, so for a period entered as dates its result can differ slightly from a count in months.

What counts as the basic wage

Gratuity is calculated on the basic salary only. Article 51(5) uses the last basic wage the worker was entitled to, and the law’s definition of basic wage leaves out every allowance.

Basic wage and wage in the Labour Law

Basic wage excludes allowances; wage includes them

The UAE Labour Law defines the basic wage as the wage stated in the employment contract and paid for the work on a monthly, weekly, daily, hourly or piecework basis, not including any allowances or benefits in kind; the wage is the basic wage plus the cash allowances and benefits in kind allocated to the worker under the contract or the law.

For the gratuity this means housing, transport, utilities, furniture and similar allowances stay out of the calculation, even when they are paid every month with the salary. Two employees on the same total pay can have very different gratuities if their contracts split the pay differently between basic wage and allowances.

The wage used is the last one. The law values every year of service at the final basic wage, not at the wage paid in that year, so a rise in the last year lifts the value of all the years counted. Workers paid by the piece are the exception: their gratuity uses the average daily wage defined in the law instead.

Turning a monthly wage into a day’s wage

The Labour Law does not say how to turn a monthly basic wage into a day’s wage. It does say how its own periods are counted:

How the Labour Law counts years and months

Year = 365 days; month = 30 days

Periods and dates in the UAE Labour Law are calculated on the Gregorian calendar, with a year counted as 365 days and a month as 30 days.

Those definitions give two divisors:

• monthly basic wage ÷ 30, using the 30-day month;
• monthly basic wage × 12 ÷ 365, using the 365-day year.

On a monthly basic wage of AED 9,000, an illustration, the first gives AED 300.00 a day and the second AED 295.89. Over five years of service, which is 105 days of wage, that is AED 31,500.00 against AED 31,068.49, a difference of AED 431.51. The 30-day divisor always gives the higher figure, by a factor of 365 ÷ 360, about 1.4%.

Neither the Labour Law nor the u.ae guidance on gratuity sets either divisor as the method. The worked examples use ÷ 30 and show the 365-day result once for comparison; the gratuity calculator offers both.

The two-year cap

The law caps the whole gratuity at “two years’ wage” (Article 51(6)).

Wage used and the cap

Last basic wage; capped at 2 years' wage

The gratuity is calculated on the last basic wage the worker was entitled to, excluding allowances such as housing, transport and utilities, and the total may not exceed 2 years' wage. The employer may deduct amounts the worker owes it.

Because the gratuity itself is calculated on the basic wage, the examples here and the gratuity calculator apply the cap as 24 months of the last basic wage. Article 1 defines “wage” to include allowances, so a cap measured on the full wage would be higher; the article does not say which wage it means. On the basic-wage reading, a monthly basic wage of AED 10,000, an illustration, gives a maximum end-of-service benefit of 24 × AED 10,000 = AED 240,000.

The cap matters only after a long career. With the 30-day divisor, 24 months of basic wage equal 720 days of wage. The first five years give 105 days, and the remaining 615 days take 20.5 more years at 30 days a year, so the cap is reached at 25.5 years. With the 365-day divisor, the cap equals 730 days of wage and is reached at about 25 years and 10 months. Both points are computed from the law’s rates, not stated in it.

Worked examples

Three years of service

Worked example

Three years of service on a basic wage of AED 8,000

The basic wage is an illustration. A day’s wage is the monthly basic wage ÷ 30.

1. Days of wage: 21 × 3 = 63 days.
2. A day’s basic wage: AED 8,000 ÷ 30 = AED 266.67.
3. Gratuity, using the unrounded day’s wage: AED 8,000 × 63 ÷ 30 = AED 16,800.00.
4. Cap: 24 × AED 8,000 = AED 192,000, not reached.

Gratuity: AED 16,800.00.

Four and a half years of service

Worked example

Four and a half years of service on a basic wage of AED 10,000

The basic wage is an illustration. A day’s wage is the monthly basic wage ÷ 30.

1. Service: 4 years and 6 months, which is 4.5 years. The first year is complete, so the half year counts.
2. Days of wage: 21 × 4.5 = 94.5 days.
3. A day’s basic wage: AED 10,000 ÷ 30 = AED 333.33.
4. Gratuity, using the unrounded day’s wage: AED 10,000 × 94.5 ÷ 30 = AED 31,500.00.
5. Cap: 24 × AED 10,000 = AED 240,000, not reached.

Gratuity: AED 31,500.00.

For exactly four years on the same wage, the days are 21 × 4 = 84 and the gratuity is AED 10,000 × 84 ÷ 30 = AED 28,000.00.

Seven years of service

Worked example

Seven years of service on a basic wage of AED 12,000

The basic wage is an illustration. The main result uses the monthly basic wage ÷ 30; step 5 shows the 365-day divisor for comparison.

1. Days of wage: 21 × 5 + 30 × 2 = 105 + 60 = 165 days.
2. A day’s basic wage: AED 12,000 ÷ 30 = AED 400.00.
3. Gratuity: 165 × AED 400.00 = AED 66,000.00.
4. Cap: 24 × AED 12,000 = AED 288,000, not reached.
5. With the 365-day divisor: AED 12,000 × 12 ÷ 365 = AED 394.52 a day, and 165 × AED 394.5205 = AED 65,095.89, which is AED 904.11 less.

Gratuity: AED 66,000.00 with the 30-day divisor, or AED 65,095.89 with the 365-day divisor.

Resignation, dismissal and the gratuity

Article 51 sets one calculation at the end of service. Its text does not depend on how the contract ends, and it contains no reduction for a worker who resigns. Other articles deal with particular endings:

• Termination as a disciplinary penalty. Article 39(1)(g) lists termination of service among the penalties an employer may impose, while preserving the worker’s right to end-of-service benefits.
• Dismissal without notice. Article 44 lists the cases in which an employer may dismiss a worker without notice. It removes the notice and says nothing about end-of-service benefits.
• Leaving without notice. A worker who leaves under one of the cases in Article 45, such as an employer’s breach that it does not put right after MOHRE notifies it, keeps the end-of-service rights.
• Unlawful dismissal. Compensation a court awards for arbitrary dismissal comes on top of the gratuity and the notice pay, not instead of them (Article 47(3)).

When notice is given, the notice period counts as service. Article 43(2) keeps the contract in force until the notice period ends, so the gratuity runs up to that date, whichever side gave notice.

Contracts of undefined term made under the old law are the main exception to a single formula:

Contracts of undefined term from before 2022

Old-law gratuity rules may apply to undefined-term contracts

The 2021 Labour Law applies to employment contracts of undefined term made under Federal Law No. 8 of 1980; employers had to convert them to fixed-term contracts within one year of the law coming into force (the Minister may extend this), and, subject to that, an employer may calculate end-of-service benefits under the old law's provisions for undefined-term contracts.

The gratuity calculator applies the current law and shows a note when service started before 2 February 2022. Notice periods and the ways a contract can end are covered in notice periods and ending a contract.

Part-time and other work models

A part-time employee’s gratuity is worked out as if the contract were full time and then scaled down by hours.

Gratuity for part-time and other work models

Pro rata by annual hours

For part-time and other work models, the gratuity is the full-time gratuity multiplied by the ratio of contractual working hours per year to full-time working hours per year.

The ratio is used as a percentage. A contract with half the yearly working hours of a full-time contract gives 50%, so the gratuity is half of what the full-time calculation gives. The rule comes from Article 30 of Cabinet Resolution No. 1 of 2022, the Labour Law’s Implementing Regulation, as u.ae summarises it. The same u.ae page says temporary work lasting less than one year carries no gratuity.

Deductions and the 14-day payment deadline

Final dues, including the gratuity, have a fixed deadline, and the employer may take off what the worker owes before paying.

Deadline for final dues

14 days

The employer must pay the worker's wages, gratuity and all other entitlements within 14 days of the end of the contract.

Article 51(7) allows deductions from end-of-service benefits for amounts due under the law or a court judgment, on conditions set in the Implementing Regulation. If the dues are not paid, the worker can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE), which tries to settle the dispute, can decide smaller claims itself and refers larger unsettled claims to court. The route is described in the guide to final pay and labour complaints.

Pay for unused annual leave is part of the same final settlement but is worked out separately: see pay for unused annual leave.

A worker who loses a job may also be able to claim from ILOE unemployment insurance, a separate scheme from the gratuity.

The Savings Scheme: the voluntary alternative

The Savings Scheme is an optional alternative to the gratuity, launched by MOHRE: a participating employer pays monthly contributions for enrolled employees into an investment fund instead of owing them the traditional gratuity.

Savings Scheme contribution rates

5.83% (under 5 years) / 8.33% (over 5 years) of basic salary

Under MOHRE's voluntary alternative end-of-service system (the Savings Scheme), a participating employer pays into an approved investment fund 5.83% of a full-time employee's monthly basic salary if the employee has under 5 years of service and 8.33% after 5 years, within 15 days of the start of each month; the employee receives the contributions and returns within 14 days of the end of employment.

The employer decides whether to join. It applies to MOHRE, contracts with a fund approved by the Securities and Commodities Authority (SCA), and can enrol all employees, particular groups or particular job categories. The scheme is open to employers in the private sector and the free zones. For enrolled staff the traditional gratuity stops, and the employer must calculate and settle the gratuity built up before enrolment under the law.

Employees can add voluntary contributions of up to 25% of their total wage, through a payroll deduction or a direct payment to the fund. The funds offer an option designed to protect the capital, portfolios with different levels of risk and Sharia-compliant funds, so what an employee finally receives depends on the option chosen and its returns. Employees can keep the money invested or withdraw it.

The rates track the gratuity. Twelve monthly contributions of 5.83% add up to about 70% of a month’s basic wage, roughly 21 days at 30 days a month, and twelve of 8.33% to about one month, or 30 days. That is arithmetic on the published rates. The legal basis is Article 51(8) of the Labour Law, Cabinet Resolution No. 96 of 2023 and Ministerial Resolution No. 668 of 2023.

Gratuity rules at a glance

The rules for an expatriate full-time employee in the private sector, with the provision each comes from:

Rules on pay, leave, hiring and payroll are collected in the Employment and payroll guides.