HRUAE8 min read

Gratuity Calculation in the UAE: Formula, Rules and Examples

Gratuity calculation in the UAE for employers: 21 and 30 day rates on basic salary, part years, unpaid leave, the two-year cap and the 14-day payment rule.

By Quickship Editorial Team · Published 22 October 2026

Gratuity calculation in the UAE follows Article 51 of Federal Decree-Law No. 33 of 2021: a foreign full-time employee with at least one year of continuous service gets 21 days of basic wage for each of the first five years and 30 days for each year after that. Part years are paid pro rata, unpaid absence is not counted, the total cannot exceed two years' wage, and the employer must pay within 14 days of the contract ending. Below are the rules, the method, three worked examples and how DIFC and ADGM differ.

All of this is general information for mainland private sector employers, not legal advice. For a disputed or unusual case, ask MOHRE or a UAE employment lawyer.

What the UAE labour law says about end of service gratuity

The rules sit in Article 51 of Federal Decree-Law No. 33 of 2021, with detail in its Implementing Regulation, Cabinet Resolution No. 1 of 2022. The u.ae page on end of service benefits summarises the same points.

Rule	What the law says	Where
Who qualifies	Foreign full-time worker with one year or more of continuous service	Art. 51(2)
Rate, years 1 to 5	21 days' wage per year	Art. 51(2)(a)
Rate, after year 5	30 days' wage per year	Art. 51(2)(b)
Salary used	Last basic wage (no allowances)	Art. 51(5), Art. 1
Part years	Paid in proportion, once one year is complete	Art. 51(3)
Unpaid absence	Not counted in the service term	Art. 51(4)
Cap	Total may not exceed two years' wage	Art. 51(6)
Deductions	Only amounts due by law or judgment, under the Regulation	Art. 51(7); Reg. Art. 29
Payment deadline	Within 14 days of the contract end date	Art. 53
UAE nationals	Pensions and social security legislation instead	Art. 51(1)

Two points cause most errors. First, the law defines basic wage as the contract wage "which does not include any other allowances or benefits in-kind". If a contract shows AED 5,000 basic plus AED 3,000 housing, gratuity runs on AED 5,000. Second, the probation period counts towards service if the worker passes it and stays on (Article 9).

Article 51 also has no reduction for resignation. The one-third and two-thirds cuts that still appear in many online calculators come from the old labour law.

How to do a gratuity calculation in the UAE, step by step

Use this sequence for every leaver so the arithmetic can be audited.

Confirm eligibility. The employee is a foreign national, works full time, and has at least one year of continuous service at the end date. Part-time and job-sharing staff use the pro rata method in Article 30 of the Implementing Regulation.
Fix the dates. Start date (probation included) and the contract end date.
Remove unpaid absence. Subtract every day of unpaid leave or unpaid absence from the service term. Paid annual and sick leave stay in.
Split the service. Up to five years go in the 21-day band. Everything after five years goes in the 30-day band. Express the final part year as a fraction (months ÷ 12, or days ÷ 365).
Work out the daily basic wage. Take the last monthly basic wage and convert it to a daily figure (see the note below).
Multiply. Daily wage × 21 × years in band one, plus daily wage × 30 × years in band two.
Apply the cap. Compare the total with two years' wage and pay the lower figure.
Deduct only what the Regulation allows, with documents for each deduction.
Pay within 14 days of the contract end date, together with the final salary, leave encashment and other dues.

Which daily rate: 30 or 365?

The Decree-Law fixes the number of days (21 or 30) but does not say how to turn a monthly basic wage into a daily wage. A common method divides the monthly basic by 30. Another multiplies by 12 and divides by 365. On AED 6,000 basic, the first gives AED 200 a day and the second about AED 197.26, so the second produces a total roughly 1.4% lower. Pick one method, put it in your HR policy and use it for everyone. The examples below use ÷ 30.

The cap raises a similar question. Because Article 51 calculates the benefit on basic wage, the examples compare the total against 24 months of basic wage. If your contracts or advisers read "two years' wage" differently, apply that reading consistently.

Worked examples of UAE gratuity

All three examples are hypothetical. Names, salaries and dates are invented to show the arithmetic.

Example 1: under five years, with a part year

A Dubai trading company's storekeeper leaves after 3 years and 4 months. Last basic wage: AED 6,000 a month. No unpaid leave.

Daily basic wage: 6,000 ÷ 30 = AED 200
One full year at 21 days: 21 × 200 = AED 4,200
Three full years: 3 × 4,200 = AED 12,600
Four months: 4,200 × 4 ÷ 12 = AED 1,400
Gratuity: AED 14,000 (well under the cap of 24 × 6,000 = AED 144,000)

Example 2: over five years, with unpaid leave

A sales manager in Abu Dhabi leaves after 8 years and 6 months, including 30 days of unpaid leave taken in year four. Last basic wage: AED 12,000.

Service after removing unpaid leave: 8 years and 5 months (30 days treated as one month here for simple arithmetic)
Daily basic wage: 12,000 ÷ 30 = AED 400
First five years: 5 × 21 × 400 = AED 42,000
Years six to eight: 3 × 30 × 400 = AED 36,000
Five months of year nine: 30 × 400 × 5 ÷ 12 = AED 5,000
Gratuity: AED 83,000 (cap: 24 × 12,000 = AED 288,000)

Without removing the unpaid month, the figure would have been AED 84,000.

Example 3: long service, where the cap applies

A finance controller retires after 26 years. Last basic wage: AED 20,000.

Daily basic wage: 20,000 ÷ 30 = about AED 666.67
First five years: 105 days, worth AED 70,000
Next 21 years: 21 × 30 = 630 days, worth AED 420,000
Formula total: AED 490,000
Cap: 24 × 20,000 = AED 480,000
Gratuity: AED 480,000

Under these rules the cap starts to bite once total days pass 720 (24 months × 30 days). That happens a little after 25 years of service.

Deductions and the 14-day payment deadline

Article 29 of the Implementing Regulation limits what an employer may take out of gratuity:

loan repayments, or amounts paid to the worker beyond their entitlement
pension and insurance contributions under UAE legislation
penalties under the establishment's MOHRE-approved penalties regulation
debts owed under a court ruling against the worker
the cost of damage to the employer's tools, machines, products or materials caused by the worker's fault

For penalties and damage, the employer must have followed the legal procedure, and no more than three months may have passed since the amount fell due, unless otherwise agreed. An unpaid notice period or an unreturned laptop is not an automatic deduction. Document it or leave it out.

Article 53 then requires payment of wages and all other entitlements within 14 days of the contract end date. Start the calculation as soon as the exit is confirmed and have a second person check it. Visas and labour cards need cancelling at the same time; our employee visa expiry checklist covers the document side.

The alternative Savings Scheme

Article 51(8) lets the Cabinet approve alternatives to the gratuity system. Cabinet Resolution No. 96 of 2023 created a voluntary Savings Scheme, which MOHRE says applies to employers that choose to subscribe. According to u.ae:

the employer pays 5.83% of monthly basic salary for employees with under five years of service, and 8.33% after five years
contributions go into an approved fund within 15 days of the start of each month
employees may add voluntary contributions of up to 25% of total wage
on leaving, the employee receives the contributions and returns within 14 days

The traditional gratuity stops for enrolled employees from the date they join. Gratuity earned before that date still has to be calculated and settled under Article 51, so you still need the formula above for past service.

Mainland vs DIFC and ADGM

The two financial free zones have their own employment laws, so the mainland method does not carry across unchanged.

	Mainland (MOHRE)	DIFC	ADGM
Law	Decree-Law 33 of 2021	DIFC Employment Law No. 2 of 2019	ADGM Employment Regulations 2024
Ongoing service	21/30 days' basic wage	Monthly contributions to a qualifying scheme such as DEWS: 5.83% then 8.33% of monthly basic wage	21/30 days' basic wage, or a pension/savings scheme if the employee chooses it in writing
Daily rate	Not set in the Decree-Law	Basic wage ÷ 365 (for pre-scheme gratuity)	Basic wage ÷ 365
Minimum basic for the calculation	None stated	At least 50% of wage	At least 50% of annual wages
Payment deadline	14 days	14 days	21 calendar days

In the DIFC, Article 66 of the Employment Law limits the old-style gratuity to service before the employee's Qualifying Scheme Commencement Date (1 February 2020 for most staff), capped at two times annual wage. After that date the employer pays monthly into DEWS or another qualifying scheme. In ADGM, the Employment Affairs Office guidance keeps the 21/30-day gratuity but excludes UAE and GCC nationals enrolled in the federal pension scheme. It also excludes employees who opted into a pension or savings scheme.

If you operate in any other free zone, confirm with that authority which rules apply to your staff.

Common gratuity calculation mistakes in the UAE

Calculating on gross salary instead of basic.
Forgetting the part year, or rounding service down to whole years.
Counting unpaid leave as service.
Applying the old resignation reductions.
Using a different daily-rate method for each leaver.
Paying after day 14 because the calculation started late.

Most come from scattered data: start dates, basic wage and unpaid leave live in different files. Quickship's HR Module keeps employee records, contracts, salaries, leave and attendance in one place, so the inputs for a final settlement are already there when someone resigns.

Frequently asked questions

Is UAE gratuity calculated on basic salary or total salary?

On basic salary. Article 51 of Federal Decree-Law No. 33 of 2021 calculates end of service benefits on the last basic wage, and the law defines basic wage as excluding allowances and benefits in kind. Housing, transport and other allowances are left out unless your contract makes them part of basic pay.

Does an employee who resigns still get full gratuity?

Article 51 of the current Decree-Law sets the same 21 and 30 day rates for any foreign full-time worker with at least one year of continuous service, and it contains no reduction for resignation. The resignation reductions many older guides quote come from the previous labour law. Check the employee's contract and any later MOHRE guidance if a case is unusual.

Is gratuity payable if an employee leaves before completing one year?

No. Under Article 51, a foreign full-time worker becomes entitled only after completing one year of continuous service. Once that year is complete, part years are paid in proportion to the time worked. The probation period counts towards service if the worker passes it and stays on.

Do Emirati employees receive end of service gratuity?

Not under the 21 and 30 day formula. Article 51 says national workers receive end of service benefits under the UAE's pensions and social security legislation, which in practice means registration with the General Pension and Social Security Authority (GPSSA).

Can an employer deduct money from an employee's gratuity?

Only in the cases the Implementing Regulation allows. Article 29 of Cabinet Resolution No. 1 of 2022 lists loan repayments and overpayments, pension and insurance contributions, approved penalties, court-ordered debts and the cost of damage caused by the worker's fault, with conditions attached. Keep the paperwork for every deduction.

Sources

Rules and fees in the UAE and Saudi Arabia change. This guide reflects the sources above on 22 October 2026. Check the official source before acting on it.

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