Base salary — exclude housing, transport & other allowances.
Quick guide to how UAE Gratuity is calculated
A common misconception is that once you pass the five-year mark, the 30-days rate applies to your entire service history. It doesn't — it only applies to the years worked beyond five. Your first five years always attract the 21-days rate. The calculator above applies this correctly automatically, but it's worth understanding if you're checking the numbers yourself.
What Is UAE Gratuity?
If you've worked in the UAE, you've probably heard the word gratuity thrown around — but not everyone knows exactly what they're entitled to or how it's worked out. So let's keep it simple.
UAE gratuity (officially called end-of-service benefit) is a lump sum payment that your employer must pay you when your employment ends. It doesn't matter whether you resign, get made redundant, or reach the end of a fixed-term contract — if you've worked for at least one year, you're legally entitled to it.
It's not a bonus or a goodwill gesture. It's a legal right, protected under UAE Federal Decree-Law No. 33 of 2021. Your employer cannot opt out of paying it, and they cannot reduce it without legal justification.
The amount depends on three things: how long you've worked there, what your basic salary is, and why your employment ended. The calculator above handles all of that for you — but if you want to understand the numbers behind your result, read on.
How Is UAE Gratuity Calculated?
The UAE gratuity formula is based on your basic salary and your length of service. Here's how it works:
For the first five years of service, you're entitled to 21 days' basic salary for each year worked.
From year six onwards, that rises to 30 days' basic salary for each year worked.
Your total gratuity is capped at two years' worth of basic salary, regardless of how long you've worked for the company.
Partial years count too. If you've worked for three years and four months, you'll receive gratuity for three full years plus a pro-rated amount for the four months.
The formula in plain numbers:
Years 1–5: (Monthly basic salary ÷ 30) × 21 × number of years
Years 6+: (Monthly basic salary ÷ 30) × 30 × number of years
So if your basic salary is AED 10,000 and you've worked for three years, your gratuity would be:
(10,000 ÷ 30) × 21 × 3 = AED 21,000
If you'd worked for seven years on the same salary, it would be:
First five years: (10,000 ÷ 30) × 21 × 5 = AED 35,000
Years six and seven: (10,000 ÷ 30) × 30 × 2 = AED 20,000
Total: AED 55,000
One important thing to note: gratuity is calculated on your basic salary only — not your total package. Housing allowance, transport allowance, and other benefits are not included. This is one of the most common reasons people get a different number than they expected.
Limited vs Unlimited Contracts: Does It Change Your Gratuity?
Yes — and it's one of the most confusing parts of UAE gratuity law, especially for employees who have been here for several years.
Before the 2022 Labour Law reforms, UAE employment contracts came in two types: limited (fixed-term) and unlimited (open-ended). The type of contract you had affected how much gratuity you received if you chose to resign before completing your term.
Under the old rules:
If you had an unlimited contract and resigned before completing five years, your gratuity entitlement was reduced:
Resigned after 1–3 years: one third of your full gratuity entitlement
Resigned after 3–5 years: two thirds of your full gratuity entitlement
Resigned after 5+ years: full gratuity entitlement
If you had a limited contract and resigned before it ended, you could forfeit your gratuity entitlement entirely in some cases — and potentially owe your employer compensation for early termination.
If your employment was terminated (rather than you resigning), you were entitled to your full gratuity regardless of contract type or years served (from year one onwards).
Under the new 2022 rules:
The unlimited contract has been phased out for new employment relationships. All new contracts issued from February 2022 are fixed-term, renewable, and capped at three years (though they can be renewed). The gratuity formula itself hasn't changed, but the resignation penalty structure has been simplified — more on that in the next section.
If you started your job before February 2022 and still have an unlimited contract, your employer had until February 2023 to transition you to the new contract type. Most employers have done this, but it's worth checking your contract if you're unsure.
Gratuity When You Resign vs When You're Terminated
The reason your employment ends has a direct impact on what you receive — so it's important to get this right in the calculator.
If you're terminated by your employer, you're entitled to your full gratuity from day one of year one, calculated using the standard formula. There is no reduction, regardless of how long you've worked there.
If you resign, the rules depend on your contract type and how long you've served:
Under the current (post-2022) system, resignation does not automatically reduce your gratuity if you've served at least one year. You receive the standard entitlement. However, if you resign during a probation period, you receive nothing — gratuity only kicks in after completing one full year of continuous service.
Under the old unlimited contract system (still relevant for anyone whose service period pre-dates the transition), the reductions described in the previous section apply to the portion of service that fell under the old contract.
If your contract ends naturally — you reach the end of a fixed term and it's not renewed — you're entitled to full gratuity just as you would be if you were terminated.
One scenario that often surprises people: if you're terminated for cause under Article 44 of the Labour Law (serious misconduct, gross negligence, etc.), your employer may have grounds to withhold gratuity. This is the exception, not the rule, and the burden of proof lies with the employer.
What Counts as Basic Salary for Gratuity?
This is where a lot of people get caught out. UAE gratuity is calculated on basic salary only — not your total monthly package.
The following are generally not included in the gratuity calculation:
Housing allowance
Transport allowance
Food or meal allowance
Phone or utility allowance
Commission or bonuses
Overtime pay
Only the fixed basic salary component on your contract counts. If your contract shows a basic salary of AED 8,000 but your total package is AED 15,000 when allowances are added, your gratuity is calculated on the AED 8,000.
This is why it's worth double-checking your contract before using any calculator — plug in the wrong number and your result will be significantly off.
One exception to watch for: if your employer pays you an all-inclusive salary with no itemised breakdown, the courts have sometimes treated the full salary as the basic salary for gratuity purposes. If your payslip doesn't separate your components, it may be worth getting clarity from your HR department.
How the 2022 UAE Labour Law Changed Gratuity
Federal Decree-Law No. 33 of 2021 came into force in February 2022 and was the most significant overhaul of UAE employment law in decades. Here's what changed and what stayed the same when it comes to gratuity.
What stayed the same: The core gratuity formula — 21 days for years one to five, 30 days from year six — was not changed. The two-year salary cap was not changed. The one-year minimum service requirement was not changed.
What changed: The unlimited contract was abolished for new employment relationships. All new hires from February 2022 are on fixed-term contracts of up to three years, renewable indefinitely. The resignation penalty structure that applied to unlimited contracts — which reduced gratuity for employees who left before five years — no longer applies to new contracts in the same way.
The new law also introduced stronger protections against arbitrary termination, clearer definitions of what constitutes gross misconduct, and new rules around probation periods (now capped at six months).
For employees who were already employed under unlimited contracts when the law changed, their service history is preserved. The gratuity clock didn't reset — years of service accumulated under the old contract count in full toward the total calculation.
Worked Examples: See the Numbers in Action
Sometimes the best way to understand gratuity is to see it calculated for a real scenario. Here are four common situations.
Example 1: Three years, resignation, AED 10,000 basic salary
Service: 3 years
Reason: Resignation
Basic salary: AED 10,000
Calculation: (10,000 ÷ 30) × 21 × 3 = AED 21,000
Example 2: Seven years, termination, AED 15,000 basic salary
Service: 7 years
Reason: Termination
Basic salary: AED 15,000
Years 1–5: (15,000 ÷ 30) × 21 × 5 = AED 52,500
Years 6–7: (15,000 ÷ 30) × 30 × 2 = AED 30,000
Total: AED 82,500
Example 3: Ten years, resignation, AED 20,000 basic salary (cap applies)
Service: 10 years
Reason: Resignation
Basic salary: AED 20,000
Years 1–5: (20,000 ÷ 30) × 21 × 5 = AED 70,000
Years 6–10: (20,000 ÷ 30) × 30 × 5 = AED 100,000
Uncapped total: AED 170,000
Two-year salary cap: AED 20,000 × 24 = AED 480,000
Total payable: AED 170,000 (cap not triggered in this case)
The information on this page reflects UAE Labour Law as of early 2025. Employment law can change — if you have a specific dispute or complex situation, we'd always recommend speaking to a qualified UAE employment lawyer or contacting MOHRE directly.
Frequently Asked Questions
How many days' salary is UAE gratuity?
21 days' basic salary per year for the first five years of service, rising to 30 days per year from year six onwards. The total cannot exceed two years' worth of basic salary.
Is UAE gratuity taxable?
No. The UAE does not levy income tax on individuals, so your gratuity payment is received in full with no deductions for tax. This applies to UAE nationals and expatriates alike.
Can my employer refuse to pay gratuity?
Generally, no. Gratuity is a legal entitlement under UAE Labour Law. An employer can only withhold gratuity in limited circumstances — primarily where an employee has been terminated for serious misconduct under Article 44 of the Labour Law. If your employer refuses to pay without valid grounds, you can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).
What happens to my gratuity if I'm fired?
If you are terminated by your employer — for any reason other than gross misconduct — you are entitled to your full gratuity. Years of service and the standard formula apply in exactly the same way as they would for a resignation after five or more years.
Is gratuity calculated on basic salary or total salary?
Basic salary only. Housing, transport, phone, food allowances, bonuses, and commissions are excluded. Check your contract for the specific basic salary figure — this is what the calculator uses.
How long does my employer have to pay gratuity?
Your employer is required to settle all end-of-service entitlements, including gratuity, within 14 days of your last working day. If payment is delayed beyond this, you may be entitled to additional compensation.
Can I negotiate my gratuity amount?
Your employer cannot pay you less than your legal entitlement, but they can pay more. Some employers offer enhanced end-of-service packages above the statutory minimum, particularly for senior roles. Whatever is in your contract or offer letter takes precedence if it is more generous than the law requires.
