UAE Gratuity and End-of-Service Benefits (with Calculator)

Gratuity — the end-of-service benefit every private-sector employee earns — is one of the most misunderstood parts of UAE employment, largely because the rules changed with the 2021 labour law and a lot of online guidance is still out of date. The biggest change: resigning no longer cuts your gratuity. This guide explains how it is calculated, works through examples, and gives you a calculator to estimate your own.

What is end-of-service gratuity?

Gratuity, or the End-of-Service Benefit (EOSB), is a lump sum a UAE employer must pay an employee when their employment ends, provided they have completed at least one year of continuous service. It is governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, in force since 2 February 2022, which replaced the older labour law and modernised the rules. It applies to private-sector employees across the mainland; some financial free zones (DIFC, ADGM) run their own end-of-service regimes.

How is UAE gratuity calculated?

The calculation rests on three rules:

• 21 calendar days' basic wage for each of the first five years of service;
• 30 calendar days' basic wage for each year beyond five years;
• the total is capped at two years' total pay.

Two details matter. First, gratuity is based on your basic salary only — not your total package. Allowances for housing, transport, and the like are excluded, so a AED 15,000 package that is AED 10,000 basic plus AED 5,000 allowances calculates on the AED 10,000. Second, the daily rate is your basic salary divided by 30. You also need at least one full year of service; below that, no gratuity is payable, and unpaid leave days are excluded from the service period.

Does resignation reduce your gratuity?

No — not any more, and this is the change most people miss. Under the old law, an employee who resigned (rather than being terminated) received a reduced gratuity — one-third for one-to-three years of service, two-thirds for three-to-five, and the full amount only after five years. Federal Decree-Law No. 33 of 2021 repealed that reduction. Today, an employee who resigns with at least one year of service receives the same full gratuity as one whose contract is ended by the employer. If you read an article that still applies the one-third/two-thirds rule, it is describing the repealed law.

Estimate your gratuity

Enter your basic monthly salary and your length of service to see an estimate:

Worked examples

The calculator does the arithmetic, but seeing it laid out helps. All examples use basic salary and a daily rate of basic ÷ 30.

For the six-year example: the first five years give 21 × 5 = 105 days, the sixth year gives 30 days, for 135 days total; at a daily rate of AED 333.33 (10,000 ÷ 30) that is AED 45,000.

The two-year cap

However long the service, total gratuity cannot exceed two years' pay. For most employees this never bites — you would need very long service or a very high basic salary to reach it — but it is the ceiling on the entitlement, and the calculator applies it automatically.

When is gratuity paid?

Gratuity is due when employment ends, and the law expects the employer to settle end-of-service dues promptly after the final working day, alongside any other outstanding entitlements such as unused leave. It is separate from the monthly salary run through the Wage Protection System — gratuity is a one-off settlement, not a WPS payroll item, though a well-run payroll function tracks the accruing liability so it is never a surprise.

Why employers should track gratuity as it accrues

For employers, gratuity is a real and growing liability, not a cost that appears only when someone leaves. Every month of service adds to what the company would owe if an employee left, and a business that does not track this can face an uncomfortable cash demand when several long-serving staff depart. Good payroll and accounting practice records the end-of-service liability on the books as it builds, so it is funded and visible — part of keeping clean financial statements under IFRS.

How QuickTax helps

Gratuity sits at the intersection of payroll, employment law, and accounting — easy to miscalculate and easy to under-provision for. QuickTax keeps your payroll accurate, tracks the end-of-service liability as it accrues so it lands correctly in your accounts, and settles final dues correctly when staff leave, alongside the rest of your bookkeeping and tax compliance.

See how our accounting and tax service works →

This material is for reference and is not legal, payroll, or tax advice. Gratuity rules depend on your specific contract, free zone, and circumstances — always verify current requirements with the Ministry of Human Resources and Emiratisation (MoHRE) and the UAE Government portal, and take advice on your situation.

What this means for you

Gratuity changed with the 2021 labour law, and stale guidance still gets it wrong. Keep three things clear: