UAE Gratuity Calculation 2026: End-of-Service Benefits Under the Labour Law

End-of-service gratuity is one of the most valuable benefits of working in the UAE, and also one of the most misunderstood. This guide is for expats in the private sector who want to know what they will receive when they leave a job. You will learn the legal formula under Federal Decree-Law No. 33 of 2021, see worked examples in AED, understand the cap and payment deadline, and find out how savings schemes such as DEWS and the voluntary MOHRE-approved scheme fit in.

Who Is Entitled to Gratuity?

Under the federal labour law, a foreign employee in the private sector who completes at least one year of continuous service is entitled to end-of-service gratuity when the employment ends. If you leave before completing one year, no statutory gratuity is due.

Under the current law, gratuity is no longer reduced simply because you resigned. That was a feature of the old 1980 labour law, and many outdated articles still repeat it. Your employer cannot withhold gratuity just because you chose to leave.

The Gratuity Formula

Gratuity is calculated on your last basic wage, not your total package. Allowances for housing, transport and similar items are normally excluded.

To find your daily wage, divide your monthly basic salary by 30, which is the method commonly used in practice. Days of unpaid absence are generally not counted towards your service period.

Step-by-Step: How to Calculate Your Gratuity

1. Find your last monthly basic salary on your contract or payslip.
2. Divide it by 30 to get your daily basic wage.
3. Count your completed years and months of service, excluding unpaid leave.
4. Multiply the daily wage by 21 for each of your first five years.
5. Multiply the daily wage by 30 for each year beyond five, and add a pro-rata amount for any part-year.
6. Add the totals together and check the result does not exceed the two-year cap.

Worked Examples in AED

These examples assume a monthly basic salary of AED 10,000, giving a daily basic wage of about AED 333.33. Figures are rounded and are for illustration only.

Notice how the package structure matters. Two people with the same AED 20,000 total salary could receive very different gratuity if one has a basic of AED 12,000 and the other a basic of AED 7,000.

Example With a Part-Year

Suppose your basic salary is AED 8,000 and you leave after 3 years and 6 months. Your daily basic wage is about AED 266.67. Three full years give 63 days, and the extra six months add half of 21 days, or 10.5 days. That is 73.5 days in total, or roughly AED 19,600. The same approach applies after year five, using 30 days instead of 21.

How the Two-Year Cap Works

The cap only matters for very long service. With a basic salary of AED 10,000, two years' wage is about AED 240,000. Under the 21-then-30 formula, you would need well over 20 years of service before reaching that limit, so most expats will never hit it.

When Must Gratuity Be Paid?

The employer must pay all end-of-service dues, including gratuity and outstanding wages, within 14 days of the contract ending. Unused annual leave is paid separately as part of your final settlement and does not form part of the gratuity calculation. The employer may deduct amounts you legally owe them.

Savings Schemes: DEWS and the Voluntary Alternative

Not everyone receives a traditional lump-sum gratuity. Two types of funded scheme are worth knowing about.

• DEWS in DIFC: Since February 2020, employers in the Dubai International Financial Centre pay into the DIFC Employee Workplace Savings plan instead of a lump-sum gratuity. Minimum employer contributions are 5.83% of monthly basic salary for employees with under five years of service and 8.33% from five years. The money is invested, so its value can rise or fall.
• Voluntary alternative scheme: Cabinet Resolution No. 96 of 2023 lets mainland and free-zone employers opt in to an alternative system. They pay monthly contributions into MOHRE-approved investment funds instead of building up a lump-sum liability.
• What changes for you: In these schemes your benefit depends on contributions plus investment returns. Service before your employer joined generally stays under the traditional gratuity rules.
• Check your free zone: Some free zones, including DIFC and ADGM, have their own employment laws, so confirm which rules cover your contract.

UAE nationals are generally covered by the national pension system rather than gratuity, so this guide focuses on expat employees.

What Can Affect Your Gratuity

• Changes to basic salary: Gratuity uses your last basic wage, so a promotion near the end of your service raises the whole amount.
• Commission-based pay: If your pay is largely commission, the basic figure in your contract still drives the calculation. Check how your contract defines basic wage.
• Moving between group companies: A transfer to a different legal entity may end one service period and start another unless your employer agrees to carry service over. Get any agreement in writing.
• Money owed to the employer: Legitimate debts, such as an unpaid company loan, can be deducted from final dues.
• Part-time contracts: Part-time workers' gratuity is generally calculated in proportion to the hours actually worked, so check your contract and MOHRE guidance.

Mistakes to Avoid

• Using total salary: Gratuity is based on basic wage. Calculating on your full package will overstate what you are owed.
• Trusting old resignation rules: Articles that say resigning cuts your gratuity to one-third or two-thirds describe the old law, not the current one.
• Accepting a basic pay cut before leaving: A reduction in basic salary just before you leave can lower your gratuity. Get legal advice if one is imposed.
• Signing a settlement without checking: Review the final settlement, compare it with your own calculation and ask questions before signing a clearance.
• Missing the complaint route: If gratuity is unpaid after 14 days, mainland employees can raise a complaint with MOHRE; free-zone employees should use their free-zone authority or court.

Final Thoughts

UAE gratuity rewards long service, especially after year five, when the rate rises to 30 days per year. Know your basic salary, keep your contract and payslips safe, and run the numbers yourself before your last day. If your employer uses DEWS or the voluntary savings scheme, check your fund statements regularly.

Frequently Asked Questions

Disclaimer: This article is general information and not legal or financial advice. Labour rules, free-zone regulations and savings schemes can change, and individual contracts differ. Check the current law with MOHRE, your free-zone authority or a qualified UAE employment lawyer before relying on any calculation.