If you have worked in the UAE for at least a year and your job is ending, your employer owes you a lump sum called end-of-service gratuity. Most people find out the exact amount only when the final settlement lands — and by then it is too late to argue.
This guide explains how the number is actually built, using the rules in force in 2026. It also covers the parts that cause most of the disputes: which salary the calculation uses, what happens if you resign instead of being terminated, and what you can do if your employer simply refuses to pay.
The law that changed everything in February 2022
Gratuity in the UAE private sector is governed by Federal Decree-Law No. 33 of 2021, which took effect on 2 February 2022. If someone gave you advice about UAE gratuity before that date, treat it as out of date.
Two changes matter most:
The resignation penalty is gone. Under the old 1980 law, an employee who resigned before completing five years lost a large chunk of their gratuity — one-third for one to three years of service, two-thirds for three to five years. That reduction no longer exists. Today, someone who resigns after one year receives exactly the same gratuity as someone who was terminated.
This is the single most misunderstood point in the UAE. Plenty of employers still quote the old reduction to departing staff, and plenty of workers accept it because they do not know the law changed.
Unlimited contracts were abolished. All private-sector contracts are now fixed-term. Employers were required to convert legacy unlimited contracts by 1 February 2023. If your contract was renewed after February 2022, the old resignation rules do not apply to you at all.
The formula, in plain terms
Gratuity is calculated on your basic salary only. Then:
- First 5 years of service: 21 days of basic salary for each year
- Every year after 5: 30 days of basic salary for each year
You need a minimum of one full year of continuous service to qualify for anything. At eleven months, you get nothing.
There is also a ceiling: your total gratuity cannot exceed two years' basic salary, no matter how long you worked. On a basic of AED 10,000, that caps you at AED 240,000 — which you would hit at roughly 23 years of service.
A worked example
Take someone with a basic salary of AED 10,000 who worked 6 years.
Daily wage = 10,000 ÷ 30 = AED 333.33
First 5 years: 21 days × 5 = 105 days → 105 × 333.33 = AED 35,000
Sixth year: 30 days × 1 = 30 days → 30 × 333.33 = AED 10,000
Total gratuity = AED 45,000
You can run your own figures on our UAE gratuity calculator instead of doing this by hand.
One detail nobody explains: which daily wage?
You will find two different daily-wage formulas online:
- Basic salary ÷ 30 (the common approach, and the one most UAE employers use)
- (Basic salary × 12) ÷ 365 (an annualised version that produces a slightly lower daily figure)
On a basic of AED 10,000, the first gives AED 333.33 per day and the second gives AED 328.77 — a difference of around AED 480 on a six-year payout. It is not huge, but if your settlement looks slightly short of your own calculation, this is often why. Ask your HR team which method they applied and check it against your contract.
Basic salary versus total package — where most disputes start
This is the part that costs people real money.
Gratuity is calculated on basic salary. Housing allowance, transport allowance, food allowance, phone allowance, and every other add-on are excluded. The law is explicit about this.
So if your package is AED 30,000 made up of AED 12,000 basic plus AED 18,000 in allowances, your gratuity is built on AED 12,000 — not AED 30,000. Over six years, that is the difference between roughly AED 54,000 and AED 135,000.
Some employers deliberately structure contracts with a small basic salary and large allowances for exactly this reason. It is legal. It is also worth knowing about before you sign, not after.
What to do now: pull out your employment contract and find the line that separates basic from allowances. If your contract shows only a single "total salary" figure with no breakdown, ask HR in writing for the split. A contract without a clear basic salary is a problem waiting to happen at settlement time.
What counts as "continuous service"
Your service period includes:
- Probation period
- Annual leave
- Paid sick leave
It does not include unpaid leave. Every day you spend off payroll pauses your gratuity accrual. If you took three months of unpaid leave during a five-year stint, your gratuity is calculated on four years and nine months.
Partial years count proportionally once you have crossed the one-year threshold. Three years and four months earns you gratuity for three years and four months, not three years.
When you can lose your gratuity entirely
Article 44 of the law lists the situations where an employer can dismiss someone without notice and without gratuity. These are serious cases — things like assuming a false identity, causing deliberate material loss to the employer, disclosing workplace secrets, or being convicted of a crime involving honour or honesty.
Ordinary poor performance, redundancy, or a personality clash with your manager are not on that list. If an employer withholds gratuity, they need to point to a specific Article 44 ground. "We are not happy with your work" is not one of them.
Free zones work differently
Most UAE free zones follow the same federal gratuity rules. DIFC is the notable exception — it runs the DEWS scheme, where the employer makes monthly contributions into a funded plan instead of paying a lump sum at the end.
If you work in DIFC or ADGM, check your specific free zone's employment regulations. The 21-day and 30-day formula in this guide may not apply to you.
The optional savings scheme
Since 2026, employers can opt into an alternative end-of-service savings scheme instead of the traditional lump sum. Under it, the employer deposits a monthly percentage of your basic salary into an approved investment fund:
- 5.83% per month for employees with under 5 years of service
- 8.33% per month for employees with over 5 years
Contributions must be made within 15 days of the start of each month. If your employer has enrolled you in this scheme, your end-of-service money sits in a fund rather than being calculated at exit — and you should be receiving statements. Ask for them.
If your employer refuses to pay
Gratuity is a legal entitlement, not a bonus. If it is withheld or short-paid:
- Ask for the calculation in writing. A written breakdown showing the basic salary used, the days counted, and the daily rate. Most disputes are resolved right here, because the employer has to show their working.
- Compare it against your contract and the formula above.
- File a complaint with MOHRE if the gap is real. The Ministry of Human Resources and Emiratisation handles private-sector labour complaints, and the process is free for employees. You can file through the MOHRE app, website, or by calling their service centre.
Do not sign a final settlement document that says you have received everything owed unless you have actually checked the number. Once signed, your position gets much weaker.
Before you leave the UAE
A short checklist that saves people a lot of trouble:
- Get your gratuity calculation in writing before your last working day
- Keep a copy of your signed employment contract, including the salary breakdown
- Check that unpaid leave days on your record match reality
- Confirm whether you are on the traditional lump sum or a savings scheme
- Do not hand over your passport or sign a clearance form until the settlement figure is agreed
Frequently asked questions
Do I get gratuity if I resign?
Yes. Since February 2022, resignation and termination are treated identically for gratuity, as long as you have completed at least one year of continuous service.
Is gratuity calculated on my total salary?
No. It is calculated on basic salary only. Housing, transport, and all other allowances are excluded.
What if I worked 11 months?
You do not qualify. One full year of continuous service is the minimum threshold.
Is there a maximum gratuity amount?
Yes. Total gratuity cannot exceed two years' basic salary.
Does unpaid leave reduce my gratuity?
Yes. Unpaid leave days do not count towards your service period.
Do UAE nationals get gratuity?
No. UAE nationals are covered by federal and local pension and social security systems instead, so the Article 51 gratuity formula does not apply to them.
Check your own number
The formula is simple enough to do on paper, but it is easy to mis-count partial years or apply the wrong daily rate. Run your figures through our free UAE gratuity calculator and compare the result against whatever your employer hands you.
If you also work overtime, our UAE overtime calculator shows what the law says you should be paid for extra hours — another figure that is frequently calculated incorrectly.
And if you are still deciding where to work next, our latest jobs in Dubai and jobs in Saudi Arabia pages are updated daily.
This guide explains the general rules under Federal Decree-Law No. 33 of 2021 and is not legal advice. For a dispute about your specific settlement, contact MOHRE or a qualified UAE employment lawyer.
