Gratuity is one of the most valuable benefits of working in the UAE. Understanding how it is calculated and when you are entitled to it helps you make better career decisions and plan your finances.
What is Gratuity?
Gratuity (also called End-of-Service Benefits, or EOSB) is a lump-sum payment your employer owes you when your employment ends. It is mandated by UAE labour law — Federal Decree-Law No. 33 of 2021 — and acts as a form of end-of-service savings.
How Gratuity is Calculated
The calculation is based on your years of continuous service:
| Service Period | Rate |
|---|---|
| First 5 years | 21 days of basic salary × years worked |
| After 5 years | 30 days of basic salary × additional years |
| Daily salary | Basic salary ÷ 30 |
Article 51 sets the entitlement in days of pay but does not state how to convert a monthly salary into a daily rate. Article 67 of the same law fills that gap: for the purposes of the law, a month is treated as 30 days — so your daily rate is your monthly basic salary ÷ 30. (Employees in the DIFC or ADGM financial free zones are covered by separate laws that divide by 365 instead; the figures here are for the UAE mainland.)
Example Calculation
For an employee with AED 15,000 basic salary and 7 years of service:
- Daily salary: 15,000 ÷ 30 = AED 500
- First 5 years: 21 × 500 × 5 = AED 52,500
- Next 2 years: 30 × 500 × 2 = AED 30,000
- Total gratuity: AED 82,500
The 2022 Labour Law Reform
Federal Decree-Law No. 33 of 2021, in force since 2 February 2022, replaced the old 1980 labour law and changed gratuity in two ways that matter to your payout:
When Are You Entitled to Gratuity?
You receive gratuity
- Completing 1 or more years of continuous service (resignation or termination)
- Termination by your employer after one year
- End of a fixed-term contract
- Retirement
- Death of the employee (paid to the heirs)
- Even after a dismissal for misconduct under Article 44 — the 2021 law preserves your gratuity for the years served (Article 39 describes the harshest sanction as “termination of service while preserving the worker’s right of end of service benefits”)
You do not receive gratuity
- Less than 1 year of continuous service — the only circumstance in which nothing is payable
- Termination during the probation period (before completing one year)
The one thing an employer may deduct is amounts you genuinely owe under the law or a court judgment (Article 51(7)) — a deduction of a proven debt, not a forfeiture of your entitlement.
Maximising Your Gratuity
- Negotiate a higher basic salary: allowances don’t count toward gratuity.
- Stay past five years if you can: the rate rises from 21 to 30 days per year.
- Keep records: document your salary history and start date.
- Understand deductions: any proven debts to your employer may be deducted.
- Calculate before you resign: know the number so you can plan your exit.
Tax Implications
There is no tax on gratuity in the UAE — your entire payment is tax-free. If you transfer the funds to your home country, check whether it is taxable there.
Frequently Asked Questions
How is gratuity calculated in the UAE?
Your gratuity is 21 days of basic salary for each of the first five years, then 30 days for each year after that, where a day is your monthly basic salary ÷ 30 (Federal Decree-Law 33/2021, Articles 51 and 67). On an AED 15,000 basic that is AED 500 a day: five years earns AED 52,500, and seven years earns AED 82,500. Allowances are excluded — only basic salary counts.
Do I lose my gratuity if I resign?
No. The old sliding scale that paid a resigning employee only one-third or two-thirds of their gratuity was abolished on 2 February 2022. You now accrue the same 21 / 30 days per year whether you resign or are terminated, provided you have completed at least one year of continuous service.
How much gratuity will I get for 2 years of service?
Two completed years earn 42 days of basic salary — 21 days per year — so on an AED 10,000 basic that is AED 14,000, and on an AED 20,000 basic it is AED 28,000. Work out your own figure on the Gratuity Calculator.
Is gratuity calculated on basic salary or total salary?
Basic salary only. Housing, transport, education and every other allowance is excluded from the gratuity calculation, which is why the split of your package matters as much as its total — a package that is 50% basic pays roughly half the gratuity of the same package at 100% basic.
Do I still get gratuity if I am dismissed for misconduct?
Yes. Even where an employer dismisses summarily under Article 44, the harshest sanction the 2021 law describes is the one in Article 39(1)(g) — "termination of service while preserving the worker's right of end of service benefits" — so your accrued gratuity for the years served survives it. The only genuine forfeiture is serving less than one year, and the only lawful deduction is a debt you actually owe under the law or a court judgment.
Is UAE gratuity taxable?
Not in the UAE — the payment is entirely tax-free. If you remit it to your home country it may be taxable there depending on your tax residency in that year, so check the rules of the country you are moving to before you transfer the money.
Is gratuity paid on top of my final salary and unused leave?
Yes. Gratuity is a separate entitlement from your final month's pay, your notice pay and the cash value of any accrued but untaken annual leave. Model the whole exit package — not just the gratuity — on the Employment Benefits Calculator.