End-of-service gratuity is the lump sum every UAE worker is entitled to when leaving an employer after one full year of service. The formula sounds simple — 21 days' pay per year for the first 5 years, 30 days for each year after — but in practice we see employers and employees disagree on the base salary, the rounding, and the deductions. Here's the 2026 reference, with worked examples.
Where the rule comes from
End-of-service benefits are governed by Articles 51 and 52 of Federal Decree-Law 33 of 2021 (the new UAE Labour Law). The 2022 abolition of "limited" vs "unlimited" contracts simplified the formula — every contract is now treated as a fixed-term contract of up to 3 years, and gratuity is calculated identically for resignation, termination, or contract end.
The formula in 2026
| Years of service | Gratuity per year |
|---|---|
| Less than 1 year | None |
| Year 1 – 5 | 21 days of basic salary |
| Year 6 onwards | 30 days of basic salary |
| Cap | Total gratuity not to exceed 2 years' basic salary |
Step-by-step calculation
- Identify the basic salary. This is the salary written in the labour contract before housing, transport, food, schooling, or any other allowance.
- Convert to a daily rate: Basic monthly salary ÷ 30.
- Calculate the first 5 years: Daily rate × 21 × number of years (or fraction).
- Calculate years 6 onwards: Daily rate × 30 × number of years (or fraction) beyond 5.
- Cap check: Total cannot exceed 2 × annual basic salary.
- Deductions: Subtract any documented loans, advances, or end-of-service contributions employer paid into a savings scheme on your behalf.
Worked example 1 — 3 years of service
Employee with basic salary AED 8,000/month, 3 years of service, resigning to join another UAE employer.
- Daily rate = 8,000 ÷ 30 = AED 266.67
- 21 days × 3 years = 63 days
- Gratuity = 266.67 × 63 = AED 16,800
Worked example 2 — 8 years of service
Employee with basic salary AED 12,000/month, 8 years of service, terminated by employer.
- Daily rate = 12,000 ÷ 30 = AED 400
- First 5 years: 21 × 5 = 105 days × 400 = AED 42,000
- Years 6 – 8: 30 × 3 = 90 days × 400 = AED 36,000
- Gratuity = AED 78,000
- Cap check: 2 × annual basic = 2 × (12,000 × 12) = AED 288,000 → not breached.
Worked example 3 — 15 years of service (cap kicks in)
Senior executive with basic salary AED 50,000/month, 15 years of service.
- Daily rate = 50,000 ÷ 30 = AED 1,666.67
- First 5 years: 21 × 5 = 105 days × 1,666.67 = AED 175,000
- Years 6 – 15: 30 × 10 = 300 days × 1,666.67 = AED 500,000
- Calculated gratuity = AED 675,000
- Cap = 2 × annual basic = 2 × (50,000 × 12) = AED 1,200,000 → not breached.
- Final gratuity = AED 675,000
Worked example 4 — partial year
Employee with basic salary AED 5,000/month, 4 years and 6 months of service.
- Daily rate = 5,000 ÷ 30 = AED 166.67
- 21 days × 4.5 years = 94.5 days
- Gratuity = 166.67 × 94.5 = AED 15,750
Limited vs unlimited contracts — does it still matter?
Under the old (pre-2022) law, an unlimited contract resignation reduced gratuity by 1/3, 2/3 or 0 depending on tenure. Under the 2022 law these reductions were abolished, and all contracts are fixed-term. If your contract was issued before February 2022 and never converted, technically the old rules can still apply — but in practice all contracts must be migrated to the new format, and MOHRE applies the new formula in any dispute.
What counts as basic salary
This is the most common dispute. Only the figure recorded as "basic salary" in the labour contract counts — not housing, transport, education, fuel, telephone, or annual flight. If your offer letter says AED 18,000 total but the contract has AED 10,000 basic + AED 8,000 housing/transport, your gratuity is calculated on AED 10,000.
Deductions employers can make
- Outstanding loans documented in writing (with worker's signature).
- Salary advances paid in the final month.
- End-of-service savings scheme contributions (DIFC and select free zones — these replace gratuity entirely).
- Confirmed damages awarded by a court.
What employers cannot deduct
- Cost of recruitment, visa, ticket — these are the employer's legal liability.
- "Damages" without a court order or signed agreement.
- Annual leave already taken (vacation is paid leave; no offset against gratuity).
- Notice period if the employee served it correctly.
Gratuity for special cases
| Scenario | Gratuity treatment |
|---|---|
| Death in service | Full gratuity paid to legal heirs regardless of contract length |
| Permanent disability | Full gratuity |
| Resignation with less than 1 year | Zero |
| Termination for gross misconduct (Art. 44) | Zero — but employer must prove misconduct |
| Domestic worker | Same 21/30 formula under Federal Decree-Law 9 of 2022 |
| DIFC employee | Replaced by DIFC Employee Workplace Savings (DEWS) — monthly contributions instead of lump sum |
| Voluntary savings scheme (mainland, opt-in) | Replaces gratuity; cumulative contributions paid out instead |
When gratuity must be paid
Article 53 requires the employer to pay gratuity and all other final entitlements within 14 days of the contract end. Late payment exposes the employer to MOHRE complaints and accruing interest.
How to verify your calculation
- Pull your labour contract from the MOHRE app and confirm the basic salary figure.
- Calculate days served (start date to last day worked).
- Apply the formula above.
- Cross-check using MOHRE's official gratuity calculator (mohre.gov.ae → Calculators → End-of-Service Gratuity).
- If the employer's figure differs, ask for the breakdown in writing.
- If unresolved, file a complaint via the MOHRE app — most cases settle within 21 days.
Frequently asked
Is gratuity taxed? No. The UAE has no personal income tax.
Can my employer pay it in instalments? Only with your written agreement. The default is lump-sum within 14 days.
What if I resign during probation? Zero gratuity (you have less than 1 year of service).
What if I'm fired for cause? Article 44 lists the disqualifying grounds (fraud, assault, repeated unexcused absence, etc.). The employer must prove the case; otherwise gratuity is owed.
Does unused annual leave get paid out? Yes, separately from gratuity, at the same daily rate.
Are bonuses included in gratuity calculation? Only if they are part of the basic salary in the contract. Discretionary annual bonuses are not.
How we help
Visa Simplified runs an independent gratuity calculation, drafts the demand letter to your employer, and represents you at MOHRE if the figure is disputed. See MOHRE & Tasheel services, or read our sponsorship transfer guide if you're moving to a new employer at the same time.
Need help with this?
Our PRO consultants handle the full process end-to-end — documents, government submission, and delivery. Service fee is fully refundable pre-submission.