First five years
For each of the first five years of service, an employee earns 21 days of basic wage as end-of-service gratuity.
Payroll guide · UAE
End-of-service gratuity in the UAE
Everything UAE businesses and their employees need on end-of-service gratuity under Federal Decree-Law 33 of 2021 — how it accrues, what pay it is based on, and how to work out the final figure.
Just need the number?
Our free UAE gratuity calculator applies the 21-day and 30-day rates, the one-year minimum, pro-rata part-years, and the two-year cap automatically.
What is end-of-service gratuity?
End-of-service gratuity is a lump-sum payment a private-sector employer must make to an employee when their employment ends, provided the employee has completed at least one year of continuous service. It is a statutory entitlement under Federal Decree-Law No. 33 of 2021, the UAE Labour Law that governs private-sector employment.
The 2021 law simplified how gratuity works. Most importantly, it abolished the old distinction between limited and unlimited contracts — all private-sector contracts are now fixed-term, and the same gratuity formula applies whether employment ends by resignation or by the employer.
For employers, gratuity is an accruing liability that should be provided for in the books over the life of each employment. For employees, it is a right worth understanding before a final settlement. The rest of this guide sets out exactly how the figure is built.
How gratuity accrues under FDL 33/2021
Six rules define almost every gratuity calculation in the UAE private sector.
Beyond five years
For each year of service after the fifth, the entitlement rises to 30 days of basic wage per year.
Basic salary only
Gratuity is calculated on basic salary alone. Allowances — housing, transport, and others — are excluded from the calculation.
Two-year cap
The total gratuity is capped at the equivalent of two years' basic wage, however long the employee has served.
One year minimum
An employee must complete at least one year of continuous service to qualify. Fractions of a year beyond that are paid pro-rata.
One contract type
The old distinction between limited and unlimited contracts has been abolished — all private-sector contracts are now fixed-term, with one gratuity formula.
Working out the figure
The calculation is built from a daily wage derived from basic salary. The sequence below shows how the parts fit together.
- 01 Take the employee's last basic salary — excluding all allowances.
- 02 Work out the daily wage: basic salary ÷ 30.
- 03 For the first five years, multiply the daily wage by 21 for each completed year.
- 04 For each year beyond five, multiply the daily wage by 30.
- 05 Add the two parts, apply pro-rata for part-years, and cap the total at two years' basic wage.
Because gratuity rests on basic salary and length of service, small differences in either change the result. Rather than run the arithmetic by hand, use the UAE gratuity calculator to get an accurate figure in seconds. When you pay the final settlement, remember it must move through the Wage Protection System (WPS) like any other salary payment.
How AIMuhaseb helps
Gratuity provisions kept current in your books
AIMuhaseb helps UAE businesses track end-of-service liabilities as they accrue rather than facing a surprise at settlement. Provisions sit in their own account, final payments are recorded cleanly, and your payroll and books stay reconciled — so gratuity is never an afterthought when someone leaves.
End-of-service provision tracked over time
Basic-salary basis handled correctly
Final settlements posted to the ledger
Payroll and books stay reconciled
FAQ
Gratuity questions, answered
What is end-of-service gratuity in the UAE?
End-of-service gratuity is a lump-sum payment an employer must pay a private-sector 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 (the UAE Labour Law) and is calculated on the employee's basic salary.
How is gratuity calculated under the 2021 Labour Law?
Under Federal Decree-Law No. 33 of 2021, an employee earns 21 days of basic wage for each of the first five years of service, and 30 days of basic wage for each year thereafter. The calculation uses basic salary only — allowances are excluded — and the total is capped at two years' wage. Part-years beyond the first completed year are paid on a pro-rata basis.
Is gratuity based on basic salary or total salary?
Gratuity is calculated on basic salary only. Allowances such as housing, transport, and other supplements are not included in the calculation. This is why the split between basic salary and allowances in an employment contract has a direct effect on the final gratuity figure.
Do I get gratuity if I resign?
Yes. Under the current Labour Law, an employee who has completed at least one year of continuous service is entitled to end-of-service gratuity whether the employment ends by resignation or by the employer. The old rules that reduced gratuity on resignation under unlimited contracts no longer apply, because the limited/unlimited contract distinction has been abolished.
Is there a maximum gratuity amount?
Yes. However long an employee has served, the total end-of-service gratuity is capped at the equivalent of two years' basic wage. Below that cap, the entitlement accrues at 21 days per year for the first five years and 30 days per year afterwards.
How can I calculate my gratuity quickly?
Use our free UAE gratuity calculator — enter your basic salary and length of service and it applies the 21-day and 30-day rates, the one-year minimum, pro-rata part-years, and the two-year cap for you. It is the fastest way to get an accurate figure before a final settlement.
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