Understanding End-of-Service Gratuity Calculation in the UAE (2025 Update)

If you’re working in the UAE, one of the most important aspects of your employment package is the end-of-service gratuity — a lump-sum payment employees receive when they leave their job.

Whether you’re finishing a contract, resigning, or moving to another company, understanding how gratuity is calculated can help you plan your finances and protect your rights.

This guide simplifies everything you need to know about the UAE’s gratuity system under the Federal Decree-Law No. 33 of 2021 (updated 2025), including eligibility rules, payment calculations, and employer responsibilities.

For personalized help with contract review or offer negotiations, explore Labeeb Writing & Designs Career Services.

What Is End-of-Service Gratuity?

End-of-service gratuity is a severance payment provided to employees who complete at least one year of continuous service with the same employer.

It acts as a financial reward and acknowledgment of service — essentially, a savings plan supported by UAE labour law.

The gratuity is paid at the end of employment, whether the employee resigns, the contract expires, or employment is terminated (except in cases of serious misconduct).

Eligibility Criteria

To qualify for gratuity in the UAE, you must meet the following conditions:

Work for at least one year continuously under a valid employment contract.
Not be dismissed for disciplinary reasons (Article 44 of the Labour Law).
Complete your notice period as specified in the employment contract.
Have all dues settled (no outstanding advances or unpaid leaves).

Gratuity applies to both limited and unlimited contracts, whether you are a UAE national or an expatriate.

Key Changes in the 2025 UAE Labour Law Update

The Ministry of Human Resources and Emiratisation (MOHRE) continues to modernize employment policies for greater transparency.

As of 2025:

All gratuity calculations are now based on calendar years rather than service days.
Basic salary only is used in calculations (allowances and bonuses are excluded).
Companies are encouraged to pay gratuity within 14 days of termination.
Partial years of service are calculated proportionally.
The law applies to all private-sector employees, including free zone companies (unless the free zone has specific rules).

You can verify current regulations on the official UAE government portal.

How Gratuity Is Calculated

Gratuity is calculated based on basic salary and years of service.

Here’s the general formula:

Gratuity = (Basic Salary × 21 days) × (Years of Service for first 5 years)
+ (Basic Salary × 30 days) × (Years of Service beyond 5 years)

The final amount cannot exceed two years’ total salary under UAE law.

Let’s understand this with a few examples.

Example 1: Employee Completing 3 Years of Service

Basic Salary: AED 10,000
Service: 3 years

Gratuity = (10,000 × 21 ÷ 30) × 3 = AED 21,000

You are entitled to 21 days’ basic salary for each completed year of service.

Example 2: Employee Completing 8 Years of Service

Basic Salary: AED 12,000
First 5 years: 21 days per year
Next 3 years: 30 days per year

Gratuity = (12,000 × 21 ÷ 30 × 5) + (12,000 × 30 ÷ 30 × 3) = AED 126,000

So, the employee receives 21 days’ salary for the first five years and 30 days for each additional year thereafter.

Example 3: Partial Year of Service

If you worked 2 years and 6 months, gratuity is calculated proportionally.

You’d receive 2.5 × (21 days of salary).

Partial years count toward the total — rounded to the nearest month — ensuring fair compensation.

Important Notes

Only basic salary is used for calculation (no housing, transportation, or bonus).
Unpaid leaves or absences are deducted from the total period of service.
Employment terminated for cause (misconduct or fraud) may lead to forfeiture of gratuity.
Probation periods are excluded — gratuity starts after one full year of service.
Temporary or part-time workers may also qualify based on contractual hours.

To confirm your expected payout, you can use MOHRE’s Gratuity Calculator Tool or consult your HR department.

Gratuity in Free Zones

Most free zones (DIFC, DMCC, JAFZA, etc.) follow similar rules, but some have unique end-of-service savings schemes.

For example:

DIFC Employee Workplace Savings (DEWS) replaces the traditional gratuity model with monthly employer contributions (5–8.33% of salary).
Employees can voluntarily add contributions to grow their retirement fund.

If you’re employed in a free zone, always check whether your company follows the federal gratuity model or a regulated savings scheme.

Gratuity for Contract Types

Limited Contract:
If your contract has a fixed end date and you complete the full term, you’re entitled to full gratuity benefits. If you resign early, you may lose part of it unless notice is served.

Unlimited Contract:
Employees under open-ended contracts can resign anytime, with gratuity calculated up to their last working day. The amount depends on total service duration and lawful notice.

Fixed-Term (Renewable):
In renewable contracts, gratuity continues accumulating as long as you remain continuously employed.

What to Do If You Don’t Receive Gratuity

If your employer delays or refuses gratuity payment:

File a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).
Submit supporting documents such as contract, salary slips, and resignation letter.
The Ministry will mediate; unresolved cases may proceed to the Labour Court.

Employees are encouraged to communicate politely with HR first, as most delays result from administrative errors.

Tax Implications

UAE remains a tax-free country, meaning gratuity payments are not subject to income tax. However, if you transfer the funds to another country, check whether your home country imposes tax on foreign-earned income.

Tips for Employees Before Resigning

Review your contract to ensure clarity on notice period and final settlement.
Calculate your gratuity in advance to confirm HR’s numbers.
Request written confirmation of your final settlement amount.
Avoid last-minute resignations — serve the required notice for smooth clearance.
Maintain professionalism — reputation matters for future references in the UAE.

For expert assistance reviewing your employment terms or resignation letter, visit Labeeb’s Career Consultation Services.

How Labeeb Writing & Designs Helps UAE Professionals

At Labeeb Writing & Designs, we help professionals across the UAE protect their careers through clarity, compliance, and professional presentation.

Our services include:

We ensure your documents meet UAE labour standards and highlight your achievements clearly to employers.

Conclusion

Understanding your end-of-service gratuity rights is essential for every employee in the UAE. It’s not just a legal entitlement — it’s part of your financial security after years of service.

Whether you’re changing jobs or completing your contract, knowing how gratuity is calculated ensures you receive what you’ve earned.

Protect your professional interests with Labeeb Writing & Designs — your trusted UAE career partner for success and security.

FAQs

1. How long must I work to be eligible for gratuity?
You must complete at least one full year of continuous service with your employer.

2. Is gratuity based on total or basic salary?
Only basic salary is used to calculate gratuity — allowances are excluded.

3. How soon should gratuity be paid after leaving a job?
Within 14 days of your last working day, as per UAE labour law.

4. What happens if I resign before completing a year?
You’re not entitled to gratuity if your total service is less than 12 months.

Arabic Summary (خلاصة بالعربية)

تُعتبر مكافأة نهاية الخدمة في دولة الإمارات العربية المتحدة حقًا قانونيًا لكل موظف أكمل عامًا واحدًا على الأقل في العمل. تُحسب المكافأة بناءً على الراتب الأساسي وعدد سنوات الخدمة، ويجب دفعها خلال 14 يومًا من انتهاء العقد. يقدّم هذا المقال شرحًا مبسطًا لقواعد الحساب وفقًا لقانون العمل المحدث لعام 2025، مع نصائح لضمان الحصول على المستحقات المالية كاملة. يمكنك الاعتماد على Labeeb.ae لمراجعة عقودك المهنية وإعداد سيرتك الذاتية باحترافية تلائم سوق العمل الإماراتي.

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