GUIDE · UPDATED SEPTEMBER 2026
UAE gratuity calculation, explained properly
End-of-service gratuity is the largest single payment in most UAE employment relationships, and the most disputed. Here is exactly how it is calculated under Federal Decree-Law 33 of 2021, including the edge cases.
THE RULE
Two rates, one cap, one qualifying period
Gratuity accrues at two different rates depending on how long somebody has worked for you, and it is always calculated on the last drawn basic wage — not the gross package.
| Element | Rule |
|---|---|
| Qualifying period | At least 1 year of continuous service |
| Years 1–5 | 21 days' basic wage per year of service |
| Beyond 5 years | 30 days' basic wage per year of service |
| Basis | Last drawn basic wage, divided by 30 for a daily rate |
| Part-years | Pro-rated to the day |
| Cap | Total gratuity capped at 2 years' wages |
| Unpaid leave | Leave-without-pay days excluded from service |
| Forfeiture | Possible under Article 44 (gross misconduct) only |
| Payment deadline | Within 14 days of the end of the relationship (Article 53) |
Applies to mainland and most free-zone employers. DIFC entities operate DEWS instead; ADGM has its own regulations.
A worked example
An employee joined on 1 March 2019, left on 31 August 2026, and had a last drawn basic wage of AED 9,000 with no unpaid leave. Counted inclusively that is 2,741 days — 7 years and 6 months, or 7.51 years once you divide by 365. Working to the day rather than rounding to "seven and a half years" is what keeps the figure defensible.
| Step | Calculation | Result |
|---|---|---|
| Daily wage | 9,000 ÷ 30 | AED 300.00 |
| Service | 2,741 days ÷ 365 | 7.51 years |
| Years 1–5 @ 21 days | 300 × 21 × 5.00 | AED 31,500.00 |
| Beyond 5 years @ 30 days | 300 × 30 × 2.51 | AED 22,586.30 |
| Total gratuity | 31,500.00 + 22,586.30 | AED 54,086.30 |
| Cap check | Two years' wages (AED 216,000) far exceeds this | Cap not reached |
Rounding the part-year down to 2.5 would underpay by AED 86.30 — small here, but the same rounding on a senior salary and a longer tenure is what disputes are made of. Run your own numbers in the free UAE gratuity calculator.
Where companies get caught
- Using gross salary instead of basic. The single most expensive error — it can inflate a settlement by 40% or more.
- Rounding part-years. Seven years and eight months is not eight years. Pro-rate to the day.
- Forgetting to exclude unpaid leave. Continuous service stops during leave without pay.
- Applying old resignation reductions. The one-third / two-thirds rules are gone. Applying them underpays the employee and invites a claim.
- Assuming Article 44 applies. Forfeiture is narrow and evidential. Using it as leverage is how employers lose at MOHRE.
- Missing the 14-day deadline. Article 53 starts the clock at the end of the relationship, not when your finance cycle is convenient.
- Treating DIFC staff the same. DIFC runs DEWS — monthly contributions of 5.83% or 8.33% of basic — not a lump sum at exit.
Not legal advice. The figures and rules on this page reflect the statutory references built into eHRMS at the time of writing, and are provided for general guidance. Entitlements change and individual contracts, free zones, DIFC and ADGM differ — always confirm current requirements with MOHRE, your free zone authority or your labour counsel.
FAQ
Gratuity questions
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