UAE end of service gratuity: how it is calculated under Decree-Law 33 of 2021

Who is entitled to gratuity

The official UAE government portal summarises Article 51 of the UAE Labour Law, Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships, as follows. A worker who has completed at least one year of continuous service is entitled to an end of service gratuity when the contract ends. A worker with less than one year of service is not entitled to any gratuity.

Two groups fall outside this rule:

• UAE nationals. End of service benefits for Emiratis in the private sector follow the legislation on pensions and social security, not Article 51.
• Employees enrolled in the Savings Scheme. If the employer joined the voluntary alternative end of service system, the employee receives the fund balance instead. More on this below.

Free zones with their own employment law, such as the financial free zones, apply their own rules. This guide covers the federal law as it applies to companies registered with MOHRE.

The formula

According to u.ae, full time workers are paid as follows:

Workers are also entitled to gratuity for fractions of a year, proportionate to the time served, once they have completed one year of continuous service.

Which salary counts

Gratuity is calculated on the last wage the worker was entitled to, namely the basic salary. It does not include allowances such as housing, transportation, utilities or furniture. This makes the split between basic salary and allowances in the employment contract one of the most consequential numbers in the whole relationship. A package of AED 15,000 with a basic of AED 6,000 produces a very different gratuity from the same package with a basic of AED 10,000.

Which days count

Days of absence from work without pay are not included in the period of service. If an employee took 40 days of unpaid leave during employment, the service period used for gratuity is 40 days shorter.

Turning days into money

The portal expresses the entitlement in days of salary but does not state how to convert a monthly basic salary into a daily rate. The common practice in the UAE, used by most calculators, is to divide the monthly basic salary by 30. We use that convention in the examples below. If a dispute turns on a few dirhams, confirm the method with MOHRE or a lawyer.

Worked examples

All three examples use a last basic salary of AED 10,000 a month, so a daily rate of AED 333.33 under the divide by 30 convention.

With the divide by 30 convention, two years of wages equals 720 days of basic salary. The first five years give 105 days, so the cap is reached after 25 and a half years of service. Few employees in a small company will get there, but it is worth knowing where the ceiling sits.

Part time and other work models

Article 30 of Cabinet Resolution No. 1 of 2022, the implementing regulation of the Labour Law, sets a proportional method for part time contracts and other work arrangements:

1. divide the working hours per year in the contract by the working hours per year in a full time contract, and multiply by 100;
2. apply that percentage to the gratuity the worker would receive on a full time contract.

So a worker on half the full time hours receives half of the full time gratuity for the same service and basic salary. The same article says gratuity does not apply to temporary work lasting less than one year.

Paying it: deadline and deductions

Employers must pay all outstanding wages, other entitlements and the gratuity within 14 days of the end of the contract. Employers may deduct from the gratuity any amounts the worker owes.

Unused annual leave is paid separately from gratuity, on the basis of basic salary, as u.ae explains in its section on leave. Read our guide to WPS in the UAE if you settle final dues through your normal payroll run, and remember that the final salary still needs to reach the employee through the Wage Protection System.

The Savings Scheme: an optional alternative

MOHRE runs a voluntary alternative end of service benefits system, the Savings Scheme, set out in Cabinet Resolution No. 96 of 2023 and Ministerial Resolution No. 668 of 2023. Instead of paying a lump sum at the end, the employer contributes each month to an approved investment fund, and the employee receives the contributions plus any returns.

• For full time employees the basic contribution is 5.83% of monthly basic salary for employees with less than 5 years of service, and 8.33% for employees who have served more than 5 years.
• Contributions must reach the fund within 15 days of the start of each calendar month.
• Employees may add voluntary contributions of up to 25% of their total wage.
• Gratuity accrued before enrolment must be calculated and settled under the law.
• The employee receives the balance within 14 days after the end of employment, and may keep it invested or withdraw it.

The two rates mirror the statutory formula: 21 days out of 360 is about 5.83%, and 30 days out of 360 is about 8.33%. The scheme applies to the private sector and free zones.

Common mistakes we see

• Using the full package instead of basic salary. Allowances are excluded by law, whatever the payslip total says.
• Counting unpaid leave as service. Keep an accurate record of unpaid days; it changes the result.
• Forgetting the fraction of the last year. After one year, partial years are paid pro rata.
• Missing the 14 day deadline. Plan the final settlement before the last working day, not after.
• Treating Emiratis like expatriates. Emirati employees fall under the pensions law.

Check your numbers

Our free UAE gratuity calculator applies Article 51 to your dates and basic salary and shows the working. For leave encashment, use the annual leave calculator.

If you would rather keep service dates, unpaid leave and basic salary in one place, HR FLARE holds employee records and runs payroll in AED and other Gulf currencies, with an Arabic interface and an AI assistant that can answer questions about your team. It is free for up to 5 employees and hosted in Europe. See pricing, or read how the rules differ in Saudi Arabia in our Arabic guide to the Saudi end of service award.