If you have worked for a UAE private-sector employer for at least a year without a break, you are owed gratuity when the contract ends. It is calculated on your last basic salary, not your full package: 21 days of basic pay for each of the first five years and 30 days for each year after that, with part years paid pro rata. Your employer has 14 days from the end of the contract to pay it.
That is the rule under Federal Decree-Law No. 33 of 2021, the UAE Labour Law, as set out on the government's u.ae portal (updated August 2026). DIFC and the voluntary savings scheme work differently, and both are covered below. This is general information, not legal advice: your contract and the facts of your exit matter.
The formula at a glance
| Continuous service | Gratuity |
|---|---|
| Less than one year | Nothing |
| Years one to five | 21 days' basic wage for each year |
| Each year after the fifth | 30 days' basic wage for each year |
| Part of a year, once past the first year | Paid pro rata |
| Overall limit | Two years' wage |
Three details decide most disagreements:
- Basic wage only. The calculation uses the last basic salary you were entitled to. Housing, transport, utilities, furniture and other allowances are left out.
- Unpaid absence doesn't count. Days off without pay are taken out of your period of service.
- Emiratis are covered differently. UAE nationals in the private sector receive end-of-service benefits under the pensions and social security legislation instead.
Part-time staff receive a proportion of the full-time figure, based on contracted hours against full-time hours a year, under Article 30 of Cabinet Resolution No. 1 of 2022. Temporary work of less than a year earns nothing.
A worked example
Say you joined a Dubai trading company on a package of AED 15,000 a month, of which AED 9,000 is basic salary. You leave after seven years and three months, with no unpaid leave.
- Work out a day's basic wage. The common method is the monthly basic divided by 30: AED 9,000 ÷ 30 = AED 300.
- First five years: 5 × 21 days × AED 300 = AED 31,500.
- The remaining two years and three months, or 2.25 years: 2.25 × 30 days × AED 300 = AED 20,250.
- Total gratuity: AED 51,750.
Two things can move that number. Some employers work out a day's pay as the annual basic divided by 365, which gives AED 295.89 a day and a total of about AED 51,041. The law speaks in days of wage without fixing the divisor, so check which method your employer's HR policy uses.
The bigger gap comes from using the wrong salary. On the full AED 15,000 package, the same service would produce AED 86,250. That is often the figure an employee has in mind, and it isn't what the law provides.
The cap rarely matters. Measured against basic pay, you would need roughly 25 years with one employer before the two-year limit started to bite.
What counts as service
Continuous service with the same employer is what counts. Three points catch people out:
- Your notice period is service. The contract stays in force until the notice period ends, so gratuity runs to your last working day, not the day you handed in your resignation.
- The first year is a hard threshold. Leave at 11 months and you receive nothing. Leave at one year and six months and you receive 21 × 1.5 = 31.5 days' basic pay.
- Unpaid leave pushes the dates back. Take 30 days of unpaid leave and every anniversary arrives 30 days later.
Does resigning reduce your gratuity?
Not under the current law. Article 51 sets one formula, and the official guidance applies it whenever employment ends after at least a year of continuous service. Older articles online describe reduced gratuity for employees who resigned early. That rule came from the previous labour law and was not carried into the 2021 law.
What resigning can cost you is the notice period. If you leave without serving it, you owe your employer pay in lieu of notice, and the law allows an employer to deduct amounts you owe from your gratuity. Salary advances or loans still outstanding are treated the same way.
If the company closes, contracts end and gratuity falls due for every employee at once. For a small business it is often the largest bill in the process. Our guide to closing a company in Dubai properly sets out the order of steps.
When the federal formula doesn't apply
DIFC. Employers in the Dubai International Financial Centre follow DIFC Law No. 2 of 2019, not the federal labour law. Since 1 February 2020, or the start date for later joiners, DIFC employers pay a monthly contribution into a qualifying savings scheme instead of building up gratuity: 5.83% of monthly basic wage for the first five years of service and 8.33% after that. The DIFC Employee Workplace Savings Plan, known as DEWS, is the default scheme. DIFC's own gratuity formula now covers only service before that date, and it uses a 365-day year to work out a day's pay.
The federal savings scheme. Mainland and free zone employers can opt into a voluntary alternative under Cabinet Resolution No. 96 of 2023. The employer pays 5.83% or 8.33% of monthly basic salary into an investment fund approved by the Capital Market Authority (CMA, formerly SCA), within 15 days of the start of each month. On enrolment, the employer must settle the gratuity built up so far. When the job ends, the employee receives the contributions and any returns within 14 days, and can withdraw the money or keep it invested. Employees may add their own contributions of up to 25% of total wage.
The scheme is optional. If your employer hasn't told you that you have been enrolled, the standard formula applies.
For employers: budgeting and paying on time
Gratuity builds up every month and falls due in one payment. Three habits keep it under control:
- Accrue it monthly. Book a provision in your management accounts so the payout isn't a cash shock and your year-end figures are complete. Our guide to bookkeeping and audit requirements for UAE companies covers the wider record-keeping picture.
- Set the basic salary with care when you hire. The basic figure in the offer letter drives your gratuity cost for years. See our guide to hiring your first employee in Dubai for contracts and payroll.
- Pay within 14 days. Final salary, other entitlements and gratuity are all due within 14 days of the contract ending. Waiting for the next payroll run is a common reason employers miss it.
Common mistakes
- Calculating on total salary instead of basic salary.
- Forgetting the part year: months beyond the last anniversary still count.
- Counting unpaid leave as service.
- Applying DIFC rules to a mainland or free zone job, or the other way round.
- Assuming an employee who resigned gets a reduced amount.
- Not writing down the dates, salary and deductions used, which turns a simple question into a complaint.
If your gratuity isn't paid
Ask for a written final settlement showing the basic salary used, your service dates and any deductions. Most disputes come down to one of those three. If the employer won't pay or won't explain the figure, you can raise a labour complaint with the Ministry of Human Resources and Emiratisation (MOHRE). Our guide to Amer, Tasheel and typing centres explains where MOHRE paperwork gets done.
For employers handling exits, cancellations or a closure, our PRO services team can manage the MOHRE side. If you want a second opinion on a settlement before you sign or pay it, book a free consultation.
Sources
Frequently asked questions
Do UAE nationals get end-of-service gratuity in the private sector?
How long does an employer have to pay gratuity?
Does the savings scheme pay more than normal gratuity?
How is gratuity worked out for part-time staff?
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