What UAE Gratuity Means
UAE end-of-service gratuity is a lump-sum benefit paid at the end of employment when an employee has completed the qualifying period of service. For private sector workers, the modern reference point is UAE Federal Decree-Law No. 33 of 2021 and its executive regulations. The benefit is designed to recognise completed service and provide a final statutory payment when the employment relationship ends. It is not the same thing as salary already earned, payment for unused annual leave, notice period compensation, commission, or an employer-provided savings plan. Those items may appear in a final settlement, but they are calculated separately.
The most important input is basic salary. In many UAE contracts, the monthly package is split into basic salary plus allowances. Housing, transport, phone, education, cost-of-living, or other allowances are usually excluded from gratuity calculations unless a more generous contractual term applies. This distinction matters because an employee with a total salary of AED 20,000 and a basic salary of AED 12,000 should normally calculate gratuity from AED 12,000, not the whole package.
Who Is Entitled
The basic rule applied by this calculator is that service of less than one year creates no gratuity entitlement. Once the employee has completed at least one year, gratuity can become payable when employment ends because of resignation, termination by the employer, or mutual agreement. The exact final settlement can still depend on the contract, the employer's policies, the facts around termination, and any written settlement signed by the parties. Employees in free zones, government roles, domestic worker arrangements, DIFC or ADGM schemes, or employer savings plans may be subject to different systems.
This calculator is therefore useful as an estimate for mainstream UAE private sector employment, but it is not a substitute for legal advice. If a dispute involves dismissal reasons, unpaid salary, deductions, absconding allegations, non-compete clauses, or a settlement agreement, the employee or employer should seek official guidance before relying on any online figure.
How Gratuity Is Calculated
The standard calculation begins by converting basic monthly salary into a daily rate by dividing it by 30. For each completed year of service from year one through year five, the employee earns 21 days of basic wage. For each completed year after year five, the employee earns 30 days of basic wage. If employment ends part way through a final year, the calculator prorates that final period. It uses the 21-day rate where the partial year falls within the first five years and the 30-day rate where the partial year falls after five completed years.
For example, an employee with a basic salary of AED 10,000 has a daily rate of AED 333.33. Three completed years are therefore worth 63 days of basic wage. Seven completed years are calculated as five years at 21 days plus two further years at 30 days. The total is then checked against the statutory ceiling: gratuity should not exceed 24 months of basic salary.
Limited and Unlimited Contracts
Historically, UAE employment contracts were commonly described as limited or unlimited, and older gratuity discussions often turned on that difference. The current labour law moved the private sector toward fixed-term contracts, but many employees and employers still use the older labels when discussing legacy paperwork or HR records. For the calculation rules used on this site, the contract type and reason for leaving are captured for context, while the mathematical gratuity formula is driven by basic salary and service length.
The practical effect of contract type can still matter outside the calculator. A contract may include a notice period, termination procedure, probation wording, or benefits clause that affects the final settlement discussion. It may also identify the basic salary figure from which gratuity should be calculated. When there is a conflict between a payslip, offer letter, contract, and HR portal, the worker should gather the documents and ask for a written breakdown before signing a final settlement.
What Counts as Basic Salary
Basic salary is the wage amount stated as basic pay in the employment contract or payroll records. It is normally the stable amount paid for work before allowances are added. End-of-service gratuity is usually calculated on this basic wage only. Allowances are common in UAE pay packages, but they are not usually part of the gratuity base. A higher amount may apply if an employer contractually promises it, but the safe estimate should start with the contractual basic salary.
Employees should also use the latest applicable basic salary when employment ends, not an old starting salary, unless a specific legal or contractual rule says otherwise. If basic salary changed during employment, keep salary certificates, amendment letters, payslips, and payroll records. These documents can help explain the figure used in the final calculation and reduce disagreement over the settlement.
FAQ
Is gratuity paid on total salary?
In the standard UAE private sector calculation, gratuity is based on basic salary, not the full package. Allowances are normally excluded.
Do I get gratuity if I resign?
This calculator does not reduce the estimate because the employee resigned. It applies the Article 51-style formula based on basic salary and service length after the one-year threshold.
What happens if I worked less than one year?
The calculator returns zero because the requested rule says service of less than 365 days creates no gratuity entitlement.
Does the 24-month cap always apply?
The cap applies only when the calculated gratuity exceeds 24 months of basic salary. Many normal service periods fall below that ceiling.
Should I rely on this result for a dispute?
Use it as an estimate. For official advice, especially where the facts are disputed, consult an employment lawyer or the relevant UAE labour authority.