UAE Gratuity Calculator 2026

What Is Gratuity in the UAE?

Gratuity (also called end-of-service benefits or EOSB) is a mandatory lump-sum payment that employers in the UAE must pay to employees when their employment ends. It is one of the most important financial rights for workers in the United Arab Emirates, affecting millions of employees — particularly the large expatriate workforce that makes up over 85% of the private sector.

The gratuity system is governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (commonly called the "New UAE Labour Law"), which came into effect on February 2, 2022. This law replaced the old Federal Law No. 8 of 1980 and introduced significant changes — most notably, abolishing the distinction between "limited" and "unlimited" contracts and ensuring full gratuity entitlement for all qualifying employees regardless of whether they resign or are terminated.

Gratuity effectively serves as a form of savings or pension for employees, since the UAE does not have a mandatory pension scheme for expats. Understanding how it works is critical for financial planning, negotiating salaries, and knowing your rights when leaving a job.

Who Is Eligible for Gratuity?

To qualify for end-of-service gratuity in the UAE, an employee must meet the following conditions:

• Minimum one year of continuous service with the same employer
• Employment must be governed by the UAE Labour Law (private sector)
• Days of unpaid leave are excluded from the service period
• Paid leave (annual, sick, maternity) counts toward service

Employees who are not eligible include:

• Workers who leave during probation (before completing 1 year)
• Government sector employees (covered by separate pension schemes)
• UAE/GCC nationals enrolled in GPSSA (General Pension and Social Security Authority)
• Free-lance or gig workers not under a standard employment contract

Contract Types in 2025 — The End of "Unlimited" Contracts

One of the most significant changes under the new UAE Labour Law is the abolition of unlimited contracts. Prior to February 2022, UAE employment contracts were classified as either:

Aspect	Old Law (Before Feb 2022)	New Law (Feb 2022 Onwards)
Contract Types	Limited (fixed-term) + Unlimited (open-ended)	All contracts are fixed-term (limited)
Maximum Duration	Unlimited had no end date	Maximum 3 years, renewable
Resignation Penalty	Unlimited: reduced gratuity (1/3, 2/3)	No reduction — full gratuity on resignation
Transition Deadline	N/A	All unlimited contracts had to be converted by Feb 2023

Gratuity Calculation Formula

The standard formula for calculating end-of-service gratuity in the UAE (for private sector employees):

Important notes:

• Use basic salary only — exclude housing, transport, bonuses, commissions, overtime
• Use the last drawn basic salary (not the average or starting salary)
• Fractional years are calculated proportionately (e.g., 7 years 6 months = 7.5 years)
• The divisor is always 30 (not calendar days in the month)

Worked Examples

Example 1: 3 Years Service — Basic Salary AED 8,000

Step	Calculation	Amount
Daily Wage	AED 8,000 ÷ 30	AED 266.67
First 5 years	21 × 266.67 × 3	AED 16,800
Beyond 5 years	N/A	AED 0
Total Gratuity		AED 16,800
Cap Check	16,800 < 192,000 (8,000 × 24)	✅ Within cap

Example 2: 7 Years 6 Months — Basic Salary AED 15,000

Step	Calculation	Amount
Daily Wage	AED 15,000 ÷ 30	AED 500
First 5 years	21 × 500 × 5	AED 52,500
Beyond 5 years	30 × 500 × 2.5	AED 37,500
Total Gratuity		AED 90,000
Cap Check	90,000 < 360,000 (15,000 × 24)	✅ Within cap

Example 3: 12 Years — Basic Salary AED 10,000

Step	Calculation	Amount
Daily Wage	AED 10,000 ÷ 30	AED 333.33
First 5 years	21 × 333.33 × 5	AED 35,000
Beyond 5 years	30 × 333.33 × 7	AED 70,000
Total Gratuity		AED 105,000
Cap Check	105,000 < 240,000 (10,000 × 24)	✅ Within cap

Example 4: When the 2-Year Cap Applies

An employee with basic salary AED 5,000 serving 25 years:

Step	Calculation	Amount
Daily Wage	AED 5,000 ÷ 30	AED 166.67
First 5 years	21 × 166.67 × 5	AED 17,500
Beyond 5 years	30 × 166.67 × 20	AED 100,000
Sub-total		AED 117,500
Cap Check	117,500 < 120,000 (5,000 × 24)	✅ Within cap
Final Gratuity		AED 117,500

Domestic Worker Gratuity

Domestic workers in the UAE are governed by a separate law — Federal Decree-Law No. 9 of 2022 on Domestic Workers. This covers employees such as:

• Housemaids and cleaners
• Nannies and au pairs
• Private drivers
• Cooks and chefs (employed by a household)
• Private tutors
• Gardeners
• Private security guards
• Private nurses

The gratuity formula for domestic workers is different:

Example: Domestic worker with AED 2,000/month basic salary, 6 years service:

Daily wage = 2,000 ÷ 30 = AED 66.67 → Gratuity = 14 × 66.67 × 6 = AED 5,600

Part-Time Employee Gratuity

Under Article 18 of the new UAE Labour Law, part-time workers are entitled to gratuity. The calculation uses the standard 21/30-day formula, but the result is then adjusted pro-rata based on working hours:

Example: Part-time employee works 20 hours/week (vs 48 hours full-time), basic salary AED 6,000, 4 years service:

Step	Calculation	Amount
Full-time gratuity	21 × (6,000 ÷ 30) × 4	AED 16,800
Hours ratio	20 ÷ 48	41.67%
Part-time gratuity	16,800 × 41.67%	AED 7,000

DIFC DEWS — Employee Workplace Savings

The Dubai International Financial Centre (DIFC) operates under a unique system that replaced traditional gratuity with a defined-contribution savings plan called DEWS (DIFC Employee Workplace Savings), effective February 1, 2020.

How DEWS Works

• Employer contributions are made monthly to a regulated investment fund managed by Zurich International Life
• Contribution rates:
  • 5.83% of basic salary for the first 5 years of service
  • 8.33% of basic salary for each year beyond 5 years
• Employee voluntary contributions — employees can make additional contributions
• Upon termination, the employee receives accumulated contributions + investment returns
• Investments are professionally managed in Sharia-compliant and conventional funds

DEWS vs Traditional Gratuity

Feature	Traditional Gratuity	DIFC DEWS
Payment Type	Lump sum on termination	Monthly contributions + returns
Employer Risk	Large liability at termination	Spread evenly monthly
Employee Risk	Employer insolvency risk	Protected in external fund
Investment Returns	None	Potential investment growth
Portability	Lost on job change	Accrued balance preserved
Transparency	Calculated at end	Visible balance anytime

ADGM — Abu Dhabi Global Market

ADGM generally follows the standard UAE gratuity calculation. However, new Employment Regulations 2024 (effective April 1, 2025) introduce an important change:

• Employers can now offer an optional savings/pension scheme as an alternative to gratuity
• The scheme is "double voluntary" — employers choose to offer it, employees choose to participate
• If neither party opts in, the standard gratuity formula (21/30 days) applies
• UAE/GCC nationals enrolled in federal pension schemes are exempt from traditional gratuity

Voluntary Alternative Savings Scheme

In October 2023, the UAE government introduced a Voluntary Alternative End-of-Service Benefits Scheme via Cabinet Resolution No. 96 of 2023. This is separate from DIFC DEWS and ADGM:

Feature	Details
Applicability	Private sector + most free zones (not DIFC, not ADGM)
Participation	Voluntary — employer chooses to join
Employer Rate (≤ 5 yrs)	5.83% of basic salary/month
Employer Rate (> 5 yrs)	8.33% of basic salary/month
Employee Voluntary	Up to 25% of annual salary
Withdrawal	Employee voluntary contributions can be withdrawn anytime
Accrued Rights	Pre-existing gratuity entitlements must be preserved
Regulatory Body	Securities and Commodities Authority (SCA)

Article 44 — Gross Misconduct and Gratuity

A common concern: "Will I lose my gratuity if I'm dismissed for misconduct?"

Under the new UAE Labour Law, employees do not automatically lose their gratuity even if dismissed under Article 44 (summary dismissal for gross misconduct). Article 44 grounds include:

• Falsifying identity or submitting forged certificates
• Committing a serious error causing substantial loss to the employer
• Violating workplace safety instructions
• Failing to perform basic duties despite written warnings
• Disclosing company trade secrets
• Being intoxicated at work
• Assaulting the employer, manager, or colleagues
• Absence without valid reason for more than 20 non-consecutive days (or 7 consecutive days) in one year

While the employer can terminate the employee for these violations, gratuity is retained. Forfeiture only occurs through a court order in extreme cases. The employer may separately sue for proven damages.

Common Mistakes When Calculating Gratuity

1. Using total salary instead of basic salary — Gratuity is calculated on basic salary only. If your total package is AED 20,000 but basic is AED 12,000, gratuity is on AED 12,000.
2. Referencing unlimited contract rules — The old sliding-scale reductions (1/3, 2/3) no longer apply as of Feb 2022. All contracts are now limited.
3. Forgetting the 2-year cap — Even with 30+ years of service, the maximum gratuity is 24 months of basic salary.
4. Including allowances in basic — Housing, transportation, commissions, and bonuses are excluded.
5. Ignoring unpaid leave — Days of absence without pay reduce the service period.
6. Using calendar days instead of 30 — Always divide monthly salary by 30 (not 28, 29, or 31).
7. Not accounting for partial years — If you served 5 years and 3 months, the 3 months counts proportionately.
8. Confusing DIFC rules with mainland rules — DIFC employees are under DEWS, not the standard gratuity formula.

Tips to Maximize Your Gratuity

1. Negotiate a higher basic salary — Since gratuity is calculated on basic, a higher basic-to-total ratio means more gratuity. Example: AED 20,000 total with AED 15,000 basic gives 50% more gratuity than AED 20,000 total with AED 10,000 basic.
2. Complete at least 5 years — The rate jumps from 21 days/year to 30 days/year after 5 years — a 43% increase per year.
3. Time your departure — If you're near a year boundary, staying a few extra weeks to complete the year gives you gratuity for the full additional year.
4. Keep records — Maintain copies of your contract, salary certificates, and bank statements showing basic salary.
5. Verify your basic salary in the contract — Ensure your employment contract clearly states the basic salary separately from allowances.
6. Request a salary breakdown from HR — Get a written confirmation of what constitutes "basic" vs "allowances" before departure.
7. Track unpaid leave days — Know exactly how many days (if any) were unpaid, as these reduce your service period.

Payment Timeline and Disputes

Under Article 54 of the UAE Labour Law:

Requirement	Detail
Payment Deadline	14 days from the last working day
Includes	Outstanding wages + unused annual leave + gratuity
If Employer Delays	File complaint with MoHRE (Ministry of Human Resources and Emiratisation)
MoHRE Contact	Call 600-590000 or use the MoHRE app/website
Dispute Resolution	MoHRE mediates first → referred to Labour Court if unresolved
Filing Deadline	Claim must be filed within 1 year of the employment end date

Documents Needed When Claiming Gratuity

• Employment contract — showing basic salary, start date, and contract type
• Resignation letter or termination notice — proving the employment ended
• Last salary certificate — showing basic + allowances breakdown
• Bank statements — showing salary credits (in case of dispute)
• Emirates ID — for identity verification with MoHRE
• AECB credit report — optional but useful if employer claims deductions
• Service certificate — if issued, confirms dates and position

Free Zone Gratuity Rules

Most UAE free zones follow the mainland UAE Labour Law for gratuity calculations, including:

Free Zone	Gratuity System	Notes
JAFZA (Jebel Ali)	Standard 21/30-day formula	Follows Federal Decree-Law 33/2021
DAFZA (Dubai Airport)	Standard formula	Same as mainland
DMCC	Standard formula	Same as mainland
Dubai Silicon Oasis	Standard formula	Same as mainland
Sharjah FZs	Standard formula	Same as mainland
RAK FTZ	Standard formula	Same as mainland
DIFC	DEWS plan	Own employment law — DIFC Law No. 2/2019
ADGM	Standard + optional savings	Employment Regs 2024, effective April 2025

What to Do With Your Gratuity

Since UAE gratuity is paid tax-free, it represents a significant financial windfall. Here are smart ways to invest it:

• Emergency fund — Keep 3–6 months' expenses in a savings account, especially if relocating
• Pay off high-interest debt — Clear credit card balances or personal loans first
• Invest in home country — Real estate, retirement funds, or stock market investments
• UAE investments — If staying in the UAE, consider compound interest investments or UAE-listed ETFs
• Gold — UAE is a major gold trading hub with competitive prices
• Education fund — Set aside money for children's education
• Start a business — Use gratuity as seed capital for entrepreneurship