UAE Gratuity Rules 2026: How End-of-Service Gratuity Is Calculated

End-of-service gratuity is the lump sum a private-sector employer in the UAE pays when your employment ends. It can be a large sum after a few years, yet many people only look up the rules in the week they resign. This guide explains who qualifies, exactly how the amount is worked out under Federal Decree-Law 33 of 2021 (Article 51), what changes in DIFC and ADGM, and how employers should budget for it. Every figure below is calculated with the same rules that power our free calculator.

Rules last reviewed: 23 September 2026, against u.ae — End-of-service benefits (private sector) and DIFC — Qualifying schemes (DEWS).

The rule in one paragraph

After at least one year of continuous service, you earn 21 days of basic salary for each of your first five years and 30 days of basic salary for each year after that. Partial years count pro-rata. The daily rate is your monthly basic divided by 30. Allowances are left out, and the total can never exceed two years of basic salary. In UAE mainland law, resigning does not cut the amount: you receive the same gratuity whether you resign or are let go.

Who is covered

• Mainland private-sector employees — the rules in this guide apply in full.
• Most free zones — our calculator applies the mainland formula by default for free zones other than DIFC. If your free zone has its own employment regulations, check your contract.
• DIFC — no lump-sum gratuity. Employers pay monthly contributions into the DEWS savings plan instead (DIFC Employment Law, Article 66). See the DIFC section below.
• ADGM — ADGM has its own employment regulations. Its default is described as a 21/30-day gratuity, but we have not finished reviewing the ADGM-specific rules, so our calculator does not model ADGM yet.
• Less than one year of service — no gratuity. One year of continuous service is the threshold.

How UAE gratuity is calculated, step by step

1. Find your basic salary. Use the basic figure on your contract or payslip, not your total package. Housing, transport and other allowances are excluded.
2. Work out the daily basic wage. Divide the monthly basic by 30.
3. Count your service. Add years, months and days. A part year is counted pro-rata, so 3 years and 4 months is 3.33 years.
4. Apply 21 days per year for the first 5 years.
5. Apply 30 days per year for every year after year 5.
6. Check the cap. If the total is more than 24 months of basic salary, it is reduced to that cap.

Worked example 1: seven years on AED 10,000 basic

Seven years on AED 10,000 basic works out at AED 55,000, or 5.5 months of basic salary.

Worked example 2: a part year

Basic salary AED 3,000, service of 1 year and 6 months. Daily wage is AED 100. Service is 1.5 years, all inside the first five, so 21 × 100 × 1.5 = AED 3,150. The six extra months add a full AED 1,050 on top of the one-year figure of AED 2,100.

Worked example 3: 3 years and 4 months on AED 8,000

Daily wage AED 266.67. Service 3.33 years × 21 days × daily wage = AED 18,666.67.

Why basic salary matters more than your package

Because UAE gratuity is calculated on basic pay only, two people on the same total package can walk away with very different gratuity. Take a package of AED 15,000 a month split into AED 6,000 basic and AED 9,000 of allowances. After five years the gratuity is AED 21,000. If the same AED 15,000 were all basic, five years would give AED 52,500. That gap of AED 31,500 is why the basic-to-allowance split is worth negotiating when you accept an offer, not when you leave.

The same basic figure also drives other end-of-service items, such as the daily rate for unused leave, so a low basic reduces more than one line of your final settlement.

Edge cases that change the number

Leaving before one year

Eleven months on AED 12,000 basic gives AED 0. One more month, reaching a full year, gives AED 8,400. If you are close to the one-year mark, the timing of your notice matters.

Resigning versus being terminated

Under the current UAE law, resignation does not reduce gratuity. Seven years on AED 10,000 basic is AED 55,000 whether you resign or your employer ends the contract. Guidance that cuts gratuity by a third or two thirds for resignation describes Saudi law (Article 85), not the UAE mainland rule.

The two-year cap

Gratuity cannot exceed 24 months of basic salary. On AED 10,000 basic, 25 years gives AED 235,000, just under the cap. At 30 years the formula would reach AED 285,000, but the payment is capped at AED 240,000. The cap starts to bite after 25.5 years of service, so it mainly affects very long-serving staff.

DIFC: savings plan instead of gratuity

In DIFC, the employer pays monthly contributions into DEWS: 5.83% of basic salary for each month of service in the first five years, and 8.33% after that. On AED 10,000 basic, three years builds up roughly AED 20,988 in contributions. On AED 15,000 basic over seven years the contributions come to about AED 82,458, close to the AED 82,500 a mainland employee would get. The DEWS balance also moves with investment returns or losses, which our estimate leaves out, and it is paid out by the plan rather than as a lump sum from your employer.

Salary changes during your service

The calculator applies the basic salary you enter to your whole service. Use your basic on the date you leave, from your latest contract or payslip. If your basic was recently cut or raised and you are unsure which figure applies, check the u.ae page linked below before you sign a settlement.

Gratuity is only one part of your final settlement

When you leave, your employer also owes any unused annual leave, salary for days worked but not yet paid, and notice pay if you are not asked to work your notice. Here is a full example for someone on AED 8,000 basic plus AED 4,000 allowances, terminated after 4 years with 12 days of unused leave, 30 days of notice paid in lieu and 10 unpaid days:

Notice pay and unpaid salary use your full wage (basic plus allowances), while gratuity and leave use basic only. This estimate does not include loans, salary advances, bonuses or air tickets, so adjust for anything in your contract.

Notice also affects your exit date. UAE contracts must set a notice period of 30 to 90 days. During probation, an employer ending the contract gives 14 days' notice; an employee leaving the UAE gives 14 days; an employee moving to another UAE employer gives 30 days, and the new employer may have to compensate the old one for recruitment costs unless agreed otherwise.

The employee view: checking your settlement

• Confirm your basic. Compare the basic on your settlement with your contract and latest payslip. It is the main input.
• Confirm your service dates. Start date to last working day. A few weeks can move you over the one-year line or add a pro-rata amount.
• Check the split. Look for separate lines for gratuity, leave, notice and unpaid salary rather than one lump figure.
• Keep the numbers. Run your figures through the calculator and keep a copy. If the employer's number differs, you can point to the exact line that differs.
• Before accepting an offer, look at how much of the package is basic. A higher basic is worth more at exit.

The employer view: budgeting and paying gratuity

Gratuity is a liability that grows every month, so it is worth accruing for it rather than meeting it as a surprise. The formula translates neatly into a monthly provision:

• Years 1 to 5: 21 days of basic per year is 0.7 months of basic a year, or about 5.83% of basic salary each month.
• After year 5: 30 days per year is one month of basic a year, or about 8.33% of basic each month.

These are the same percentages DIFC employers pay into DEWS, so the provision for a mainland employee and the contribution for a DIFC employee are close for the same basic and service. Other practical points:

• Keep service dates and basic salary history accurate in payroll. The start date and the basic salary are the two inputs that decide the number.
• Do not reduce gratuity for resignation on UAE mainland contracts. That rule no longer applies.
• Show the calculation line by line on the settlement statement. It answers most questions before they are asked.
• When designing pay, remember that a larger basic raises gratuity, leave encashment and overtime costs. Allowances do not.

How UAE gratuity compares with Saudi, Qatar and Oman

If you are weighing a move within the Gulf, the end-of-service formula is part of the offer. Here is the same case, 7 years of service with no allowances, under each country's rules as modelled in our calculator. Results are shown in months of basic salary so they compare across currencies:

The UAE is unusual in two ways: the rate steps up after five years, and resigning costs you nothing. In Saudi Arabia, resigning after 5 to 10 years pays two thirds of the full award. Saudi gratuity also counts fixed allowances, so with allowances the Saudi figure would be higher.

Common mistakes when people work out their own gratuity

• Using the total package. Gratuity on AED 15,000 gross instead of AED 6,000 basic overstates five years by AED 31,500.
• Using 30 days for every year. The first five years earn 21 days each. Seven years on AED 10,000 is AED 55,000, not the AED 70,000 you get from one month per year.
• Rounding service down to whole years. Part years count pro-rata, so 3 years and 4 months is worth more than 3 years: AED 18,666.67 against AED 16,800 on AED 8,000.
• Applying Saudi resignation cuts in the UAE. They do not apply to UAE mainland contracts.
• Forgetting the cap. It rarely matters, but for very long service the total stops at 24 months of basic.

Quick reference table

All figures assume UAE mainland rules and the same basic salary throughout.

Sources and review date

Every rule and number in this guide comes from the same rule set that powers the MenaJobs calculators. The sources below were last checked on 23 September 2026. Labour rules change, so confirm with the official source, your contract or a qualified adviser before you rely on a figure in a dispute.

• u.ae — End-of-service benefits (private sector) (Federal Decree-Law 33/2021, Art 51). Official source; reviewed 23 September 2026.
• DIFC — Qualifying schemes (DEWS) (DIFC Employment Law, Art 66). Official source; reviewed 23 September 2026.
• u.ae — Terminating employment contracts (Federal Decree-Law 33/2021, Arts 9, 43). Official source; reviewed 23 September 2026.
• u.ae — Types of leaves (private sector) (Federal Decree-Law 33/2021, Arts 29–32). Official source; reviewed 23 September 2026.
• Saudi Labour Law Arts 84–85 (Etqan Law Firm) (Arts 84, 85). Secondary summary — confirm with the official text; reviewed 23 September 2026.
• Qatar Labour Law No. 14 of 2004 (summary). Secondary summary — confirm with the official text; reviewed 23 September 2026.
• Oman Labour Law — Royal Decree 53/2023. Official source; reviewed 23 September 2026.

This guide is general information, not legal advice.