UAE Law on Gratuity: How to Calculate Your End of Service Benefits (2026)

End-of-service gratuity is a statutory right under UAE employment law — not a discretionary payment. Under Federal Decree-Law No. 33 of 2021, every employee who has completed at least one year of continuous service is entitled to gratuity on leaving, regardless of whether they resigned or were made redundant. The calculation is straightforward once you know the two variables that actually matter: your basic wage and your years of service.

Legal notice: This article is general information only and does not constitute legal advice. Consult a UAE-licensed lawyer for advice on your specific situation.

The Legal Framework

Gratuity is governed by Article 51 of Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations. Federal Law No. 8 of 1980 — the old Labour Law — was repealed in full when the 2021 law came into effect on 2 February 2022. Any references to gratuity under the 1980 law should be treated as historical context only; the current legal basis is exclusively the 2021 statute.

The Calculation Formula

Gratuity is calculated on basic wage only — housing allowances, transport allowances, bonuses, commissions, and other benefits are excluded. The formula has two tiers:

• Years 1 to 5: 21 days of basic wage for each completed year of service
• Years beyond 5: 30 days of basic wage for each additional completed year
• Cap: total gratuity cannot exceed 2 years of wages, regardless of length of service
• Minimum service: at least 1 full year of continuous service required. No gratuity for less than one year.

Worked Example

Employee with a basic wage of AED 10,000/month and 7 years of service:

1. First 5 years: AED 10,000 ÷ 30 days × 21 days × 5 years = AED 35,000
2. Years 6 and 7: AED 10,000 ÷ 30 days × 30 days × 2 years = AED 20,000
3. Total gratuity: AED 35,000 + AED 20,000 = AED 55,000

What Counts as Basic Wage

Only the basic wage is used for gratuity calculations — not total compensation. The following are excluded:

• Housing allowance
• Transport allowance
• Annual bonus and commissions
• Overtime pay
• Any other allowances or benefits

This distinction is significant for employees whose basic wage is a small fraction of their total package. An employee earning AED 15,000 total but with a basic wage of AED 5,000 will have their gratuity calculated on AED 5,000, not AED 15,000. Check your employment contract to confirm which figure is your stated basic wage.

How Termination Reason Affects Entitlement

• Voluntary resignation (after 1 year): full gratuity entitlement on the standard formula.
• Termination by employer (any lawful reason except Article 44): full gratuity entitlement.
• Summary dismissal under Article 44 (serious misconduct): gratuity may be forfeited. The grounds are exhaustive: fraudulent documents, breach of confidentiality, repeated neglect after warnings, safety violations, or trade secret disclosure. The employer must prove the ground.
• Redundancy or business closure: full gratuity entitlement.

Tax Treatment

Gratuity payments in the UAE are not subject to income tax. The UAE does not levy personal income tax, so employees receive the full calculated gratuity amount.

Documentation to Keep

• Employment contract showing your start date and basic wage
• Pay slips showing the breakdown between basic wage and allowances
• Termination letter or resignation acceptance confirming the end date of service
• Any written warnings if an Article 44 misconduct dismissal is being challenged

Disputing an Unpaid or Underpaid Gratuity

If an employer refuses to pay gratuity or pays less than the statutory entitlement:

1. Raise it internally first with HR in writing — create a paper record.
2. File a MoHRE complaint at mohre.gov.ae, via the MoHRE app, or in person at a MoHRE service centre. Bring your contract, payslips, and termination documentation.
3. Labour Court if MoHRE mediation fails. The Labour Court can order payment of the full statutory entitlement plus any applicable compensation.

If a travel ban has been imposed in connection with an employment dispute, check your status through our UAE travel ban guide. If a court or police case is involved, check its status online.

Frequently Asked Questions

Am I entitled to gratuity if I resign before completing one year? No. The minimum service requirement is one full year of continuous service.

Are allowances included in the gratuity calculation? No. Only basic wage is used. Housing, transport, bonuses, and commissions are excluded.

Can an employer withhold gratuity for misconduct? Only if the dismissal was under Article 44 of Federal Decree-Law No. 33 of 2021 for one of the five specified grounds. The employer must prove the ground existed.

Is there a cap on gratuity? Yes. Total gratuity cannot exceed two years of wages, regardless of how long the employee has worked.

Is UAE gratuity taxable? No. Gratuity payments are not subject to income tax and are received in full.

What if my employer refuses to pay? File a complaint with MoHRE online, via app, or in person. If mediation fails, the case goes to the Labour Court.

Key Takeaways

• Governed by Article 51 of Federal Decree-Law No. 33 of 2021 — the old 1980 law is repealed.
• Minimum one year of service required. 21 days basic wage per year for years 1–5; 30 days per year thereafter; capped at 2 years wages.
• Basic wage only — allowances, bonuses, and commissions are excluded.
• Forfeiture only applies on Article 44 grounds — employer bears the burden of proof.
• Tax-free. MoHRE complaint is the first step for any unpaid gratuity dispute.

References

1. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (Article 51) — UAE Legislation Portal
2. Ministry of Human Resources and Emiratisation — mohre.gov.ae
3. UAE Government Portal — End of service gratuity