UAE employers must pay end-of-service gratuity to employees when they leave. Here is a complete guide to UAE gratuity calculation under the 2022 Labour Law.
UAE Gratuity Eligibility
All UAE private sector employees are entitled to end-of-service gratuity IF: they have completed at least 1 year of continuous employment (employees terminated or resigning before 1 full year are NOT entitled to gratuity), and their employment is covered by UAE Labour Law (Federal Decree-Law No. 33 of 2021). Note: DIFC and ADGM employees have their own end-of-service schemes (the DIFC Employee Workplace Savings scheme and the ADGM equivalent). The following discussion covers mainland and free zone employees under federal Labour Law.
UAE Gratuity Calculation Formula
Based on basic salary ONLY (not total salary including allowances): First 5 years of service: 21 days of basic salary per year of service. Formula: (Basic Monthly Salary / 30) x 21 x Number of Years in the first 5 years. Beyond 5 years of service: 30 days of basic salary per year for each year beyond the 5th. Formula: (Basic Monthly Salary / 30) x 30 x Number of Years beyond 5. Maximum gratuity: capped at 2 years total salary (basic salary calculation).
UAE Gratuity Calculation Example
Example: Employee with AED 10,000 basic monthly salary, 7 years of service. Years 1-5: (10,000/30) x 21 x 5 = AED 333.33 x 21 x 5 = AED 35,000. Years 6-7: (10,000/30) x 30 x 2 = AED 333.33 x 30 x 2 = AED 20,000. Total gratuity: AED 35,000 + AED 20,000 = AED 55,000. Reduction for resignation: Under the 2022 Labour Law, there is no longer a reduction in gratuity for employees who resign voluntarily. The previous rule (reducing gratuity to 1/3 or 2/3 for employees who resigned in their first 1-5 years) was abolished.