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UAE Free Zone Gratuity Calculator Guide 2026 — End-of-Service Benefits Explained
UAE employees are entitled to end-of-service gratuity when they leave. Here is the 2026 guide for UAE free zone company employers on how gratuity is calculated.
In this guide:
UAE Gratuity — What Is It?
- End-of-service benefit: UAE Labour Law entitles employees to gratuity pay when employment ends
- Who pays: The employer; this is a mandatory benefit; not optional
- Applies to: All UAE private sector employees including free zone company staff
Gratuity Calculation Formula
- First 5 years: 21 calendar days basic salary per year of service
- After 5 years: 30 calendar days basic salary per year above 5 years
- Maximum: Gratuity capped at 2 years total basic salary (per UAE Labour Law)
Gratuity Examples
- Employee with 3 years; basic salary AED 10,000/month: 3 x 21 days = 63 days; daily rate: AED 10,000 / 30 = AED 333; Gratuity: 63 x AED 333 = AED 21,000
- Employee with 7 years; basic salary AED 15,000/month: (5 x 21) + (2 x 30) = 105 + 60 = 165 days; Daily rate: AED 500; Gratuity: 165 x AED 500 = AED 82,500
When Gratuity Is Reduced
- Employee resignation (less than 5 years): Gratuity may be reduced if employee resigns (vs. terminated); check current Labour Law provisions as 2021 reforms changed rules
- Misconduct termination: Gratuity may be forfeited in proven gross misconduct cases
Budget for Gratuity
- Accrue monthly: Budget approximately 1.75% of monthly basic salary per employee per month as gratuity accrual
- Provision: Include gratuity provision in your company financial statements as a liability
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