UAE Labour Law entitles employees to an end-of-service gratuity payment when they leave employment. Here is how to calculate it correctly under Federal Decree-Law No. 33 of 2021.
UAE Gratuity Formula
Gratuity is calculated based on the employee’s BASIC SALARY only (not total package including allowances). The formula depends on length of service:
For years 1–5: 21 days’ basic salary per year of service.
For years 5+: 30 days’ basic salary per year beyond 5 years.
Gratuity Calculation Example
An employee with a AED 15,000/month basic salary who worked for 7 years: First 5 years: 21 days × (15,000/30) × 5 = AED 52,500. Years 6–7 (2 more years): 30 days × (15,000/30) × 2 = AED 30,000. Total gratuity = AED 52,500 + AED 30,000 = AED 82,500.
Gratuity for Partial Years
If the employee has worked for 2 years and 6 months: Full years portion: 2 × 21 days × (monthly salary / 30). Partial year (6 months = 0.5 year): 0.5 × 21 days × (monthly salary / 30). Both components are payable.
Maximum Gratuity Cap
Total gratuity cannot exceed 2 years’ basic salary. If the calculated gratuity exceeds this cap, pay the capped amount.
DIFC DEWS (Alternative Gratuity Scheme)
DIFC companies must either comply with the DIFC Employee Workplace Savings (DEWS) scheme or apply for an exemption. DEWS replaces the end-of-service gratuity with a monthly contribution (5.83% of basic salary for years 1–5; 8.33% for years 5+) into a managed fund. DEWS contributions are portable — employees take their fund balance with them when they leave the UAE, unlike the lump-sum gratuity model.