UAE end-of-service gratuity is one of the most important employee benefits — and calculating it correctly is critical for both employers and employees. Here is a complete UAE gratuity calculation guide covering all scenarios.
UAE Gratuity Formula (2022 Labour Law)
Applicable to employees on fixed-term contracts (all UAE employment contracts since 2022). Daily rate = Monthly basic salary × 12 / 365. Years 1–5: 21 days × daily rate × number of years. Years above 5: 30 days × daily rate × additional years. Maximum gratuity: 2 years’ total wage.
Gratuity Calculation Examples
Example 1: 3 years service, AED 6,000 basic salary. Daily rate = AED 6,000 × 12 / 365 = AED 197.26/day. Gratuity = 21 days × AED 197.26 × 3 = AED 12,427.40. Example 2: 7 years service, AED 10,000 basic salary. Daily rate = AED 10,000 × 12 / 365 = AED 328.77/day. Years 1–5 gratuity = 21 × AED 328.77 × 5 = AED 34,520.55. Years 6–7 gratuity = 30 × AED 328.77 × 2 = AED 19,726.03. Total = AED 34,520.55 + AED 19,726.03 = AED 54,246.58. Example 3: Less than 1 year service. No gratuity entitlement (must complete 1 full year to qualify). Example 4: Partial year above a milestone. Gratuity is pro-rated for partial years. If 5 years and 6 months: first 5 years calculated as above, 6 months pro-rated: 30 days × daily rate × (6/12) = 15 × daily rate.
Gratuity in DIFC and ADGM
DIFC uses DEWS (DIFC Employee Workplace Savings) instead of end-of-service gratuity: employer contributes 5.83% of monthly salary for the first 5 years of service and 8.33% for years above 5 into an individual employee savings account. ADGM: similar DEWS-style scheme. DIFC/ADGM employees may have larger retirement benefits than mainland UAE employees, depending on tenure and salary levels.