Last updated: September 2026
UAE end of service gratuity is calculated on the employee’s last basic salary: 21 days of basic wage for each of the first five years of service, then 30 days per year after that, capped at two years’ total wages. The rule sits in Article 51 of Federal Decree-Law No. 33 of 2021, covers foreign employees (UAE and GCC nationals fall under the GPSSA pension system instead), and applies the same way whether the employee resigns or is terminated.
Three things matter more than the headline formula. First, gratuity runs on basic salary only, not the gross package, which is where most disputes start. Second, DIFC replaced the lump-sum model entirely with a funded monthly scheme called DEWS. Third, a voluntary mainland alternative to lump-sum gratuity already exists, and ADGM has its own rules for the daily rate.
How Is UAE End of Service Gratuity Calculated?
The formula has two tiers, and almost every calculation error traces back to mixing them up. For each of the first five years of service, an employee earns 21 days of basic wage. From year six onward, every additional year earns 30 days of basic wage instead. The two figures are added together, not blended into a single rate across the full tenure.
Article 51(2) of Federal Decree-Law No. 33 of 2021 sets this out directly: a foreign full-time worker who has completed one or more years of continuous service is entitled to a wage of 21 days for each year of the first five years, and a wage of 30 days for each year in excess of that. The daily rate is the last basic monthly wage divided by 30.
| Years of service | Gratuity in days of basic wage | On AED 15,000 basic salary |
|---|---|---|
| 1 year | 21 days | AED 10,500 |
| 3 years | 63 days | AED 31,500 |
| 5 years | 105 days | AED 52,500 |
| 7 years | 165 days | AED 82,500 |
| 10 years | 255 days | AED 127,500 |
For a founder budgeting UAE headcount costs, this table is the number that matters more than the corporate tax rate in year one. Every employee on the books after twelve months carries an accruing gratuity liability, and it compounds faster once someone passes the five-year mark.
What Counts as Basic Salary for UAE Gratuity Purposes?
UAE end of service gratuity is calculated on the last basic wage only, and that figure typically sits well below an employee’s full monthly package. Article 51(5) of Federal Decree-Law No. 33 of 2021 is explicit that the calculation runs on the basic wage received by the worker, not the total compensation.
The following are excluded from the gratuity base under standard UAE practice, even when paid every month without exception:
- Housing allowance
- Transport allowance
- Schooling or education allowance
- Telephone or communication allowance
- Bonuses and commission payments
- Overtime pay and other variable benefits
This distinction has real financial consequences. An employee on an AED 20,000 monthly package with a basic wage of AED 10,000 accrues gratuity on AED 10,000, not AED 20,000, cutting the liability in half. The split should be written into the employment contract from day one, because it is the contract and the payslip that fix the basic wage.
Do You Still Get Gratuity in the UAE If You Resign?
Yes. Under Federal Decree-Law No. 33 of 2021, an employee who resigns after completing one or more years of continuous service receives the identical gratuity to one whose contract is terminated by the employer. The historic penalty for resigning early no longer applies.
Before this law took effect on 2 February 2022, Federal Law No. 8 of 1980 treated the two contract types differently. On an unlimited contract, an employee who resigned after one to three years received one-third of the gratuity, and two-thirds after three to five years. On a limited contract, an employee who resigned before completing five years received no gratuity at all. Federal Decree-Law No. 33 of 2021 removed both reductions and moved every private-sector employment contract onto a fixed-term basis.
Dismissal does not change the number either. The repealed 1980 law allowed gratuity to be forfeited on certain dismissals for misconduct. Article 51 of the current law grants gratuity on completing one year of continuous service and does not make it conditional on the reason the contract ended. Even the list of disciplinary sanctions in the law describes dismissal “while preserving the worker’s right to end-of-service gratuity.” What an employer can do is deduct amounts lawfully owed, covered below.
How Is Gratuity Calculated for a Partial Year of Service?
Any period beyond a completed year is paid proportionately, using the same 21 or 30 day rate that applies to the year in progress. An employee who leaves at five years and four months receives the full five-year gratuity plus a pro-rated amount for the additional four months.
The proration mechanics run in a fixed sequence:
- Confirm the last basic monthly wage from the payslip or contract, not the offer letter.
- Divide the basic wage by 30 to get the daily rate.
- Count complete years of continuous service, excluding any unpaid leave days under Article 51(4).
- Apply 21 days per complete year for years one through five.
- Apply 30 days per complete year for any year beyond five.
- For the final partial year, multiply the daily rate by the applicable 21 or 30 days, then by the number of days worked in that final period, and divide by 365.
Part-time and job-sharing employees follow a different route entirely. Article 30 of Cabinet Resolution No. 1 of 2022, the executive regulation to the labour law, sets their gratuity as a percentage: contracted annual working hours divided by full-time annual hours, multiplied by 100, applied to the equivalent full-time entitlement.
Is There a Maximum Gratuity Amount Under UAE Law?
Yes. Article 51(6) of Federal Decree-Law No. 33 of 2021 caps total end of service gratuity at two years’ wage, regardless of how long the employee has worked. Two years of basic wage is roughly 720 days at the 30-day daily rate.
The cap rarely binds. Someone who serves 20 years accrues 555 days under the formula: 105 days for the first five years plus 450 days for the next fifteen. That is still under the cap. The formula only reaches two years’ wage after roughly 25 years of continuous service, so for a typical three to five year hire the cap is irrelevant.
Employers may also deduct amounts owed by the employee from the final gratuity figure. Article 51(7) permits deductions for sums due by law or by judgment, subject to the conditions in the executive regulation.
How Does DIFC Calculate Gratuity Differently From Mainland UAE?
DIFC does not use the lump-sum formula at all. Since 1 February 2020, the DIFC Employee Workplace Savings plan, known as DEWS, has been mandatory for private-sector DIFC employers, replacing the traditional end of service gratuity with a funded, monthly-contribution scheme instead.
Under DEWS, employers contribute 5.83 percent of an employee’s basic salary per month for the first five years of service, then 8.33 percent per month from year six onward. These percentages mirror the mainland day-count formula in substance, but the money is paid monthly into a segregated trust account that the employee owns immediately, rather than accruing as an unfunded liability on the employer’s balance sheet.
| Feature | Mainland UAE | DIFC |
|---|---|---|
| Legal basis | Federal Decree-Law No. 33 of 2021, Article 51 | DIFC Employment Law, DEWS regulations |
| Structure | Lump-sum, paid at termination | Funded monthly contributions to a trust |
| Contribution rate | 21/30 day formula | 5.83% (years 1-5), 8.33% (year 6+) |
| Who holds the money | Employer, until payout | Employee, from day one |
| Cap | Two years’ basic wage | No equivalent cap |
DIFC employers can alternatively use a Qualifying Alternative Scheme certified by the DIFC Registrar in place of DEWS, but the default obligation is DEWS.
Does ADGM Calculate Gratuity the Same Way as Mainland UAE?
Largely yes, with one technical difference that trips up payroll teams moving between jurisdictions. Section 61 of the ADGM Employment Regulations 2024 sets the same tiered formula: 21 days’ basic wage for each of the first five years and 30 days for each additional year, for any employee who completes one year or more of continuous service, regardless of the reason for termination.
The difference is the daily rate. Mainland UAE divides the monthly basic wage by 30. Section 61(3) of the ADGM regulations divides basic wage by 365. The ADGM rules also require basic wage to be at least 50 percent of total wages, count the full period across successive fixed-term contracts, and pro-rate a part year. Groups running payroll across an ADGM entity and a mainland or DIFC entity need separate calculation logic, not a single shared spreadsheet formula.
Under section 61(5), an ADGM employer may offer employees, in writing, a pension or savings scheme as an alternative to the gratuity. The employee confirms the choice in writing, and choosing the scheme replaces the gratuity unless the employer agrees otherwise.
What Is the UAE Alternative End-of-Service Benefits Scheme?
Cabinet Resolution No. 96 of 2023 introduced a voluntary, funded alternative to the traditional mainland gratuity model. Instead of an unfunded lump-sum liability sitting on the employer’s books until termination, participating employers make monthly contributions into regulated investment funds at the same 5.83 percent and 8.33 percent rates used in DIFC.
The scheme does not apply automatically. An employer has to opt in.
Employees can add voluntary contributions of up to 25 percent of annual salary on top of the employer’s mandatory share. The key structural difference from DIFC’s DEWS is withdrawal timing: employer contributions under the mainland Alternative Scheme are only accessible at the end of service, while an employee’s own voluntary contributions can be withdrawn during active employment. The scheme does not apply to DIFC or ADGM entities, which sit under their own regimes entirely.
FAQ
1. 0 Is UAE gratuity calculated on basic salary or gross salary?
Basic salary only, not gross salary. Article 51(5) of Federal Decree-Law No. 33 of 2021 bases the calculation on the employee’s last basic wage, excluding housing, transport, schooling and other allowances. An employee earning AED 20,000 gross with a basic wage of AED 10,000 accrues gratuity on the AED 10,000 figure, not the full package. The split should be documented in the employment contract from the outset.
2. 0 Do you still get gratuity in the UAE if you resign?
Yes. Under the current law, resignation and termination produce the same gratuity after one year of continuous service. Federal Decree-Law No. 33 of 2021, in force since 2 February 2022, abolished the one-third and two-thirds reductions that applied to resignations on unlimited contracts, and the rule that gave no gratuity to employees who resigned a limited contract before five years. Article 51 does not make gratuity conditional on the reason for leaving.
3. 0 How is DIFC gratuity different from mainland UAE gratuity?
DIFC does not use a lump-sum gratuity model at all. Since 1 February 2020, DIFC private-sector employers must contribute to DEWS, the DIFC Employee Workplace Savings plan, a funded scheme paying 5.83 percent of basic salary monthly for the first five years and 8.33 percent from year six onward into a trust the employee owns immediately. Mainland UAE instead accrues an unfunded lump-sum liability under Federal Decree-Law No. 33 of 2021, paid out only at termination. DIFC employers may alternatively use a Qualifying Alternative Scheme certified by the DIFC Registrar instead of DEWS.
4. 0 Is there a maximum gratuity amount under UAE law?
Yes. The total cannot exceed two years’ wage under Article 51(6) of Federal Decree-Law No. 33 of 2021. In practice the cap rarely binds: 20 years of service accrues 555 days of basic wage, still under two years, and the formula only reaches the cap after roughly 25 years. Employers may deduct amounts lawfully owed from the final payment under Article 51(7), subject to the conditions in the executive regulation.
5. 0 Does ADGM calculate gratuity the same way as UAE mainland?
Mostly, but not identically. Section 61 of the ADGM Employment Regulations 2024 applies the same 21 days and 30 days tiered formula as mainland federal law. The difference is the daily rate: ADGM divides basic wage by 365, while mainland UAE divides the monthly basic wage by 30, which produces a different daily figure on an identical salary. ADGM also requires basic wage to be at least 50 percent of total wages, and lets employers offer a pension or savings scheme in writing as an alternative to the gratuity.
This article is for informational purposes and does not constitute tax or legal advice. GCG Structuring advises on UAE corporate structuring, tax residency, and free zone setup.
