Ask Gulf News: Terminated or resigned from your job? How gratuity is calculated in the UAE
How your basic salary and years of service determines your end-of-service benefit
Dubai: When leaving a job in the UAE, one of the key things to understand is your gratuity, or end-of-service benefit. This lump-sum payment, mandated by UAE Labour Law, rewards employees for their service and is calculated based on your basic salary and length of employment.
Gratuity in the UAE is an end-of-service benefit paid as a lump sum to employees who have completed at least one year of service.
Under UAE Labour Law, the rate is 21 days of basic pay for each of the first five years and 30 days of pay for every year thereafter. However, the total gratuity cannot exceed two years’ worth of salary.
What determines your gratuity in the UAE?
Your gratuity is calculated based on your basic salary, which is only one part of your overall pay package. Many employment contracts in the UAE also include allowances, which are not counted in the gratuity calculation.
Basic salary: The fixed amount specified in your employment contract.
Allowances: Additional payments such as housing, transport, sales commission, or cost-of-living support.
Gross salary (total wage): The sum of your basic salary and all allowances.
Only the basic salary is used when calculating your end-of-service benefit.
Gratuity rules under UAE Labour Law
According to Article 51 of the UAE Labour Law, full-time expatriate employees in the private sector are entitled to gratuity payments under the following conditions:
Employees who have completed at least one year of continuous service are eligible for gratuity upon termination.
Unpaid leave days are not included when calculating total service time.
Employees are also entitled to gratuity for partial years, calculated proportionally to their time served, as long as they have completed one full year.
The gratuity is based solely on the last basic salary, excluding allowances such as housing, transportation, utilities, or furniture.
Employers are required to settle all dues, including unpaid wages and gratuity, within 14 days after the employment contract ends.
Employers have the right to deduct any amounts owed by the employee from the gratuity payment.
How is gratuity calculated in the UAE?
There are clear rules on how gratuity is computed:
Less than one year of service: No gratuity is payable.
Between one and five years: 21 days of basic salary for each year of service.
More than five years: 21 days of basic salary for each of the first five years, plus 30 days of basic salary for every year after that.
Maximum limit: The gratuity cannot exceed two years’ total salary.
If you want to estimate your end-of-service payout, you can use the Gulf News gratuity calculator for an instant breakdown.
Gratuity is a key part of every employee’s financial rights in the UAE. Understanding how it’s calculated ensures you know exactly what you’re entitled to when your employment ends.
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