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UAE End-of-Service Gratuity, Explained with a Worked Example

By Aurang Zeb Loona — Loona Automation

For most expatriate workers in the UAE, the gratuity — the end-of-service benefit paid when an employment contract ends — is the largest single payment of their working life abroad. It is also widely misunderstood: many people still calculate it with rules that were abolished in 2022, or on their full salary when the law says something narrower. This guide explains the current rule, works a complete example step by step, and warns about the errors that cost people money.

Scope and honesty note: this guide covers full-time foreign workers in the mainland private sector under Article 51 of the UAE Labour Law (Federal Decree-Law No. 33 of 2021). DIFC and ADGM free zones run their own schemes, domestic workers fall under a separate law, and UAE nationals are covered by the pension system instead. This is general information, not legal advice; for a dispute, MOHRE or a UAE labour lawyer is the right destination.

The Rule, in Plain Words

• One year minimum. You must complete at least one year of continuous service. Below one year, statutory gratuity is zero.
• Basic salary only. Gratuity is calculated on your basic salary — the figure named as basic in your contract. Housing, transport and other allowances never count, however large they are.
• Daily wage = monthly basic ÷ 30. The law works in days, and a month counts as 30 days for this purpose.
• 21 days per year for the first five years of service, then 30 days per year for every year after the fifth. Part-years count pro-rata, and days of unpaid absence are excluded from service.
• A cap of two years' wage. However long you served, the total cannot exceed 24 months of basic salary.
• Resignation does not reduce it. Since the current law took effect on 2 February 2022, leaving voluntarily earns the same gratuity as being let go. The old system — where the answer depended on "limited" versus "unlimited" contracts and resignation could cut the benefit — was abolished.
• Payment is due within 14 days of the contract ending (Article 53).

A Worked Example

Meet Sana, a teacher in Dubai whose contract shows a basic salary of AED 7,500 a month (her total package is higher, but only the basic counts). She leaves after 6 years and 6 months of continuous service.

1. Daily basic wage: 7,500 ÷ 30 = AED 250 per day.
2. First five years: 21 days × 250 × 5 = AED 26,250.
3. The remaining 1.5 years: 30 days × 250 × 1.5 = AED 11,250.
4. Total gratuity: 26,250 + 11,250 = AED 37,500.
5. Cap check: two years' basic = 24 × 7,500 = AED 180,000 — far above her total, so the cap does not bite.

Two contrasting cases sharpen the picture. A colleague who leaves after 11 months receives AED 0 — the one-year line is absolute. And a very long-serving employee, say 30 years, would earn 21 × 5 + 30 × 25 = 855 days of basic pay — 28.5 months' worth — but the cap trims the payment to exactly 24 months of basic salary.

Common Mistakes

• Using the full salary. If your package is AED 12,000 but your basic is AED 7,500, the law sees 7,500. Checking the basic figure in your contract — before you sign, ideally — is the single most valuable habit.
• Using an old-law calculator. Any tool that asks whether your contract is "limited or unlimited", or reduces gratuity because you resigned, is applying the pre-2022 law. Its answer is wrong under the current one.
• Dividing by 365. Some back-of-envelope calculations spread the salary over calendar days. The statutory method builds the daily wage from a 30-day month; the difference is real money on a long service.
• Forgetting unpaid leave. Days of absence without pay do not count as service, so a long unpaid break slightly reduces the total.
• Assuming the cap rarely matters. For careers of 25+ years it matters a great deal, as the example above shows.

Frequently Asked Questions

Does it matter whether I resign or my contract is terminated?

Under the current law, no — the calculation is the same either way, provided you completed one year. (Serious misconduct dismissals under the law's specific articles are a separate legal question; take advice if that is your situation.)

What is this "alternative savings scheme" I have heard about?

Alongside the classic gratuity, the UAE has introduced an optional savings scheme under which monthly contributions are invested in approved funds instead of a lump sum being calculated at the end. Employers may offer it and employees may join voluntarily; if you are enrolled, your benefit follows the scheme's rules rather than the Article 51 formula. Check your contract and HR records to see which system you are actually in.

My basic salary increased over the years. Which figure is used?

Your last basic salary — the one in force when the contract ends. That is another reason a late-career basic increase is worth more than it looks: it revalues every year of service behind it.

When should the money actually reach me?

End-of-service dues, including gratuity, must be settled within 14 days of the contract's end. If they are not, a complaint to MOHRE is the standard first step.

Run your own figures with the free Loona UAE Gratuity Calculator — it applies the current Article 51 rule, shows the year-by-year breakdown, and works entirely in your browser.