End-of-service gratuity is one of the most valuable financial rewards an employee receives after completing their work tenure in the UAE. Whether you’re planning to resign, switch jobs, or simply calculating your future benefits, understanding how end-of-service gratuity is calculated gives you clarity and financial confidence. This detailed guide explains the UAE gratuity calculation step-by-step, along with eligibility, rules for unlimited and limited contracts, and deductions or situations where benefits may be reduced.
What Are End-of-Service Benefits?
End-of-service benefits are a mandatory financial payout given to employees working in the UAE after they complete at least one year of continuous service. It is provided as a token of appreciation and compensation for their service when employment ends due to resignation, termination, or contract expiry.
Who Is Eligible for End-of-Service Gratuity?
You are entitled to receive gratuity if:
- You have completed at least 1 year of continuous employment.
- You worked under a private sector, free zone, government, or semi-government company.
- Your resignation or termination occurred as per UAE labour law rules.
- You are working on full-time employment (temporary & freelance workers have different rules).
End-of-Service Gratuity Calculation Method
Gratuity is calculated based on basic salary only, not total salary including allowances.
Formula
- For the first 5 years of service → 21 days of basic salary per year
- After 5 years of service → 30 days of basic salary per year
Note: The total gratuity must not exceed two years of wage.
Calculation Table – Years of Service vs. Benefit
| Years of Service | Basis of Calculation | Gratuity Amount |
|---|---|---|
| 1 – 5 Years | 21 days of basic salary per year | (Basic Salary ÷ 30 × 21) × Years |
| 6th Year Onwards | 30 days of basic salary per year | (Basic Salary ÷ 30 × 30) × Years after Year 5 |
| Maximum Limit | Cannot exceed 2 years of wage | Based on law |
| Salary Considered | Basic salary only | No allowances included |
| Eligibility Time | Minimum 1 year | Gratuity starts after year 1 |
Example of UAE End-of-Service Calculation
Assume:
- Basic Salary: AED 5,000
- Total Service: 7 years
Step-by-step:
- First 5 years:
(5000 ÷ 30 × 21) × 5 = AED 17,500 - Remaining 2 years:
(5000 ÷ 30 × 30) × 2 = AED 10,000
Total Gratuity = 17,500 + 10,000 = AED 27,500
Deductions or Situations That Reduce Benefits
Gratuity may be reduced or withheld when:
- The employee is terminated for misconduct under Article 120.
- The employee uses forged documents or commits fraud.
- Work permit or official documents are violated intentionally.
However, resigning does not reduce gratuity under the updated UAE labour law.
Important Points Employees Should Remember
- Gratuity is based on last received basic salary.
- Company must clear payment within 14 days from termination date.
- End-of-service should be paid even during company liquidation.
- Employees cannot be forced to sign away their gratuity.
- Labour disputes can be filed through MOHRE / free zone authorities.
Overview Table
| Category | Details |
|---|---|
| Minimum eligibility | 1 year of continuous service |
| Basis of calculation | 21 days per year (first 5 years), 30 days (after) |
| Salary considered | Basic salary only |
| Maximum payout | 2 years of wage |
| Payment deadline | 14 days from last working day |
| Applies to | Private, free zone, semi-government, government sectors |
Documents Required to Claim Gratuity
- Passport copy
- Emirates ID
- Labour contract copy
- Last payslip
- Final settlement approval or resignation confirmation
How to Use UAE End-of-Service Benefits Calculator
To get your exact gratuity instantly, you need to enter:
- Basic monthly salary
- Last working day
- Joining date
- Type of employment contract
- Any unpaid leave (if applicable)
The calculator will automatically determine:
- Total gratuity amount
- Service years and months
- Breakdown of 21-day and 30-day benefits (if applicable)
Why Every Employee Should Calculate Gratuity Early
Understanding your gratuity helps in:
- Better financial planning
- Smoother job transitions
- Detecting miscalculations in settlement
- Ensuring legal compliance from employers
Many employees discover later that their gratuity was under-calculated simply because they didn’t verify it beforehand.
FAQs
Q1. Can an employer refuse gratuity?
No, gratuity is mandatory and cannot be waived unless misconduct under law is proven.
Q2. Are allowances included in gratuity calculation?
No, only basic salary is used to compute gratuity.
Q3. Is gratuity paid during resignation?
Yes, employees receive full gratuity even if they resign after completing one year.