UAE End-of-Service Gratuity Calculator (Updated 2025)

Gratuity, also known as End-of-Service Benefit (EOSB), is a monetary payment made by an employer to an employee upon the termination of their employment contract in the UAE, provided certain conditions regarding the length of service are met. It is governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (the New UAE Labour Law) and its Executive Regulations.

To be eligible for gratuity in the UAE, an employee must have completed at least one year of continuous service with the employer. If service is less than one year, no gratuity is due.

Under the New UAE Labour Law (Federal Decree-Law No. 33 of 2021, effective Feb 2, 2022), the calculation of gratuity is streamlined. The distinction between limited and unlimited contracts is largely removed, and the calculation is based on the employee's last basic salary (excluding allowances) and years of service.

• Service from 1 to less than 5 years: Entitled to 21 days' basic salary for each year of service.
• Service of 5 years or more: Entitled to 21 days' basic salary for the first five years, and 30 days' basic salary for each additional year of service.

The total end-of-service gratuity should not exceed two years' basic salary.

If an employee has completed 2 years of service and their last basic salary was AED 5,000:

• Daily basic salary = AED 5,000 / 30 = AED 166.67 (assuming 30 days in a month for calculation)
• Gratuity per year = 21 days × AED 166.67 = AED 3,500.07
• Total Gratuity for 2 years = AED 3,500.07 × 2 = AED 7,000.14

(Note: Calculation is based on the average number of days in a month (30 days). The law specifies 21 days basic salary for each year, not for 21 working days).

If an employee has completed 5 years of service and their last basic salary was AED 5,000:

• Daily basic salary = AED 5,000 / 30 = AED 166.67
• Gratuity for 5 years = (21 days × AED 166.67) × 5 years = AED 3,500.07 × 5 = AED 17,500.35

If an employee completes 6 years of service with the same basic salary:

• Gratuity for first 5 years = AED 17,500.35
• Gratuity for 6th year (additional year) = 30 days × AED 166.67 = AED 5,000.1
• Total Gratuity for 6 years = AED 17,500.35 + AED 5,000.1 = AED 22,500.45

(Note: The maximum gratuity payout cannot exceed two years' basic salary.)

For gratuity calculation in the UAE, "last drawn salary" refers to the employee's basic salary at the time of termination of employment. It explicitly excludes allowances such as housing, transport, utilities, overtime pay, and other benefits in kind.

Yes, the notice period itself is part of the continuous service period for calculating gratuity, provided the employee works through it until the last day of employment. Gratuity is calculated based on the total completed service period up to the last working day.

Under the New UAE Labour Law, whether an employee resigns or is terminated (unless for gross misconduct), the gratuity calculation remains the same based on the length of service. The previous reductions for resignation on unlimited contracts are no longer applicable for contracts converted or newly issued under the new law.

No, gratuity is not taxable in the UAE. The UAE does not levy income tax on individuals, which includes end-of-service benefits like gratuity.

Your employer is responsible for calculating and paying your gratuity. You can ask your HR department for a breakdown. If there's a dispute, you can approach the Ministry of Human Resources and Emiratisation (MoHRE) via their app or website for assistance. There are also online gratuity calculators available from various legal firms or government entities for estimation purposes.

To claim it, ensure you have served your notice period (if applicable) and completed all handover formalities. The employer is legally required to pay all end-of-service benefits within 14 days of the last working day.

Yes, the Federal Decree-Law No. 33 of 2021 (New UAE Labour Law) generally applies to all establishments, companies, and employers in the UAE, including most free zones. However, certain financial free zones like DIFC (Dubai International Financial Centre) and ADGM (Abu Dhabi Global Market) have their own separate employment laws, which include gratuity provisions, though often similar in principle or offering more beneficial terms. For other free zones, the federal law usually applies unless specific free zone regulations provide otherwise.

Prior to the New UAE Labour Law (effective Feb 2, 2022), the type of contract (limited or unlimited) significantly impacted gratuity calculation, especially in cases of resignation. This distinction has largely been removed by the new law, and all new contracts are generally treated as 'fixed-term' up to 3 years, renewable.

For contracts that originated under the old law and were *not* converted to the new fixed-term standard, the old rules might still apply until they expire or are renewed/converted. However, for most current employees under contracts issued/converted after Feb 2, 2022, the streamlined rules explained above apply.

While the concept of end-of-service benefits or gratuity exists in many countries (like Qatar, Oman, Saudi Arabia, India, Philippines), the specific eligibility criteria, calculation methods, and tax implications vary significantly based on their respective labour laws. This FAQ focuses primarily on UAE gratuity law. For other countries, it is essential to consult their local labour regulations.

The term "gratuity" can also refer to a tip or service charge, commonly found on restaurant bills or pre-charged on cruise ship bookings (like MSC or Royal Caribbean). This type of gratuity is a payment to service staff for good service, separate from the end-of-service employee benefit discussed in the context of labour law.