What your gratuity is actually worth.
End-of-service pay under the 2021 labour law, worked out from your basic salary and your dates, with the reductions that no longer exist left out.
Fill in the panel and press Calculate my gratuity.
Paying it, not receiving it?
The figure above is a liability that builds from an employee’s first year onward, one month at a time. It does not appear on the day somebody resigns, it has been accruing quietly the whole time they worked for you.
On a 12,000 AED basic salary the accrual is roughly 700 AED a month for the first five years. Across eight staff that is about 67,000 AED a year leaving the business without ever appearing in a monthly report, unless someone provisions for it.
- Booked monthly, it is an ordinary staff cost and the accounts stay accurate under IFRS.
- Booked at the year end, the interim figures overstate profit all year, and the corporate tax position is built on that overstated profit.
- Booked at the leaving date, three departures in one quarter become a cash problem that had been visible for two years.
We carry the end-of-service provision per employee as part of monthly bookkeeping, so it is already in the accounts before anyone hands in notice. Ask us how it would look for your payroll, the first call is free.
How this is calculated
The formula
After one full year of service you earn 21 days of basic pay for each of the first five years and 30 days for every year after that. Part years count proportionally. The whole thing is capped at two years' pay, a limit that only bites after roughly 25 years of service. Article 51 of Federal Decree-Law No. 33 of 2021.
Below one year of service there is no entitlement at all. That is not a calculation that comes out at zero, it is a different situation: unused annual leave is still paid out.
Basic salary, and why yours may be low
Gratuity is calculated on basic salary alone. Housing, transport, phone allowances and bonuses are excluded by law. On the mainland there is no minimum share that the basic has to represent, which is why many contracts set it at 40 to 50 % of the package. Nothing about that is unlawful, and it quietly halves the end-of-service pay.
In the DIFC the basic must be at least 50 % of the total. If you are negotiating a mainland contract, the split between basic and allowances is worth as much attention as the headline number.
Three things the internet still gets wrong
- Resigning does not reduce your gratuity. The old rules cutting it to one third or two thirds were abolished on 2 February 2022. Hundreds of pages, including law firm articles, still show them.
- Dismissal under Article 44 no longer forfeits it. That was the position under Article 120 of the previous law, and it did not survive the reform.
- Limited and unlimited contracts no longer exist. All contracts are now fixed-term, with a maximum of three years, so any calculator that asks which type you have is working from the old law.
The daily rate the law does not prescribe
To turn a monthly basic into a daily figure, the market divides by 30. Some employers multiply by twelve and divide by 365 instead. The law does not say which, and the difference is about 1.4 %. This tool uses the division by 30 and shows the other result alongside it, so you can check what your contract assumes.
Free zones, DIFC and ADGM
Companies in ordinary free zones follow the federal law, so the calculation above applies unchanged. The DIFC is different: since February 2020 the employer pays a monthly contribution into the DEWS scheme instead of a lump sum, at 5.83 % of basic for the first five years and 8.33 % after that. What you eventually receive is the accumulated contributions plus or minus investment returns, so a lump-sum figure is only a comparison. ADGM uses the same formula as the mainland but settles within 21 days and pays nothing if the contract ends during probation.
When it has to be paid, and the leave trap
Everything is due within 14 days of the end of the contract, under Article 53. Unused annual leave is paid alongside it, and here is the trap worth knowing: leave you take is paid at your full salary, leave you cash out is paid at basic only.
What this tool does not do
- It does not calculate notice pay, unused leave, or compensation for arbitrary dismissal. Notice is paid on the full salary, not the basic, which is the opposite of the gratuity rule.
- It assumes an ordinary end of contract. Absconding cases, unpaid disputes and terminations during probation follow separate rules.
- It cannot tell you what your employer will actually pay. If the figure it produces and the figure on your final settlement differ, the gap is usually in the definition of basic salary or in unpaid leave days.
Legal note. The information and calculators provided here are for general information purposes only and do not replace individual tax or legal advice. Results are based on the data you enter and on the statutory rules applied at the time of calculation.
Legal position as at 15 August 2026. Sources: Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations , Cabinet Resolution No. 1 of 2022 implementing the labour law .
Common questions
- How is gratuity calculated in the UAE?
- Gratuity is based on basic salary only, not the total package. For each of the first five years of service you accrue 21 days of basic pay, and 30 days for every year after that. The daily rate is your monthly basic salary divided by 30. Total gratuity is capped at two years of basic pay, and no gratuity is due below one year of service.
- Does gratuity include allowances such as housing and transport?
- No. Housing, transport, utilities, bonuses, commission, overtime and any benefit in kind are excluded. Only the basic wage stated in the employment contract counts. Because UAE packages usually split into basic plus allowances, that split decides the size of the final payment.
- Do I still get gratuity if I resign?
- Yes. Under Federal Decree-Law No. 33 of 2021 an employee who resigns after at least one year of continuous service receives the same calculation as one whose contract is ended by the employer. The old reduction for resigning on a limited contract no longer applies. The entitlement is only lost on summary dismissal for one of the reasons listed in the law.
- How is end of service pay calculated for a partial year?
- Years beyond the first completed year are pro-rated by days actually served. Periods of unpaid leave do not count towards service and are deducted from the total before the calculation. If payroll does not track unpaid leave accurately, the figure will be wrong.
- Do DIFC and ADGM companies pay gratuity the same way?
- No. Since February 2020 the DIFC has replaced lump sum gratuity with DEWS, a mandatory workplace savings scheme funded by monthly employer contributions, and the ADGM operates a comparable scheme. Service before that date is still settled as legacy gratuity. Mainland companies and all other free zones follow the standard rules used by this calculator.
- Should gratuity be accrued monthly in the accounts?
- Yes. The liability builds from the employee’s first year onward, so under IFRS it belongs in the accounts as a monthly provision rather than as a one-off cost in the month someone leaves. That keeps the financial statements accurate and avoids an unplanned cash outflow when several long-serving staff leave at once.
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