How to Calculate End of Service Benefits in UAE: Complete Formula Guide
Learn the complete UAE end of service calculation formula. Step-by-step guide with examples for limited/unlimited contracts and partial year calculations.
Key Takeaways
- End of service gratuity is calculated based on 21 days salary for first 5 years, then 30 days per year thereafter
- Gratuity is calculated on basic salary only, excluding allowances and bonuses
- Employees are entitled to gratuity after completing one year of continuous service
End of service calculation in UAE follows a specific formula: divide your basic salary by 30 to get daily wage, then multiply by 21 days for years 1-5, and 30 days for subsequent years. The calculation uses only basic salary, excluding allowances, and requires minimum one year of continuous service.Accurate end of service calculation protects your financial rights and prevents disputes with employers.
Understanding the precise formulas helps you verify correct payments and plan your career transitions effectively.What is End of Service Calculation in UAE?End of service calculation determines the gratuity amount employees receive when their employment ends in the UAE. According to Article 51 of Federal Decree Law No. 33 of 2021, this calculation serves as mandatory compensation for completed service
years.Essential Calculation Requirements:Minimum service period: One full year of continuous employmentSalary basis: Basic salary only (excluding all allowances)Payment timing: Within 14 days of contract terminationLegal protection: Cannot be waived or reduced below statutory minimumsThe calculation method varies depending on contract type (limited vs unlimited), termination reason (resignation vs
dismissal), and total service duration.What is the Basic End of Service Calculation Formula?The UAE end of service calculation follows a standardised mathematical approach that converts annual service into daily wage equivalents.Step 1: Calculate Daily Wage Daily Wage = Basic Salary ÷ 30 daysStep 2: Apply Service Duration MultipliersYears 1-5: Daily Wage × 21 days × Number of YearsYears 6+: Daily
Wage × 30 days × Number of YearsComplete Calculation Example: Employee with AED 9,000 basic salary, 7 years service:Daily wage: AED 9,000 ÷ 30 = AED 300First 5 years: AED 300 × 21 × 5 = AED 31,500Next 2 years: AED 300 × 30 × 2 = AED 18,000Total gratuity: AED 49,500How Do Limited vs Unlimited Contracts Affect Calculations?Contract type significantly impacts end of service calculation methods
and employee entitlements under UAE labour law.Limited Contract Calculations: Limited contract employees receive full calculated gratuity amounts regardless of termination reason, provided they complete minimum service requirements.Unlimited Contract Resignation Calculations:1-3 years service: One-third of calculated amount3-5 years service: Two-thirds of calculated amount5+ years service: Full calculated
amountUnlimited Contract Termination by Employer: Employees receive full calculated gratuity regardless of service duration, providing protection against arbitrary dismissal.This distinction makes understanding your contract type crucial for accurate benefit planning.What Salary Components Are Used in End of Service Calculation?UAE labour law specifies exact salary components for end of service calculation
to ensure consistency and prevent employer manipulation.Included in Calculations:Basic salary as stated in employment contractBasic salary increases during employment tenureExc...
About This Article
This article provides general information about UAE labour law and employment regulations. The information is based on Federal Decree-Law No. 33 of 2021 and subsequent amendments. For specific legal advice regarding your situation, please consult with a qualified legal professional or contact the Ministry of Human Resources and Emiratisation (MOHRE).