What is UAE End of Service Gratuity and How is it Calculated?
Learn how UAE end of service gratuity is calculated. Understand the 21/30 day formula, basic salary requirements, and your legal entitlements under UAE labour law.
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
UAE end of service gratuity is a mandatory payment employers must make to employees who complete at least one year of continuous service. The calculation is based on your basic salary: 21 days' pay for each of the first five years, and 30 days' pay for each subsequent year of service.Understanding your gratuity entitlement is crucial for financial planning in the UAE. This legal benefit provides financial
security when employment ends and forms a significant part of your total compensation package throughout your career.What is End of Service Gratuity Under UAE Labour Law?End of service gratuity, also known as end-of-service benefits, is a legally mandated payment that serves as a form of severance compensation for employees. According to Article 51 of Federal Decree Law No. 33 of 2021, this benefit
recognizes your years of service and provides financial support during career transitions.Key Legal Requirements:Available to all employees after completing one full year of continuous serviceCalculated exclusively on your basic salary (excluding allowances)Paid regardless of termination reason (resignation or dismissal)Protected by UAE labour law as an absolute employee rightThe gratuity system reflects
the UAE's commitment to worker welfare and provides expatriate employees with financial security in a country where most workers eventually return to their home countries.How is UAE End of Service Gratuity Calculated?The calculation follows a two-tier structure that rewards longer service periods with increased daily allowances.Standard Calculation Formula:Years 1-5 of Service:21 days' basic salary
for each completed yearYears 6 and Beyond:30 days' basic salary for each completed yearPartial Year Calculation: For incomplete years of service, gratuity is calculated proportionally based on months worked, provided you've completed at least one full year.Example Calculation: An employee with AED 8,000 basic salary working for 7 years:First 5 years: 5 × 21 days = 105 daysNext 2 years: 2 × 30 days
= 60 daysTotal: 165 days × (AED 8,000 ÷ 30) = AED 44,000What Salary Component is Used for Gratuity Calculations?UAE labour law specifies that gratuity calculations must use only the basic salary component, excluding all allowances and additional benefits.Included in Calculations:Basic salary as stated in employment contractAny basic salary increases during employmentExcluded from Calculations:Housing
allowanceTransportation allowanceCommission payments (unless averaged per specific rules)Overtime paymentsAnnual bonusesOther discretionary paymentsThis distinction makes understanding your salary structure crucial when reviewing employment contracts, as a higher basic salary percentage directly increases your gratuity entitlement.How Do Commission Workers Calculate Gratuity?Employees working on commission-based
structures follow special calculation rules under UAE labour law to ensure fair compensation.Commission Calculation Method: According to Article 29 of Labour...
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).