UAE Labour Law End of Service Explained

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

IntroductionEnd of service gratuity is a fundamental right for employees working in the UAE’s private sector. This benefit, codified in the UAE Labour Law, forms a key part of an employee’s final settlement upon leaving a company. The objective of this article is to provide a thorough, up-to-date guide to end of service gratuity, including eligibility, calculation methods, legal changes, and the

new voluntary savings scheme. This reference aims to equip employees, HR professionals, and employers with a clear understanding of the law and practical steps required to ensure compliance and protect worker rights.Legal Foundation of GratuityThe framework for end of service gratuity is set out in Federal Decree-Law No. 33 of 2021 and its subsequent amendments. The legislation defines eligibility,

calculation formulas, maximum limits, and outlines the situations in which gratuity may be forfeited. These rules standardise end of service benefits across the UAE, replacing earlier fragmented and contract-dependent provisions with a unified system. The law is designed to promote fair treatment for employees while providing employers with clear guidelines and obligations.What is End of Service Gratuity?End

of service gratuity is a statutory payment made by the employer to the employee upon the termination of employment, provided the employee has completed at least one year of continuous service. This benefit serves as a recognition of an employee’s service and loyalty, providing financial support as they transition out of their role.Gratuity is not a discretionary reward; it is a legally mandated

component of employment, forming an essential part of the UAE’s labour relations framework. For employees, understanding the rules around gratuity ensures their entitlements are fully protected, while for employers, proper implementation helps maintain compliance and avoid disputes.Eligibility RequirementsEmployees are eligible for gratuity if the following conditions are met:Completion of at least

one continuous year of service with the same employer.Employment within the private sector, subject to UAE Labour Law provisions.Termination of employment due to resignation, completion of contract, or lawful dismissal (excluding cases involving gross misconduct or breach of contract).Gratuity is not limited by nationality, profession, or contract type. The law applies equally to all qualifying employees,

including those working under full-time, part-time, or flexible arrangements.Calculation of End of Service GratuityBasis for CalculationThe calculation of end of service gratuity is based on the employee’s last drawn basic salary, explicitly excluding allowances such as housing, transportation, utilities, or other bonuses. Only the amount stated as “basic salary” in the employment contract is

used in all relevant formulas.Standard Calculation FormulaThe law stipulates a two-tier structure for gratuity accrual:For employees with service up to five years:Entitlement is 21 d...

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).