UAE Gratuity Calculation 2025: Rules, Formulas & Examples.
Gratuity is an important payment that employees in the UAE receive when their job ends. It’s a way for employers to say thank you for the work done. The UAE Labour Law makes it a must for companies to pay this amount. But how do you calculate it? This article explains the rules, formulas, and examples for gratuity in the UAE. We’ll also talk about how a gratuity calculator uae can make things easier.
What is End of Service Gratuity?
End of service gratuity is money paid to employees when they leave their job. It’s based on their basic salary (not including allowances or bonuses) and how many years they worked. The maximum gratuity you can get is two years’ basic salary. Knowing how it works helps you understand what you’re entitled to.
How Do I Calculate Gratuity in the UAE?
Gratuity depends on your contract type (limited or unlimited), who ends the job (you or the employer), and how long you’ve worked40. Here’s how it works:
Rules for Limited Contracts
- If you finish the contract: You get full gratuity.
- If you resign before the contract ends:
- Less than 5 years: No gratuity.
- 5 years or more: Full gratuity.
Rules for Unlimited Contracts
- If the employer ends the job: You get full gratuity (after 1 year of work).
- If you resign:
- Less than 1 year: No gratuity.
- 1 to 5 years: Reduced gratuity (1/3 for 1-3 years, 2/3 for 3-5 years).
- More than 5 years: Full gratuity.
The Formula
- Calculate your daily basic salary: Monthly basic salary ÷ 30.
- For the first 5 years: 21 days’ basic salary × years worked.
- For years after 5: 30 days’ basic salary × extra years.
- Total gratuity can’t be more than 2 years’ basic salary.
If you resign from an unlimited contract with less than 5 years, the amount is reduced (1/3 or 2/3, as explained).
What’s the New Rule for Gratuity in UAE?
As of 2025, there are no major new rules for gratuity in the UAE Labour Law. The calculation still follows the same formula: 21 days’ salary per year for the first 5 years and 30 days per year after that, with a cap at two years’ salary. However, always check the latest updates from the UAE government, as small changes might happen.
How to Calculate Final Settlement in UAE?
Your final settlement includes gratuity, unpaid salary, leave pay, and other dues. To calculate it:
- Add your gratuity (using the formula above).
- Include any unpaid wages or overtime.
- Add payment for unused annual leave.
For more on this, check our guide on leave salary and final settlement.
What’s the Minimum Gratuity Amount for 5 Years?
For 5 years of service, the minimum gratuity depends on your basic salary. Let’s say your basic salary is AED 5,000:
- Daily basic salary: 5,000 ÷ 30 = AED 166.67.
- Gratuity: 5 × 21 × 166.67 = AED 17,500.35.
This is the full amount if you finish a limited contract or the employer ends an unlimited contract. If you resign from an unlimited contract, it’s reduced to 2/3 (about AED 11,666.90).
How to Compute End of Service?
End of service is the same as gratuity. Use these steps:
- Find your daily basic salary (basic salary ÷ 30).
- Multiply by 21 for each year up to 5 years.
- Multiply by 30 for each year after 5.
- Apply reductions if you resign from an unlimited contract with less than 5 years.
A gratuity calculator uae can do this quickly for you.
Is Notice Period Considered for Gratuity in UAE?
Yes, the notice period is usually included in your total service time for gratuity. For example, if you worked 4 years and serve a 2-month notice, your gratuity is based on 4 years and 2 months. However, if you’re fired for serious misconduct, you might lose your gratuity.
Do You Get Gratuity If You Resign?
Yes, but it depends:
- Limited contract: No gratuity if you resign before the contract ends with less than 5 years. Full gratuity if 5 years or more.
- Unlimited contract: No gratuity if less than 1 year. Reduced gratuity for 1-5 years. Full gratuity if more than 5 years.
What’s the Maximum Gratuity Limit in UAE?
The maximum gratuity is two years’ basic salary. For example, if your basic salary is AED 10,000 per month, the limit is 24 × 10,000 = AED 240,000. Even if you work 10 years, your gratuity won’t go above this.
When Should Gratuity Be Paid in UAE?
Employers must pay gratuity within 14 days after your job ends. If they don’t, you can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).
Examples of Gratuity Calculation
Example 1: Unlimited Contract, Employer Ends, 3 Years
- Basic salary: AED 10,000.
- Daily salary: 10,000 ÷ 30 = AED 333.33.
- Gratuity: 3 × 21 × 333.33 = AED 20,999.79.
Example 2: Unlimited Contract, You Resign, 2 Years
- Basic salary: AED 10,000.
- Full gratuity: 2 × 21 × 333.33 = AED 13,999.86.
- Reduced to 1/3 (1-3 years): 13,999.86 ÷ 3 = AED 4,666.62.
Example 3: Limited Contract, Completed, 4 Years
- Basic salary: AED 10,000.
- Gratuity: 4 × 21 × 333.33 = AED 27,999.72.
Using a gratuity calculator uae helps avoid mistakes in these calculations.
Why Use a Gratuity Calculator UAE?
Calculating gratuity by hand can be confusing with all the rules. A gratuity calculator uae lets you enter your basic salary, years worked, contract type, and reason for leaving. It then gives you the exact amount. It’s fast and simple, but knowing the rules helps you double-check the result.
For more details on salary basics, see our explanation of UAE salary calculations.
Conclusion
Gratuity is a key benefit for UAE employees. Whether you’re on a limited or unlimited contract, understanding how to calculate it ensures you get what you deserve. The formula is straightforward: 21 days’ salary per year for the first 5 years and 30 days after that, with a two-year cap. If it feels tricky, try a gratuity calculator uae to make it easier. For any doubts, refer to the UAE Labour Law or ask your HR team.
