UAE Gratuity Calculation Rules & Labour Law Articles
The definitive statutory guide to UAE gratuity calculation rules under Federal Decree-Law No. 33 of 2021. Learn how end-of-service benefits are determined for the UAE private sector, how basic wages are calculated, and what exceptions apply across free zones.
What Are the Gratuity Rules in the UAE? (Summary Checklist)
Under UAE labour law, expatriate employees in the private sector are guaranteed end-of-service severance according to eight core statutory rules:
Foreign workers must complete at least 1 continuous year of service to qualify for gratuity (Article 51 Clause 1).
Gratuity is calculated strictly on the last Basic Wage divided by 30 days. Housing, transport, and bonuses are excluded.
21 days of basic wage for each completed year of service during years 1 through 5 (Article 51 Clause 2a).
30 days of basic wage for each additional year of service exceeding five years (Article 51 Clause 2b).
Service fractions after completing the first year are calculated proportionally by day and month.
Total gratuity cannot exceed 2 years' basic salary (24 months) under Article 51 Clause 3.
Employees who resign after 1 year receive 100% full gratuity under the 2021 law (the 1980 cuts no longer apply).
Employers must settle all gratuity and dues within 14 calendar days of contract end (Article 53).
UAE Gratuity Calculation as per Labour Law (Article 51 In-Depth)
Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations
Article 51 serves as the universal legal standard for private sector full-time employment across UAE mainland establishments and federal-compliant free zones.
A foreign full-time worker who has completed one or more years of continuous service with an employer is entitled to an end-of-service gratuity upon the severance of the employment relationship. Service of less than 365 calendar days does not qualify for gratuity.
Gratuity is calculated on the basis of the last basic wage stipulated in the employment contract (excluding allowances):
- Tier 1: 21 days' basic wage for each year of service during the first five (5) years.
- Tier 2: 30 days' basic wage for each additional year of service exceeding five (5) years.
- Pro-Rata Rule: Fractions of a year are calculated proportionally according to the actual period worked, provided the initial 1-year threshold has been met.
The total end-of-service gratuity amount payable shall not exceed the equivalent of two years' basic wages (24 months). Any calculated entitlement exceeding this statutory cap is capped by law.
Employers may deduct legally established debts, advances, or court judgments. Furthermore, days of unpaid absence from work are legally excluded from the continuous service duration.
Resignation Gratuity Rules: Current Law vs. Old 1980 Law
One of the most frequent points of confusion among UAE employees is whether resigning forfeits part of your gratuity. Under the repealed 1980 law, employees who resigned suffered severe cuts. Under the current 2021 law, resignation penalties are completely abolished:
| Completed Service | Old 1980 Law (Repealed) | Current 2021 Law (Decree-Law 33/2021) |
|---|---|---|
| Under 1 Year | 0% (Ineligible) | 0% (Minimum 1 year required) |
| 1 to 3 Years | Only 1/3 (33.3%) paid (Penalty) | 100% Full Gratuity (21 days/year) |
| 3 to 5 Years | Only 2/3 (66.7%) paid (Penalty) | 100% Full Gratuity (21 days/year) |
| 5+ Years | 100% entitlement | 100% Full Gratuity (30 days/year after yr 5) |
UAE Gratuity Calculation for Private Sector vs. Other Regimes
Governed by Federal Decree-Law No. 33 of 2021. Gratuity is paid as a deferred lump sum upon contract severance directly by the employer.
Governed by DIFC Employment Law No. 2 of 2019. Gratuity was replaced in 2020 by monthly employer contributions (5.83% / 8.33%) into the DEWS workplace savings scheme.
Mainland employers enrolled in the alternative scheme make monthly investment fund deposits instead of traditional end-of-service severance.
Exempt from expatriate severance; registered under GPSSA or Abu Dhabi Pension Fund with monthly state retirement contributions.
All formulas, statutory caps, and eligibility criteria on this platform are strictly derived from official UAE federal legislations and ministerial decrees. We do not use third-party assumptions or unverified rules.
Foreign full-time workers completing 1+ year continuous service receive 21 days basic wage/yr for first 5 years, and 30 days basic wage/yr for subsequent years, not to exceed 2 years total basic salary.
Employers must settle all worker dues within 14 calendar days from contract severance.
Part-time gratuity equals (Contracted Annual Hours ÷ Full-Time Annual Hours) multiplied by Full-Time Equivalent Gratuity.
Employers enrolled in the voluntary savings scheme contribute monthly into licensed funds (5.83% for first 5 yrs, 8.33% thereafter). Traditional lump sum does not apply to participating workers.
Official Legal Disclaimer & Scope of Application
This UAE Gratuity Calculator is an automated computation tool built strictly according to statutory standards codified under Federal Decree-Law No. 33 of 2021 (Regulation of Labour Relations) and Cabinet Resolution No. 1 of 2022. It is provided for personal evaluation, budgeting, and general estimation purposes only.
Individual contracts may carry explicit clauses, pre-existing valid agreements, non-compete terms, or approved alternative workplace savings funds (Cabinet Resolution No. 96 of 2023). For official labor disputes, file a grievance via the MOHRE Smart App or call the toll-free helpline at 600 590 000.