End-of-service gratuity is the single largest statutory payment most UAE employers ever make to an employee, and it is where final-settlement disputes most often start. The rules look simple — a fixed number of days of pay per year of service — but three things trip employers up: which part of the salary the calculation runs on, what a resigning employee is actually owed after the 2022 reforms, and whether the employer has enrolled in the new savings scheme that changes the calculation entirely.
This guide is written for employers and payroll teams. It gives the exact formula under Federal Decree-Law No. 33 of 2021, the basic-salary-only rule, the two-year cap, worked examples in tables, the resignation position that most online calculators still get wrong, and the two-track savings-scheme reality that determines how a 2026 exit is actually settled.
| Who is entitled | Foreign private-sector workers, 1+ year service |
| First 5 years | 21 days' basic wage per year |
| After 5 years | 30 days' basic wage per year |
| Calculated on | Last basic wage only (no allowances) |
| Maximum | 2 years' basic wage |
| Payment deadline | Within 14 days of the last working day |
Who is entitled to gratuity
Under Article 51 of Federal Decree-Law No. 33 of 2021, a foreign worker in the private sector who has completed at least one year of continuous service with the same employer is entitled to end-of-service gratuity when the employment relationship ends. A few points define the edges of that rule:
- One year is the floor. A worker who leaves before completing one continuous year gets no gratuity. Once past a year, they also earn gratuity on the fraction of the final incomplete year, pro-rated by days served.
- Days of unpaid absence do not count. Article 51 excludes periods of unpaid leave from the service used to calculate gratuity, so extended unpaid leave pushes the accrual back.
- UAE nationals are different. Emirati employees are covered by the GPSSA pension and social-security system rather than by gratuity, so this calculation is for expatriate staff.
- It is the same for resignation and termination. Since the 2022 reforms there is no longer any reduction for resigning — more on this below, because it is the most commonly mis-stated rule in the UAE.
The formula: 21 days, then 30
Gratuity accrues in two tiers based on length of service:
| Service period | Accrual rate | Basis |
|---|---|---|
| First 5 years | 21 days' wage per year | Last basic wage |
| Each year beyond 5 | 30 days' wage per year | Last basic wage |
The daily wage is worked out from the monthly basic salary. UAE practice, reflected in MOHRE's own guidance and calculators, is to divide the monthly basic by 30 to get a daily figure:
Gratuity = Daily wage × gratuity days × years of service
Worked example: a 3-year employee
Take an employee with a monthly basic salary of AED 10,000, leaving after exactly 3 years. Because 3 years is within the first-five-years band, the whole period accrues at 21 days per year.
| Step | Working | Amount |
|---|---|---|
| Daily wage | AED 10,000 ÷ 30 | AED 333.33 |
| Gratuity days per year | 21 (first 5 years) | 21 |
| Years of service | — | 3 |
| Total gratuity | 333.33 × 21 × 3 | AED 21,000 |
A useful shortcut: 21 days of a month-of-30 is 0.7 of a month, so first-tier gratuity is roughly 0.7 months of basic salary per year. Three years at AED 10,000 basic ≈ 0.7 × 10,000 × 3 = AED 21,000, which matches.
Worked example: a 7-year employee (both tiers)
Now an employee on the same AED 10,000 basic, leaving after 7 years. The first 5 years accrue at 21 days; years 6 and 7 accrue at 30 days.
| Service | Rate | Working | Amount |
|---|---|---|---|
| First 5 years | 21 days/yr | 333.33 × 21 × 5 | AED 35,000 |
| Years 6–7 | 30 days/yr | 333.33 × 30 × 2 | AED 20,000 |
| Total gratuity | — | — | AED 55,000 |
The second tier is worth noticeably more per year (30 days versus 21), so long-service employees accrue faster after the five-year mark.
The two-year cap
However long the service, total gratuity is capped at two years' basic wage. For an employee on AED 10,000 basic, the maximum gratuity is AED 240,000 (24 months × AED 10,000), reached at roughly 22–23 years of service. Beyond that point, additional years add nothing to the gratuity figure.
Resignation vs termination: the rule everyone gets wrong
This is the single most out-of-date piece of UAE gratuity information still circulating online, so it is worth stating plainly.
The distinction between limited and unlimited contracts was also removed. All contracts are now fixed-term, and the same gratuity rules apply to every private-sector expatriate employee regardless of contract type.
The two-track reality: the savings scheme changes everything
Here is the point that almost every online gratuity calculator misses, and which increasingly determines how a 2026 exit is actually settled. In October 2023, MOHRE — in coordination with the Securities and Commodities Authority — introduced a voluntary Alternative End-of-Service Benefits Scheme (the "Savings Scheme") under Cabinet Resolution No. 96 of 2023. Instead of the employer holding an accruing gratuity liability and paying a lump sum at the end, the employer makes monthly contributions into a regulated investment fund on the employee's behalf.
When an employer enrols an employee in the scheme, the traditional gratuity calculation does not disappear — it freezes:
| Period | How it is settled |
|---|---|
| Service before enrolment | Gratuity accrued up to the enrolment date is calculated under the Article 51 formula and preserved as a protected amount |
| Service after enrolment | Traditional accrual stops; the employee instead receives the fund balance — the monthly contributions plus any investment returns |
So for an enrolled employee, a 2026 exit calculation depends on the enrolment date, not just salary and service. The monthly contribution rates mirror the gratuity accrual:
| Employee service | Monthly contribution |
|---|---|
| Less than 5 years | 5.83% of monthly basic salary |
| 5 years or more | 8.33% of monthly basic salary |
Contributions are paid by the employer (not deducted from the employee), must be transferred within 15 days of the start of each month, and are held in the employee's name in a fund that is ring-fenced from the employer's balance sheet — which protects the entitlement if the employer becomes insolvent. As of 2026 the scheme remains voluntary for mainland and most free-zone employers, though a mandatory rollout has been widely anticipated.
The 14-day settlement rule
Under Article 53, the employer must pay the employee's end-of-service entitlements — gratuity plus any other dues such as unpaid wages, notice pay, and accrued leave encashment — within 14 days of the end of the contract. Lawful deductions (outstanding loans, salary advances, or amounts owed to the employer) may be set off against the final payment, but the gratuity itself cannot simply be withheld. Late settlement is a compliance exposure, and the gratuity forms part of the broader final-settlement obligation.
What reduces or removes gratuity
- Under one year of service: no gratuity at all.
- Unpaid leave: excluded from the service period, so it reduces accrued years.
- Lawful deductions: loans and advances can be set off against the final figure.
- Dismissal for gross misconduct: the grounds in the law for dismissal without notice are narrow and specific; employers should not assume gratuity is automatically forfeited, as wrongly withholding it is itself a source of claims.
Try it yourself: UAE gratuity calculator
Enter a basic salary and service period to see the gratuity figure, with the 21/30-day tiers, the two-year cap, and the unpaid-leave adjustment handled for you — plus a savings-scheme view if the employee is enrolled.
Why gratuity is easier on one connected system
Gratuity is a liability that accrues quietly every month against each employee's basic salary, changes tier at the five-year mark, is capped at two years, and — for enrolled employees — interacts with a monthly contribution and an enrolment-date freeze. When basic-salary figures, join dates, unpaid-leave records, and savings-scheme enrolment sit across different spreadsheets and systems, computing the right end-of-service figure at exit, and provisioning the liability correctly on the balance sheet in the meantime, is manual and error-prone — which is exactly where final-settlement disputes come from.
When UAE payroll sits on a single database, gratuity accrues automatically from live basic-salary and service data, the tier change and the two-year cap apply themselves, unpaid leave adjusts the service period, and — where the savings scheme is in use — the enrolment-date split is tracked from one record. This is how Helion handles UAE end-of-service inside a multi-country platform, so the figure at exit is computed from one source of truth rather than reconciled across tools. For a company running the UAE alongside India and Singapore, one system applying each country's distinct end-of-service rules keeps the numbers consistent and the liability visible.
This guide reflects the position for 2026 under Federal Decree-Law No. 33 of 2021 as amended, including the Alternative End-of-Service Benefits Scheme under Cabinet Resolution No. 96 of 2023. Gratuity rules, the savings-scheme contribution rates, and free-zone frameworks (DIFC DEWS, ADGM) can change, and DIFC/ADGM operate their own regimes. Figures are illustrative. This is general information for employers, not legal advice or a substitute for guidance from a qualified UAE employment professional or MOHRE.