End of service gratuity is the biggest single payment most UAE employees ever receive from an employer – and one of the most misunderstood. This guide walks through exactly how it works under Federal Decree-Law No. 33 of 2021, with worked examples for every service length. If you just want your number, use our UAE gratuity calculator and come back for the detail.
The formula in plain language
Three inputs decide your gratuity: your last basic salary, your years of continuous service, and nothing else. The law converts your basic salary into a daily wage by dividing by 30, then awards 21 days of that wage for each of your first five years of service and 30 days for every year beyond five. Partial years count pro rata once you pass the one-year minimum. The total can never exceed two years of basic pay.
Worked examples at every stage
Take a basic salary of AED 10,000, so a daily wage of AED 333.33. At 2 years of service: 2 × 21 × 333.33 = AED 14,000. At 5 years: 5 × 21 × 333.33 = AED 35,000. At 8 years: the first five years earn AED 35,000 and the next three earn 3 × 30 × 333.33 = AED 30,000, for a total of AED 65,000. At 25 years the raw formula would exceed the cap, so the payout stops at 24 months of basic pay: AED 240,000.
Why “basic salary” is the number that matters
Gratuity ignores allowances entirely. Two colleagues with identical AED 18,000 packages can retire with very different gratuities if one has a basic of AED 12,000 and the other AED 6,000 with larger allowances. The same basic-only rule applies to leave encashment. Before accepting any offer, check the basic-to-allowance split – it is the quiet clause that decides your exit money.
What changed in 2022
The current law abolished unlimited contracts and, with them, the old resignation penalties that cut gratuity to one third or two thirds for early leavers. Today you receive full gratuity for completed service whether you resign or are terminated. If part of your service predates February 2022 on an unlimited contract, the legacy rules calculator shows how that period may be treated.
Who this formula does not cover
Four groups follow different rules: DIFC employees (the DEWS savings plan replaced gratuity in 2020), ADGM employees (own regulations, similar formula), UAE and GCC nationals registered for pension (GPSSA contributions replace gratuity), and domestic workers (14 days per year – see the domestic worker calculator).
When and how it must be paid
All end of service entitlements are due within 14 days of the contract end date under Article 53. Gratuity is also tax-free in the UAE – what you calculate is what you receive. If your employer delays or underpays, document everything and raise a complaint with MOHRE on 80060; the process is free and most cases settle at mediation.
This guide is for information only and is not legal advice. Figures verified 6 July 2026 against Federal Decree-Law No. 33 of 2021.