UAE Gratuity Formula & Eligibility Explained (2026)

Have you ever questioned how your end-of-service benefits or gratuity are computed in the UAE? Both expatriates and the UAE nationals, as long as you are in the private sector, it is important to have knowledge of your gratuity rights. The UAE Labour Law gives a clear structure on the persons who are entitled to the gratuity, and the calculation of the amount of the gratuity, to ensure that all workers have fair compensation for their service experience.

In this guide, I will provide all about the Gratuity Calculation Formula, who is entitled to receive the gratuity, and the precise formula to calculate it according to the new UAE Labour Law (Federal Decree-Law No. 33 of 2021).

What is Gratuity in the UAE?

End-of-service benefit, or gratuity, is a sum of money given by the employer to the employee upon termination of their employment. It is used to motivate the employee as a financial reward to the company in terms of service and loyalty.

It concerns primarily workers of the private sector who do not belong to the company pension scheme and have had one year of consecutive service.

The UAE Labour Law regulates gratuity and is computed based on:

• The employee’s last basic salary,
• The number of years of service is calculated in total.

Eligibility for Gratuity in the UAE

You need to ensure that you are eligible before you calculate your gratuity. The following are the ones who would be considered under the UAE Labour Law:

1. Minimum One Year of Continuous Service

To be eligible, an employee should have worked one year in the same employing company uninterrupted.

2. Type of Contract

In the case of termination of an employee on the grounds of grave misconduct, the employer may refuse to give gratuity.

3. Reason for Termination

Gratuity eligibility also depends on the reason for leaving:

• Resignation: You are eligible for gratuity if you’ve completed one year or more.
• Termination by Employer: You are eligible unless dismissed for gross misconduct (Article 44 of the Labour Law).
• End of Contract: Full gratuity is due if the contract naturally expires and is not renewed.

4. No Deductions for Misconduct (Except Serious Cases)

If an employee is terminated due to serious misconduct, the employer has the right to deny gratuity.

How is Gratuity Calculated in the UAE?

The gratuity calculation depends on:

• Your last drawn basic salary
• Your total years of service
• The nature of your contract (limited or unlimited)

Basic Gratuity Formula

Gratuity = (Basic Salary ÷ 30) × 21 days × (Years of Service up to 5 years)
Gratuity = (Basic Salary ÷ 30) × 30 days × (Years of Service beyond 5 years)

Let’s break this down step-by-step.

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Step-by-Step Gratuity Calculation Example

Example:

Let’s assume:

• Monthly basic salary = AED 10,000
• Total service = 6 years

Now calculate:

First 5 years:
= (AED 10,000 ÷ 30) × 21 × 5
= AED 70,000

After 5 years (1 extra year):
= (AED 10,000 ÷ 30) × 30 × 1
= AED 10,000

Total Gratuity = 70,000 + 10,000 = AED 80,000

 Your gratuity amount = AED 80,000

Important Rules for Gratuity Calculation

1. Based on Basic Salary Only

Gratuity is not calculated on total salary, but only on the basic pay.
Allowances such as housing, transportation, or commissions are excluded.

2. Partial Years Count

If you have worked more than one year but less than a full additional year, your gratuity is calculated proportionally to the number of months worked.

3. Unpaid Leave Excluded

Any unpaid leave days are deducted from the total service period.

4. Gratuity Payment Timeframe

Employers are legally required to pay gratuity within 14 days after the employee’s final working day.

Gratuity Calculation for Different Contract Types

Under the updated UAE Labour Law (2022 onwards), the calculation method is now the same for both limited and unlimited contracts.

Previously, there was a difference in calculation if an employee resigned under an unlimited contract. That distinction no longer exists.
Now, all employees receive gratuity based purely on:

• The number of service years, and
• Their basic salary.

When Can Gratuity Be Forfeited?

The UAE Labour Law (Article 44) states that gratuity may be forfeited if an employee is dismissed due to gross misconduct, such as:

• Theft or fraud
• Disclosure of company secrets
• Repeated absenteeism without a valid reason
• Substance abuse during work hours
• Violence or assault at the workplace

In these cases, the employer can legally withhold gratuity.

Difference Between Gratuity and Pension

Many people confuse gratuity with a pension, but they are not the same.

FAQS

How do you qualify to receive gratuity in the UAE?

The UAE Labour Law requires an employee to have over one year of uninterrupted work experience with the same employer to be eligible for the gratuity.

What is the rule of calculation of gratuities in the UAE?

According to the new UAE Labour Law (since 2022), all employees, irrespective of the limited or unlimited contracts, receive gratuity according to their final basic salary and the duration of years of service.

How do you check if you are eligible for gratuity?

You are eligible if you:

• Have completed 1+ year of service
• Were not terminated for misconduct
• Worked under a valid labour contract registered with MOHRE

Which employees are not eligible for gratuity?

Employees are not eligible if they:

• Worked less than one year
• We were dismissed for gross misconduct
• Are under a company pension plan (UAE nationals)

 How to check the gratuity calculator?

• You can check your gratuity using the official MOHRE Gratuity
  • Calculator on www.mohre.gov.ae — simply enter your basic salary, start date, and end date to see the estimated amount.

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Final Words

Knowledge of the UAE calculation formula and eligibility for gratuity is, therefore, a necessary element for every employee in the Emirates. You are entitled to gratuity no matter how many years you have worked as a long-term professional or if you are finishing your first contract, because it is your right to get a reward that compensates your hard work and many years of service.

According to the most recent UAE Labour Law (Federal Decree-Law No. 33 of 2021), an employee working at least one year of uninterrupted employment is entitled to receive gratuity on leaving the job, irrespective of the type of contract they have, be it limited or unlimited.