Calculate your end of service gratuity under UAE Federal Decree-Law No. 33 of 2021. No resignation penalty under the new law - accurate results in AED with full breakdown.
UAE gratuity is governed by Federal Decree-Law No. 33 of 2021 (effective February 2022). The gratuity is based on your basic salary (not your complete compensation package). Under the old Labour Law, employees were subjected to a resignation penalty, which was taken away by the new law, making the UAE one of the most employee-friendly gratuity systems in the GCC.
| Years of Service | Rate | Formula | Example (AED 8,000 basic) |
|---|---|---|---|
| Less than 1 year | No entitlement | AED 0 | AED 0 |
| 1 to 5 years | 21 working days per year | (Basic ÷ 30) × 21 × Years | 3 yrs = AED 16,800 |
| More than 5 years | 30 working days per year | (Basic ÷ 30) × 30 × Years | 7 yrs = AED 56,000 |
| Cap (any duration) | Maximum 2 years salary | Basic × 24 | Max = AED 192,000 |
New UAE Labour Law 2022: Federal Decree-Law No. 33 of 2021 (which takes effect on 1 February 2022) introduces equal treatment for resignation and termination, both in terms of the termination notice period and the gratuity calculation. The old resignation penalty, where employees who resigned received reduced gratuity, has been completely removed. The formula above is also applicable whether you are resigning or being terminated.
Step 1 - Daily wage: Daily = Monthly Basic Salary ÷ 30
Step 2 - Gratuity (1–5 years): Daily × 21 × Total Years of Service
Step 3 - Gratuity (5+ years): Daily × 30 × Total Years of Service
Step 4 - Apply cap: If result > Basic × 24, then cap at Basic × 24
⚠️ Note: Gratuity is always based only on basic salary. If you have a total package of AED 15,000 per month, but your employment contract has a basic salary of AED 7,000, the entire calculation shall be based upon AED 7,000. This does not include any housing allowance, transport, food, school fees or any other allowances.
UAE's Federal Decree-Law No. 33 of 2021 - which replaced the existing Labour Law No. 8 of 1980 - brought about significant changes for employees. These are the crucial variations:
Resigned employees will get a lower gratuity: nothing - less than 1 year, 1/3 - between 1-3 years, 2/3 - between 3-5 years and full amount - after 5 years. The rules were different for unlimited contracts than for limited contracts.
In the new law (After Feb 2022), the resignation penalty is Nil. Now there will be the same gratuity for resignation and termination. The distinction between Limited/Unlimited Contract for Gratuity has been eliminated. All employees with 1+ year service receive full-entitled gratuity regardless of how they leave.
When will the new law take effect? This means the UAE Labour Law will cover all employees in the private sector who began working on or after 2 February 2022 and will be applied retroactively to those who were already working before this date. If you had started your job prior to the February 2022 change, then your full period of employment would continue to count towards the new rules when you left your job.
These examples show how UAE gratuity is calculated for different scenarios. All examples use AED 8,000 as the monthly basic salary.
The basic salary for the UAE gratuity is the fixed amount mentioned in your employment contract each month and is usually called ‘Basic salary' or ‘Base salary'. According to the UAE Labor Law, the following are specifically exempted from the calculation of gratuity:
Allowances may make up to 50-70% of the monthly salary in some employment packages in the UAE, especially in certain areas such as banking, Oil and Gas, aviation and executive positions. These are not considered part of the gratuity calculation because they are paid regularly and in small amounts.
The maximum limit of total gratuity as per UAE Labour Law is 2 years of basic salary. That is, the final amount of gratuity due cannot exceed 24 times the monthly basic salary, regardless of the number of years of service. Our calculator does this automatically, and keeps track of it in the breakdown of the result. It's basically for the very long-serving employees who have a high base salary. The calculated gratuity will be well below the cap for most employees with 1-15 years of service.
The employment in UAE free zones could be regulated by other regulations, depending on the free zone authority where the employee is employed:
If you don't know which framework governs your employment, consult with your HR department or your employment contract for any mention of the governing law.
The new UAE Labour Law states that the notice period (usually ranging from 30 to 90 days, depending on your employment contract) is part of your employment. Gratuity keeps on accumulating during notice period. If you leave prior to the end of your notice period without your employer's consent, however, the number of days of your unvested notice period will be deducted from your final settlement. Always make sure you provide the full notice time to preserve 100% of the gratuity's notice entitlement.
According to the new UAE Labour Law, your employer has to pay you your gratuity within 14 days from the date of your last working day. To protect yourself:
The UAE does not levy personal income tax on any income, including end of service gratuity. Gratuities are paid out without any UAE tax deductions. However, depending on your nationality and tax requirements in the country of tax residence, you may be liable to declare or pay taxes in the country of tax residence on this amount. In particular, nationals of the UK, the USA, Australia, Canada and India should seek advice from their tax advisor in their country of origin concerning the taxation of lump-sum payments from abroad.
Yes - absolutely. As per Federal Decree-Law No. 33 of 2021 (which came into effect in February 2022), the difference between resignation and termination for gratuity has been removed. The same gratuity is paid if you leave voluntarily or are discharged from your employer, after you have served 1 full year. Penalty for resignation has been completely eliminated from UAE Labour Law.
Labour Law in UAE limits the amount of total gratuity to 2 years of basic salaries, no matter how many years you have served. For instance, if the basic salary is AED 10,000 per month, the highest possible gratuity will be AED 240,000 (AED 10,000 x 24 months). This cap is only relevant for persons who have served a very long time – the typical time is around 25-30 years of service depending on the salary level.
Your employer is required to pay your full gratuity within 14 days of your last day of work, according to the new UAE labour law. If it is not paid within this period, you can submit a complaint to the Ministry of Human Resources and Emiratisation (MOHRE) at mohre.gov.ae or via the free call number 800 60. MOHRE will initiate mediation and/or refer the case to the Labour Court in the event of failures. There are heavy fines for non-payment.
Yes - the probation period is also a part of your overall service period for the calculation of gratuity (as long as you pass out the probation period). But for those who choose to terminate their services during the probation period (whether by resignation or termination), no gratuity is owed, as services have not reached the minimum 1-year requirement. The probation period is included, but only if the total period of employment is 1 year or more.
UAE Labour Law has defined its divisor for calculating the daily wage as 30 - so even if there are 30 days in a month, your daily wage will be calculated as 30. This is not a calendar calculation; it is a fixed formula. However, the service period is based on actual calendar days from the date of joining to the date of leaving the job, which our calculator can work out exactly from the dates you input.
UAE Labour Law permits employers to recognise in the final settlement the amounts that have been documented as owed by the employee, such as amounts that have been advanced to the employee, loans granted by the employer or amounts due under a written contract. But, the employer may not deduct any amounts on disputed and unverified claims and the employer may not reduce the gratuity below zero. If you think that your employer has deducted your gratuity for reasons that are not justified, you should contact MOHRE as soon as possible.
There are different employment frameworks in the UAE free zones. The average employee at DIFC (Dubai International Financial Centre) will likely be part of the DIFC Employee Workplace Savings (DEWS) scheme, which is a defined contribution scheme with an employer contribution of a percentage of basic salary (per month) that is paid into an individual savings account. This is in lieu of the traditional gratuity system. There are similar provisions in ADGM (Abu Dhabi Global Market). Most of the other free zones operate as per the standard UAE mainland Labour Law gratuity rules.