How to Calculate Gratuity in UAE (2026 Guide)
If you are working in the UAE private sector, understanding your end of service gratuity is essential. Whether you are planning to resign, changing jobs, or your employer has terminated your employment, knowing how your gratuity is calculated helps you estimate the amount you are entitled to receive.
This comprehensive 2026 UAE Gratuity Guide explains the gratuity calculation formula, eligibility, examples, and frequently asked questions based on the latest UAE Labour Law.
Whether you are an employee, HR manager, or business owner, this guide will help you understand gratuity calculations with confidence.
What is Gratuity in UAE?
Gratuity, also known as End of Service Benefits (EOSB), is a financial benefit paid by an employer to eligible employees when their employment ends.
It is designed to reward employees for their years of service and provide financial support after leaving employment.
In the UAE private sector, gratuity is calculated based on:
- Basic salary only
- Length of continuous service
- Type of employment termination
- Compliance with UAE Labour Law
Allowances such as housing, transportation, commissions, and other benefits are not included in gratuity calculations unless specifically agreed in the employment contract.
UAE Labour Law for Gratuity (2026)
Gratuity for private sector employees is governed by Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Labour Relations, together with its Executive Regulations and subsequent amendments.
Under the current law:
- Employees completing less than one year of continuous service are not entitled to gratuity.
- Employees completing one year or more are generally entitled to gratuity based on their basic salary.
- The distinction between limited and unlimited contracts has largely disappeared under the current employment framework because employment contracts are now based on fixed-term arrangements.
- Employees who resign after completing the qualifying service period generally remain eligible for gratuity, subject to the law and employment terms.
As of 2026, there have been no major changes to the gratuity calculation formula under the UAE Labour Law. Employers and employees should always monitor any future legislative updates issued by the UAE government.
Who is Eligible for UAE Gratuity?
You are generally eligible if:
- You work in the UAE private sector.
- You have completed at least one year of continuous service.
- Your employment relationship ends according to UAE Labour Law.
UAE Gratuity Calculation Formula (2026)
The gratuity calculation depends on your total years of service.
Employees with Less Than 1 Year of Service
If your continuous service is less than one year, you are not entitled to end of service gratuity.
Formula
Gratuity = AED 0
Example
Basic Salary: AED 8,000
Length of Service: 9 months
Gratuity:
AED 0
Employees with 1 to 5 Years of Service
Employees who complete between one and five years receive:
21 days of basic salary for each completed year of service.
Formula
Daily Basic Salary = Basic Salary ÷ 30
Gratuity = Daily Salary × 21 × Years of Service
Example 1
Basic Salary = AED 10,000
Years of Service = 2 years
Step 1
Daily Salary
AED 10,000 ÷ 30 = AED 333.33
Step 2
21 days salary
AED 333.33 × 21 = AED 7,000
Step 3
Multiply by service years
AED 7,000 × 2
Total Gratuity = AED 14,000
Employees with More Than 5 Years of Service
For employees completing more than five years:
- First five years = 21 days salary per year
- Every additional year = 30 days salary per year
Formula
First 5 Years
Daily Salary × 21 × 5
Remaining Years
Daily Salary × 30 × Additional Years
Add both amounts together.
Example 2
Basic Salary = AED 10,000
Service = 6 years
Daily Salary
AED 10,000 ÷ 30 = AED 333.33
First Five Years
333.33 × 21 × 5
= AED 35,000
Additional One Year
333.33 × 30
= AED 10,000
Total Gratuity
AED 35,000 + AED 10,000
Total = AED 45,000
Example 3
Basic Salary = AED 15,000
Service = 10 years
Daily Salary
15,000 ÷ 30 = AED 500
First Five Years
500 × 21 × 5
= AED 52,500
Remaining Five Years
500 × 30 × 5
= AED 75,000
Total Gratuity
AED 127,500
How to Calculate Per Day Basic Salary
Only your basic salary is considered.
Daily Salary Formula
Basic Salary ÷ 30
Example
Basic Salary
AED 12,000
Daily Salary
AED 400
Housing allowance, transportation allowance, bonuses, overtime, commissions, and other benefits are generally excluded from gratuity calculations.
Resignation vs Termination
One of the most common questions employees ask is whether resigning affects gratuity.
Under the current UAE Labour Law:
If You Resign
If you have completed at least one year of continuous service, you are generally entitled to gratuity based on the same calculation rules.
If Your Employer Terminates Your Employment
Eligible employees generally receive gratuity based on their completed years of service.
Unlike previous labour laws, resignation no longer automatically reduces gratuity entitlement simply because the employee resigned after meeting the qualifying conditions.
Limited Contract vs Unlimited Contract
Before the introduction of the current Labour Law, gratuity rules differed depending on whether an employee had a limited or unlimited contract.
Today:
- Private sector employment contracts are generally fixed-term.
- The gratuity calculation formula is applied consistently according to the current law.
- Older employment cases may still be subject to transitional provisions depending on when the employment relationship began.
Can Absences Affect Gratuity?
Possibly.
Certain circumstances may affect the final gratuity amount, including:
- Unpaid leave that does not count towards continuous service.
- Outstanding debts legally recoverable by the employer.
- Court orders.
- Compensation agreed under UAE Labour Law.
- Other lawful deductions permitted by legislation.
Employers cannot make arbitrary deductions from gratuity. Any deductions must comply with UAE Labour Law and other applicable legal requirements.
Common Mistakes When Calculating Gratuity
Many employees accidentally overestimate or underestimate their gratuity.
Avoid these common mistakes:
- Using gross salary instead of basic salary.
- Including housing allowance.
- Including transport allowance.
- Forgetting that service below one year has no gratuity.
- Using the wrong formula for service exceeding five years.
- Ignoring unpaid leave that may affect qualifying service.
Use Our Free UAE Gratuity Calculator
Calculating gratuity manually can be confusing, especially when service includes partial years or different employment scenarios.
Use our free UAE Gratuity Calculator tool.
Simply enter:
- Basic salary
- Joining date
- Last working date
- Employment status
Our calculator instantly estimates your gratuity according to the latest UAE Labour Law.
Final Thoughts
Understanding how gratuity is calculated allows employees to plan their finances and ensures employers remain compliant with UAE Labour Law.
The basic principle is straightforward:
- Less than 1 year, no gratuity.
- 1 to 5 years, 21 days of basic salary per year.
- More than 5 years, 21 days for the first five years and 30 days for every additional year.
Using an accurate UAE gratuity calculator can save time, reduce errors, and provide quick estimates whenever you need them.
UAE Gratuity Summary Table
| Length of Service | Gratuity Entitlement | Formula |
|---|---|---|
| Less than 1 year | No gratuity | AED 0 |
| 1 to 5 years | 21 days basic salary for each year | (Basic Salary ÷ 30) × 21 × Years of Service |
| More than 5 years | First 5 years: 21 days per year, Remaining years: 30 days per year | ((Basic Salary ÷ 30) × 21 × 5) + ((Basic Salary ÷ 30) × 30 × Additional Years) |
Disclaimer
This article is for informational purposes only. It is not intended as legal advice. Labour laws may change, and individual employment circumstances may vary. Consult a qualified legal professional or the relevant UAE authorities for advice specific to your situation.
Frequently Asked Questions (FAQ)
Frequently asked questions about gratuity calculation in UAE.
No. End of service gratuity paid to employees is generally not subject to personal income tax in the UAE, as the UAE does not levy personal income tax on employment income.
In certain situations permitted under UAE Labour Law, an employee's entitlement may be affected. Whether gratuity can be reduced or forfeited depends on the specific legal circumstances, so each case should be assessed individually.
No, Gratuity is calculated using basic salary only.
Housing, transport, commissions, bonuses, and similar allowances are generally excluded.
It can.
Certain periods of unpaid leave may not count towards continuous service depending on the applicable legal provisions and employment circumstances.
An employer cannot lawfully withhold gratuity from an eligible employee without a valid legal reason. If a dispute arises, employees may seek assistance through the appropriate UAE labour dispute resolution channels.
