How to Calculate Gratuity in UAE (2026 Complete Guide)

Updated October 2026 · 5 min read

End-of-service gratuity is a legal entitlement for every employee who has completed at least one year of continuous service in the UAE. Whether you are leaving a job, being terminated, or retiring, understanding how gratuity is calculated can mean thousands of dirhams difference in what you receive.

What Is UAE Gratuity?

UAE gratuity (also called end-of-service benefit or ESB) is a lump-sum payment made by an employer to an employee when their employment ends. It is governed by the UAE Labour Law (Federal Decree-Law No. 33 of 2021) and applies to all private-sector employees.

Gratuity is calculated based on your basic salary and years of service. Allowances such as housing, transport, and food are not included in the gratuity calculation.

UAE Gratuity Formula (2024)

Under the current UAE Labour Law, gratuity is calculated as follows:

Step-by-Step Calculation Example

Let's say Ahmed has worked for 7 years with a basic salary of AED 8,000 per month.

1. Daily wage: AED 8,000 ÷ 30 = AED 266.67
2. First 5 years: 21 days × AED 266.67 × 5 = AED 28,000
3. Next 2 years: 30 days × AED 266.67 × 2 = AED 16,000
4. Total gratuity: AED 28,000 + AED 16,000 = AED 44,000

What If I Resigned?

Under the 2022 Labour Law reform, resignation no longer reduces your gratuity entitlement. Whether you resign or are terminated (for non-disciplinary reasons), you receive the same full gratuity calculated using the formula above, provided you have completed at least one year of service.

Gratuity for Less Than 1 Year

If you have worked for less than one year, you are not entitled to gratuity under UAE Labour Law. Gratuity entitlement begins only after completing 12 consecutive months with the same employer.

Important Notes

• Gratuity is based on your last drawn basic salary, not total package
• The maximum gratuity payable is equal to 2 years of total basic salary
• Gratuity must be paid within 14 days of the last working day
• Free zone employees may have different rules — check your contract