Gratuity Calculation in the UAE: Formula, Examples & Rules (2026)
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Quick answer: Gratuity calculation in the UAE follows Article 51 of the UAE Labour Law (Federal Decree-Law No. 33 of 2021). A full-time expatriate employee in the private sector who has completed at least one year of continuous service earns 21 days of basic wage for each of the first five years and 30 days of basic wage for each year after that, with part years paid pro rata. It uses the last basic salary only (no housing or transport allowance), unpaid absence does not count as service, the total is capped at two years’ wage, and the employer must pay it within 14 days of the contract ending.
Last updated 13 November 2026. This guide is general information for business owners and buyers, not legal advice. It covers the federal private-sector rules as published by the UAE Government. Confirm a specific case with the Ministry of Human Resources and Emiratisation (MoHRE) or a labour adviser.
What is end-of-service gratuity in the UAE?
End-of-service gratuity is a lump sum that a private-sector employer owes a foreign employee when their employment ends. It is set by Articles 51 to 53 of Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, usually called the UAE Labour Law, which has applied since 2 February 2022. The official UAE Government page on end-of-service benefits and the Dubai government portal both summarise the same rules.
For a business owner, gratuity is not a bonus you can choose to pay. It is a liability that builds up every month an employee stays with you. A shop with ten staff who have each been there for several years can carry a gratuity bill worth several months of payroll, and that bill falls due when people leave, when the business closes, or, depending on how it is structured, when it is sold.
The rules below apply to full-time expatriate employees in the private sector. UAE nationals in the private sector receive end-of-service benefits under the pensions and social security legislation (the portal refers to Federal Law No. 57 of 2023). The financial free zones, DIFC and ADGM, have their own employment laws, so staff employed there follow those rules instead.
How does gratuity calculation work in the UAE?
The official portal sets out the entitlement in three bands. Every calculation starts from two numbers: the employee’s last basic wage and their length of continuous service.
| Length of continuous service | Gratuity entitlement |
|---|---|
| Less than 1 year | No gratuity |
| 1 year up to 5 years | 21 days of basic wage for each year of service |
| More than 5 years | 21 days for each of the first 5 years, plus 30 days of basic wage for each year after the first 5 |
| Any length | Total capped at 2 years’ wage |
Four further rules from the same official summary change the result in practice:
- Basic salary only. Gratuity is based on the last basic wage the worker was entitled to. Allowances such as housing, transport, utilities and furniture are excluded.
- Part years count. Once one year of continuous service is complete, fractions of a year are paid in proportion to the time served.
- Unpaid absence is excluded. Days of absence from work without pay are not counted as service.
- Deductions are allowed. The employer may deduct amounts the worker owes it from the gratuity.
What is the gratuity formula, step by step?
You can work out any employee’s gratuity in four steps. Keep the calculation in a spreadsheet for each employee so it can be checked later by the employee, an auditor or a buyer.
- Find the service period. Count from the employee’s start date to the last working day, then remove any days of unpaid absence. If the result is under one year, there is no gratuity.
- Count the days of wage earned. Multiply the first five years (or less) by 21 days. Multiply any service beyond five years by 30 days. Include part years pro rata.
- Convert days into dirhams. Multiply the days of wage by one day’s basic wage, taken from the employee’s last basic monthly salary. Many payroll tools treat one day’s wage as the monthly basic divided by 30. Because the method you use changes the final figure, check your number against MoHRE’s guidance before you pay or agree a deal.
- Apply the cap and deductions. Make sure the total does not exceed two years’ wage, then deduct any amounts the employee lawfully owes you.
Written as a formula for someone with more than five years of service:
Gratuity = (21 × 5 + 30 × years beyond 5) × one day’s basic wage, up to a maximum of two years’ wage.
What do real gratuity calculations look like? Worked examples
The examples below show the number of days of basic wage owed. The dirham figures use one simple, clearly labelled assumption, one day’s wage = monthly basic salary ÷ 30, so you can follow the arithmetic. They are illustrations, not official calculations.
| Example | Service | Days of basic wage | Illustration at AED 6,000 basic a month (AED 200 a day) |
|---|---|---|---|
| Cashier leaves before 12 months | 11 months | 0 (under 1 year) | AED 0 |
| Barista leaves after 3 years 6 months | 3.5 years | 21 × 3.5 = 73.5 days | AED 14,700 |
| Supervisor leaves after exactly 5 years | 5 years | 21 × 5 = 105 days | AED 21,000 |
| Store manager leaves after 8 years | 8 years | 105 + (30 × 3) = 195 days | AED 39,000 |
| Long-serving technician after 12 years 3 months | 12.25 years | 105 + (30 × 7.25) = 322.5 days | AED 64,500 |
Notice two things. First, the total salary does not matter. An employee earning AED 6,000 basic plus AED 4,000 in allowances is still calculated on AED 6,000. Second, the jump from 21 to 30 days after year five means long-serving staff become much more expensive to let go, which is worth knowing before you buy a business with an experienced team.
Does resignation or termination change gratuity in the UAE?
Under the older labour law, an employee who resigned early received a reduced share of gratuity. The current Article 51 rules, as summarised on the official UAE Government portal, give the same 21-day and 30-day rates to every full-time employee who has completed one year of continuous service when the service ends, and the portal does not list a separate, reduced scale for resignation.
That does not mean every exit is treated the same in every respect. Notice periods, unpaid leave, amounts the employee owes, and dismissal for one of the reasons the law permits can all affect what is actually paid. If an exit is disputed, the employee can file a labour complaint with MoHRE, so keep written records of the reason for leaving and of every payment.
How is gratuity calculated for part-time and other work models?
The UAE Government portal explains that, under Article 30 of Cabinet Resolution No. 1 of 2022 (the Implementing Regulation of the Labour Law), gratuity for part-time and other flexible work models is proportionate to hours worked:
- Divide the employee’s contracted working hours per year by the working hours of a full-time contract per year, and multiply by 100 to get a percentage.
- Apply that percentage to the gratuity that a full-time employee would receive.
For example, someone contracted for half of full-time hours receives 50% of the full-time gratuity for the same service. The portal also states that gratuity does not apply to temporary work lasting less than one year.
When must the employer pay gratuity?
According to the official portal, the employer must pay all outstanding wages, other entitlements and the gratuity within 14 days of the end of the contract. In practice that means you need the money ready when someone leaves, not weeks later. Paying final dues late is one of the most common reasons for labour complaints.
The final settlement usually includes more than gratuity. Typical items to check are:
- Salary for days worked in the final month (paid through the Wage Protection System for most employers; see our Wage Protection System UAE guide).
- Cash in lieu of annual leave not taken. MoHRE’s employer guide confirms the employee is entitled to this when the contract ends.
- The return ticket to the employee’s home country or an agreed destination, unless they have joined another employer or the termination is attributable to them, as set out in MoHRE’s guide for employers.
- Gratuity, less any lawful deductions.
What is the UAE Savings Scheme instead of gratuity?
Since 2023, private-sector and free zone employers can choose a voluntary alternative to traditional gratuity, called the Savings Scheme, under Cabinet Resolution No. 96 of 2023. Instead of paying a lump sum at the end, the employer pays a monthly contribution into an investment fund approved by the Securities and Commodities Authority (SCA).
| Point | Traditional gratuity | Savings Scheme (optional) |
|---|---|---|
| When the employer pays | Lump sum within 14 days of the contract ending | Monthly, within 15 days of the start of each calendar month |
| How much | 21 or 30 days of basic wage per year of service | 5.83% of monthly basic salary for staff under 5 years of service; 8.33% for staff with more than 5 years |
| What the employee receives | The calculated gratuity | All basic contributions plus investment returns, within 14 days of the employment ending |
| Risk if the employer fails | Employee depends on the employer having the cash | Money sits in the fund, outside the business |
The portal notes that an employer can enrol all staff or selected groups, but once employees join it must stop applying traditional gratuity for them and must calculate and settle any gratuity they had already earned before enrolment. Employees can also add voluntary contributions of up to 25% of their total wage. For the contribution rules for other work patterns, see Ministerial Resolution No. 668 of 2023, linked from the same u.ae page.
For a buyer, this matters because a business that has moved its staff into the Savings Scheme should have a smaller unfunded gratuity liability. Ask for the fund statements to confirm the monthly contributions were actually made.
How should business owners budget for gratuity?
Because gratuity grows with every month of service, it is sensible to track it as a running liability rather than discover it when someone resigns. A simple routine:
- Keep a staff register with each employee’s start date, current basic salary and any unpaid leave.
- Recalculate accrued gratuity every month or quarter and record it in the accounts as a provision. A small business accountant in Dubai can set this up, and our guide to bookkeeping in the UAE covers the records you should keep.
- Watch staff approaching five years of service, when the rate rises from 21 to 30 days a year.
- Keep basic salary in contracts, MoHRE records and WPS payments consistent, because the basic figure drives the whole calculation.
- Set cash aside, or consider the Savings Scheme, so you can pay within 14 days when someone leaves.
What happens to gratuity when you buy or sell a business in the UAE?
This is where gratuity calculation in the UAE becomes a deal issue. The answer depends on how the sale is structured.
| Deal type | Who is the employer afterwards? | What it means for gratuity |
|---|---|---|
| Share purchase (you buy the company) | The same company, now owned by you | Service and accrued gratuity stay with the company, so you inherit the liability |
| Asset purchase or new licence | Usually a new employer (your company) | The seller normally settles end-of-service dues as the old employer; staff you keep start new contracts with you |
In both cases, the safest approach is to put a number on it before you agree a price:
- Ask the seller for a staff list showing join dates, nationality, basic salary, total salary and unpaid leave for every employee.
- Check it against the MoHRE contracts and recent WPS salary records, not just the seller’s spreadsheet.
- Calculate each employee’s accrued gratuity using the rules above and add it up.
- In a share purchase, either reduce the price by the accrued liability or ask the seller to settle it before completion. In an asset deal, write into the contract that the seller pays all staff dues and indemnifies you.
- Confirm there are no pending labour complaints.
Our due diligence checklist for buying a business in the UAE lists the other documents to request, and how to buy a company in Dubai explains the share-purchase route. If you are on the other side of the deal, see how to prepare to sell your business in the UAE. A business broker listed on BusinessFinder.me can also help structure the staff side of a sale.
Which running businesses with staff are for sale now?
Most running businesses listed on BusinessFinder.me come with a trained team. These listings are live now. When you contact a seller, ask for the staff list and accrued gratuity figure early, so the price you offer reflects it.
- Ladies Salon for Sale in Dubai Marina – USD 98,000 (approx AED 360,000) (Dubai Marina, Dubai)
- Running Cafeteria for Sale in Rawda 2, Ajman – AED 76,000 (Rawda 2, Ajman)
- Running Grocery Shop for Sale in Al Nuaimiya 1, Ajman – AED 45,000 (Al Nuaimiya 1, Ajman)
- Running Grocery Supermarket for Sale in International City, Dubai – AED 150,000 (International City, Dubai)
- Established Restaurant for Sale in International City, Dubai – AED 250,000 (985 sq ft) (International City, Dubai)
- Ladies Salon for Sale in International City, Dubai – AED 65,000 (International City, Dubai)
You can browse every listing in businesses for sale in the UAE, or read what to check when buying a running business in Dubai.
Key takeaways
- UAE gratuity is 21 days of basic wage per year for the first five years and 30 days per year after that, pro rata for part years.
- No gratuity is due for less than one year of continuous service, and unpaid absence does not count.
- Only basic salary counts. Allowances are excluded, and the total is capped at two years’ wage.
- Pay final dues, including gratuity, within 14 days of the contract ending.
- Part-time gratuity is proportionate to contracted hours, and the optional Savings Scheme replaces the lump sum with monthly contributions of 5.83% or 8.33% of basic salary.
- When you buy a business, calculate the staff’s accrued gratuity from verified records and agree in writing who pays it.
Frequently asked questions
How is gratuity calculated in the UAE?
For a full-time expatriate employee in the private sector, gratuity is 21 days of basic wage for each of the first five years of service and 30 days of basic wage for each year after that. Part years count pro rata once the employee has completed one year of continuous service. It is based on the last basic wage only, without allowances, and the total cannot exceed two years’ wage.
Is gratuity paid if an employee resigns in the UAE?
The Article 51 rules summarised on the official UAE Government portal entitle an employee with at least one year of continuous service to gratuity when the service ends, and they set out the same 21-day and 30-day rates without a separate, reduced scale for resignation. Check the employment contract and any MoHRE guidance for the specific case, especially where the employee is dismissed for a reason the law allows.
Is gratuity calculated on basic salary or total salary?
On basic salary. The UAE Government portal says gratuity is calculated on the last wage the worker was entitled to, namely the basic salary, so it does not include allowances such as housing, transport, utilities or furniture. This is why the basic salary written in the contract and paid through WPS matters so much.
Does an employee get gratuity with less than one year of service?
No. An employee who has served less than one year is not entitled to gratuity. Once one year of continuous service is completed, fractions of later years are paid in proportion to the time served. Days of unpaid absence are not counted as service.
When must the employer pay gratuity in the UAE?
The employer must pay all outstanding wages, other entitlements and the gratuity within 14 days of the end of the contract. The employer may deduct amounts the worker legally owes it from the gratuity.
What happens to staff gratuity when I buy a business in Dubai?
It depends on what you buy. If you buy the shares of the company, the employer stays the same, so gratuity already earned by the staff stays with the company you now own. If you buy the assets and run the business under a new licence, the seller is normally the employer that must settle the staff’s end-of-service dues. Either way, ask for a staff list with join dates and basic salaries, calculate the accrued gratuity, and agree in the sale contract who pays it.