Gratuity is the lump-sum end of service benefit UAE employers must pay employees who complete at least one year of continuous service. It is calculated on basic salary only: 21 days of basic pay per year for the first five years, and 30 days per year thereafter, capped at two years of total pay.
Federal Decree-Law No. 33 of 2021 governs gratuity for private sector employees. The calculation excludes allowances such as housing and transport, which is why the split between basic salary and allowances matters so much in GCC pay structures. Unpaid days of absence are deducted from the service period.
Free zone employers largely mirror federal rules, though DIFC and ADGM operate their own regimes: DIFC replaced gratuity with the DEWS funded savings plan in 2020. Employers moving staff between mainland and financial free zones should model both systems before transfers.
Audit your gratuity accruals annually against actual basic salaries, not headline packages. Under-provisioning is one of the most common findings in our HR audits across the UAE. If your organisation is restructuring pay, remember that shifting value from allowances into basic salary raises your gratuity liability at the same time.
Last updated: July 2026 | Reviewed by Tuscan Consulting, Dubai