Gratuity: Meaning and How It Is Calculated in the UAE


For many expats, gratuity is the largest single payment of their working life in the Gulf. It funds a move home, a new business or a child's education. That is why getting the number right, every time, builds so much trust.

Definition: Gratuity is a lump-sum payment an employee receives when their employment ends, as a reward for their years of service. In the UAE private sector, staff qualify after one year of continuous service. They earn 21 days of basic salary for each of the first five years and 30 days for each year after that.

How is UAE gratuity calculated?

  • Start from the last monthly basic salary, without allowances.
  • Work out the daily basic wage.
  • Allow 21 days of basic pay for each of the first five years.
  • Allow 30 days of basic pay for each year after five.
  • Count part years pro rata once the first year is complete.
  • Cap the total at two years' wages.

Example: seven years of service

An employee leaves after seven years on a monthly basic salary of AED 10,000. Using the common method of basic salary divided by 30, the daily wage is about AED 333. The first five years earn 105 days, about AED 35,000. The next two years earn 60 days, about AED 20,000. Total gratuity: roughly AED 55,000.

How much gratuity do you get? Five worked examples

Last basic salaryServiceCalculationGratuity
AED 6,0003 years63 days (3 × 21) × AED 200AED 12,600
AED 10,0005 years105 days (5 × 21) × AED 333.33AED 35,000
AED 10,0007 years165 days (105 + 2 × 30) × AED 333.33AED 55,000
AED 12,00010 years255 days (105 + 5 × 30) × AED 400AED 102,000
Any salaryUnder 1 yearNo entitlementAED 0

Daily wage uses the common method of last basic salary divided by 30. Part years count pro rata after the first full year, unpaid leave days are excluded from service, and the total is capped at two years' wages.

Work out your gratuity now

Gratuity or end of service benefits?

Gratuity is the core payment. End of service benefits is the wider term. It can also include unused leave, notice pay and a repatriation ticket, all settled in the final settlement.

What should HR teams do?

  • Keep basic salary and allowances clearly separate in every contract.
  • Track unpaid leave, which does not count towards service.
  • Accrue gratuity every month so the cost never surprises finance.
  • Pay final dues within 14 days of the employment ending.

Frequently asked questions

Who is eligible for gratuity in the UAE?

Private sector employees who complete at least one year of continuous service with the same organisation.

Is gratuity calculated on basic salary or total salary?

On the last basic salary. Housing, transport and other allowances are not included.

Is there a maximum gratuity amount?

Yes. Total gratuity cannot exceed two years' wages.

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Last updated: November 2026 | Reviewed by Tuscan Consulting, Dubai


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