End-of-service gratuity is the lump sum every eligible private-sector employee in the UAE receives when their job ends. It is a statutory entitlement, not a bonus, and the rules changed materially under the current labour law. This guide shows exactly how the payment is worked out in 2026, with a worked example you can apply to your own contract.
What is end-of-service gratuity in the UAE?
End-of-service gratuity is a legally mandated severance payment calculated from an employee’s basic salary and total years of continuous service, payable when employment ends after at least one full year. It is governed by Federal Decree-Law No. 33 of 2021, the UAE labour law in force since February 2022.
The entitlement applies to full-time private-sector employees across mainland and most free zones, though the DIFC and ADGM run their own comparable schemes. Crucially, the payment is built on the basic wage only — housing, transport, and other allowances are excluded. That single rule is why gratuity figures are often lower than employees expect.
Who is eligible for gratuity in the UAE?
Any full-time employee who completes at least one year of continuous service is eligible, regardless of whether they resign or are terminated. Days of unpaid leave do not count toward the length of service.
The most important change under the 2021 law is that resignation no longer reduces the payment. Under the previous system, employees on unlimited contracts who resigned before five years received only a fraction of their gratuity. That penalty is gone: an eligible employee now receives the full statutory amount whether they resign or are dismissed, provided the dismissal is not for one of the gross-misconduct reasons that forfeit the entitlement.
How is UAE gratuity calculated in 2026?
Gratuity accrues at 21 days of basic pay for each of the first five years of service, and 30 days of basic pay for every year beyond five. The total gratuity is capped at two years’ full wage.
The calculation runs in three steps. First, find the daily wage by dividing the monthly basic salary by 30. Second, multiply that daily wage by 21 for each of the first five years, and by 30 for each subsequent year. Third, add the results together. Partial years after the first are paid pro rata. The table below shows the accrual rate by service band.
| Years of service | Accrual rate per year | Basis |
|---|---|---|
| Less than 1 year | No gratuity | — |
| 1 to 5 years | 21 days’ basic wage | Basic salary only |
| Each year beyond 5 | 30 days’ basic wage | Basic salary only |
| Overall cap | 2 years’ total wage | Maximum payout |
What does a worked gratuity example look like?
Consider an employee with a monthly basic salary of AED 10,000 who has completed exactly seven years of continuous service. Their daily wage is AED 10,000 divided by 30, or about AED 333.33.
For the first five years, they earn 21 days per year: 5 × 21 × 333.33 = AED 35,000. For the two additional years, they earn 30 days per year: 2 × 30 × 333.33 = AED 20,000. The total gratuity is AED 55,000. Because this is far below two years’ total wage, the cap does not apply. Running the same maths on your own basic salary and tenure gives a reliable estimate of what you are owed.
When must gratuity be paid?
The employer must settle gratuity along with all other end-of-service dues within 14 days of the employment contract ending. Late payment can be escalated to the Ministry of Human Resources and Emiratisation (MOHRE).
Gratuity is calculated on the final basic salary in effect at the end of service. If an employee has been on a salary-savings or investment scheme in place of the traditional accrual — such as the DIFC’s mandatory DEWS plan or the UAE’s voluntary alternative-savings schemes — the payout follows the scheme’s accumulated value instead of the statutory formula. Employees should confirm which system their employer uses before assuming the standard calculation applies.
What reduces or forfeits gratuity?
Two things affect the final figure: the basic-versus-total salary split, and gross misconduct. Because only basic pay counts, a contract that loads most of the package into allowances produces a smaller gratuity even at a high total salary.
Dismissal for one of the serious causes listed in the labour law — such as assault, disclosing trade secrets, or being absent without valid reason for the statutory number of days — can forfeit the entitlement entirely. Ordinary resignation, redundancy, and non-renewal do not. Employees who believe their gratuity has been miscalculated can raise a complaint with MOHRE, which increasingly relies on the details of the registered labour contract and hiring records to resolve disputes.
Key takeaways
In 2026, UAE gratuity is straightforward once three rules are clear: you need at least one year of service, only basic salary counts, and resignation no longer cuts the amount. The formula — 21 days per year for the first five years, 30 days per year thereafter, capped at two years’ pay — applies uniformly across the private sector, with DIFC, ADGM, and savings-scheme employees following their own equivalent arrangements. Checking your basic-salary figure on your contract is the fastest way to know what your final settlement should be.
Sources
- Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations — mohre.gov.ae
- Ministry of Human Resources and Emiratisation, End of Service Benefits — mohre.gov.ae
- UAE Government portal, End of service benefits — u.ae