If you work in the UAE, there is a good chance you have heard of end of service gratuity. It is basically a lump sum payment your employer owes you when you leave your job, and it is one of the biggest financial benefits of working here. Think of it as a form of severance pay or a long-service bonus — the longer you work for a company, the more you get.
But how exactly is it calculated? What counts towards it and what does not? And has anything changed under the new labour law? Let us go through it step by step.
What Is End of Service Gratuity?
Under UAE Federal Decree-Law No. 33 of 2021 (the new labour law, which came into effect on 2 February 2022), every employee who completes at least one year of continuous service is entitled to an end of service gratuity payment. It does not matter whether you resign or are terminated — you are entitled to it either way.
This is different from the old law, which reduced the gratuity if you resigned before completing five years. Under the current law, the full gratuity is payable regardless of how your employment ends, as long as you have completed one year of service.
You can quickly calculate your entitlement using our end of service gratuity calculator. Just enter your basic salary and years of service, and it does the maths for you.
How Is It Calculated?
The calculation is based on your basic salary — not your total package. Allowances like housing, transport, and phone are not included. Here is the formula:
- First five years: 21 days of basic salary for each year of service
- After five years: 30 days of basic salary for each additional year
The total gratuity is capped at two years' worth of basic salary, no matter how long you have worked.
Let us look at a quick example. Suppose your basic salary is AED 10,000 per month, and you have worked for 7 years.
- First 5 years: (10,000 / 30) x 21 x 5 = AED 35,000
- Next 2 years: (10,000 / 30) x 30 x 2 = AED 20,000
- Total gratuity: AED 55,000
That is a decent sum, and for people who stay with one employer for a long time, it can add up to a very significant amount. It is well worth understanding what you are owed.
What Salary Is Used in the Calculation?
This is where people often get confused. The gratuity is calculated on your last basic salary — the basic salary you are earning at the time you leave. If you got pay rises during your employment, those work in your favour because the entire calculation uses the final (higher) figure.
But remember: only basic salary counts. If your contract says your salary is AED 15,000 but that includes AED 5,000 in allowances, then only AED 10,000 is used for the gratuity calculation. This is why it is important to understand how your salary is structured.
What About Part-Time Employees?
Under the new law, part-time employees are also entitled to gratuity, but it is calculated proportionally based on the hours they work relative to a full-time contract. The details should be set out in the employment contract.
Unlimited vs Limited Contracts: Does It Matter Anymore?
Under the old labour law, the type of contract (limited or unlimited) affected your gratuity if you resigned. The new law eliminated unlimited contracts entirely. All employment contracts in the UAE are now fixed-term, with a maximum duration of three years (renewable). This simplifies things — the gratuity rules are the same for everyone.
When Must the Employer Pay?
Your employer must pay your end of service gratuity within 14 days of your last working day. This is a legal requirement, not a suggestion. If they fail to pay on time, you can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).
Along with your gratuity, your employer must also settle any outstanding salary, unused annual leave entitlement, and other dues within the same 14-day period.
Can You Lose Your Gratuity?
There is one situation where you can lose your gratuity entirely: if you are dismissed for one of the reasons listed under Article 44 of the new labour law. These include serious misconduct like fraud, assaulting a colleague, or revealing confidential business information. In that case, the employer may terminate without notice and without paying gratuity.
However, this is a narrow exception. In most termination or resignation scenarios, you keep your full entitlement.
DEWS and Savings Schemes: The New Alternative
The UAE government has introduced the DIFC Employee Workplace Savings (DEWS) scheme as an alternative to the traditional gratuity system. Under DEWS, employers in the DIFC contribute monthly to an investment fund instead of paying a lump sum at the end. This protects employees because the money is ring-fenced — it cannot be affected by the employer's financial troubles.
There are plans to expand similar savings schemes across the UAE. For now, most private sector employees outside the DIFC still receive the traditional gratuity payment. If you work in the DIFC, check your entitlement using our DIFC employee cost calculator.
Gratuity and the GPSSA (For UAE/GCC Nationals)
If you are a UAE or GCC national working in the private sector, your employer must register you with the General Pension and Social Security Authority (GPSSA). In this case, pension contributions replace the gratuity entitlement. The employer pays 12.5% of salary and the employee pays 5%, giving a total contribution of 17.5%. You can explore this further with our GPSSA pension calculator.
Expat employees are not part of the GPSSA system and receive gratuity instead.
Tips to Protect Your Entitlement
- Keep a copy of your employment contract — it should clearly state your basic salary separately from allowances
- Track your start date — gratuity is calculated from the first day of employment
- Check your payslips — make sure your basic salary matches what is in your contract
- Know the law — MOHRE provides guidance and a complaint mechanism if your employer does not pay
End of service gratuity is a fundamental part of working in the UAE. Whether you are planning to leave soon or just want to know where you stand, understanding how it works puts you in a much stronger position. Use our gratuity calculator to get a quick estimate of what you are owed today.