Accounting & Bookkeeping UAE, Insights

UAE Gratuity Calculation 2026: End of Service Benefits

10 min read

How Is UAE End of Service Gratuity Calculated in 2026?

Quick Answer: UAE gratuity is 21 days of basic salary per year for the first 5 years of service, then 30 days per year for each year beyond 5. The minimum qualifying service is 1 year. Under Federal Decree-Law No. 33 of 2021, both resigned and terminated employees receive the same full gratuity with no reduction for resignation.

UAE gratuity calculation 2026 follows the formula set under Federal Decree-Law No. 33 of 2021. End of service gratuity is one of the most important financial entitlements for private-sector employees in the UAE. Whether you are an employer calculating what you owe a departing staff member, or an employee checking your rights, getting the formula right is critical. Errors lead to MOHRE complaints, labour disputes, and financial penalties.

In this guide, Qaspro Global breaks down the exact gratuity formula, step-by-step calculations with real AED amounts, DIFC exceptions, and every rule that applies to UAE businesses and employees in 2026.

What Is UAE End of Service Gratuity?

UAE end of service gratuity is a mandatory lump-sum payment that every private-sector employer must make to an employee when the employment contract ends. It is governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships, specifically Articles 51, 52, and 53, which replaced the previous Federal Law No. 8 of 1980 from February 2022.

Gratuity is calculated on basic salary only, not total compensation. Housing allowance, transport allowance, utilities, bonuses, commissions, and overtime are all excluded from the gratuity calculation base.

Who Is Entitled to End of Service Gratuity in UAE?

Under Article 51 of Federal Decree-Law No. 33 of 2021, all private-sector employees in the UAE are entitled to end of service gratuity after completing a minimum of one year of continuous service. The key eligibility rules are:

Private sector only: Government and public sector employees follow separate pension schemes administered by state authorities.
UAE nationals: Covered by GPSSA pension contributions, not the gratuity system under Federal Law 33/2021.
Minimum 1 year service: No gratuity is payable for less than 12 months of employment. Days of unpaid absence do not count toward service.
Resignation and termination both qualify: The resignation penalty was abolished in 2022. Both situations now receive full gratuity.
Domestic workers: Governed separately under Federal Decree-Law No. 9 of 2022 with different provisions.
Part-time employees: Entitled to proportional gratuity under Article 52.

What Is the UAE Gratuity Formula for 2026?

The gratuity calculation formula under Article 51 of Federal Decree-Law No. 33 of 2021 works as follows:

Years 1 to 5: 21 days of basic salary for each completed year of service
Year 6 and beyond: 30 days of basic salary for each additional year after the first 5
Daily rate: Basic monthly salary divided by 30
Partial years: Calculated on a pro-rata basis after the first full year is completed
Maximum cap: Total gratuity cannot exceed the equivalent of 2 full years of basic salary (Article 53)

Gratuity Calculation Formula in Simple Terms

For an employee with a basic monthly salary of AED X:

Daily rate = AED X divided by 30
Service of 1 to 5 years: Gratuity = Daily rate x 21 x total years
Service over 5 years: Gratuity = (Daily rate x 21 x 5) + (Daily rate x 30 x years beyond 5)

UAE Gratuity Calculation 2026: Worked Examples with AED Amounts

The table below shows gratuity amounts for an employee earning AED 10,000 basic salary per month. The daily rate is AED 10,000 / 30 = AED 333.33 per day.

Years of Service	Days Earned	Calculation	Total Gratuity (AED)
1 year	21 days	21 x AED 333.33	AED 7,000
2 years	42 days	42 x AED 333.33	AED 14,000
3 years	63 days	63 x AED 333.33	AED 21,000
5 years	105 days	105 x AED 333.33	AED 35,000
7 years	165 days	(105 + 60) x AED 333.33	AED 55,000
10 years	255 days	(105 + 150) x AED 333.33	AED 85,000

Based on AED 10,000 basic monthly salary. The 2-year maximum cap of AED 240,000 applies only at very long service tenures for this salary level.

How to Calculate Gratuity for a Partial Year

If an employee has worked 3 years and 6 months (after completing the first full year), the partial year is included on a pro-rata basis. Using AED 10,000 basic salary:

3 full years: 63 days x AED 333.33 = AED 21,000
6 months (0.5 year): 0.5 x 21 x AED 333.33 = AED 3,500
Total gratuity: AED 24,500

What Changed Under the New UAE Labour Law for Gratuity?

Federal Decree-Law No. 33 of 2021 made one significant improvement for employees: the resignation penalty was permanently abolished. Under the previous Federal Law No. 8 of 1980, employees who resigned before completing 5 years received reduced gratuity: one-third for 1 to 3 years of service, and two-thirds for 3 to 5 years. That reduction no longer applies under the current law.

Since February 2022, every employee who resigns after completing one year receives the full gratuity entitlement, identical to an employee who was terminated. The unlimited contract type was also removed, and all private-sector employees must be on fixed-term contracts. Employers who had unlimited contracts were required to convert them to fixed-term contracts by 1 February 2023.

How Does Gratuity Work in UAE Free Zones?

Most UAE free zones follow the same Federal Decree-Law No. 33 of 2021 gratuity rules as the mainland. This includes JAFZA, DMCC, RAKEZ, IFZA, Meydan, SHAMS, and all other non-financial free zones. There are two exceptions worth noting:

DIFC (Dubai International Financial Centre): Uses the DIFC Employee Workplace Savings (DEWS) scheme instead of the lump-sum gratuity model. Employers make monthly contributions of 5.83% of basic salary for employees with under 5 years of service, and 8.33% for employees with 5 or more years, into a regulated savings plan. This replaces the standard gratuity payment at end of service.
ADGM (Abu Dhabi Global Market): Operates under its own independent employment regulations with updated provisions introduced in 2024 and 2025.

All other free zones default to Federal Law 33/2021. If you are uncertain about your free zone’s gratuity obligations, review your employment contracts against the applicable regulatory framework.

When Must UAE Employers Pay End of Service Gratuity?

Employers must settle all outstanding wages, accrued annual leave, and gratuity within 14 days of the contract end date. This deadline is strict. Failure to pay within 14 days entitles the employee to file a MOHRE complaint through the MOHRE app, the MOHRE website (mohre.gov.ae), or by calling 800-60. The complaint triggers a mandatory reconciliation process and can escalate to labour court proceedings if unresolved. Employers may also face financial penalties for delayed payment.

Processing gratuity and final settlements is part of the broader PRO services workflow that many UAE businesses outsource to avoid errors and delays with MOHRE. See also our guide on labour cards in UAE 2026 for the full employment lifecycle from onboarding through exit.

Can UAE Employers Reduce or Withhold Gratuity?

Gratuity cannot be withheld without legal cause. Employers may deduct amounts legally owed by the employee from the gratuity, such as outstanding salary advances or loans provided under a written agreement. However, such deductions cannot reduce the gratuity to zero unless the owed amount equals or exceeds the total gratuity entitlement. If the employer claims the employee caused financial damage to the business, a formal court order is required before any deduction can be made on that basis. Unilateral withholding exposes the employer to MOHRE action.

Is UAE Gratuity a Deductible Expense for Corporate Tax?

Yes. End of service gratuity paid or properly provisioned in line with UAE labour law qualifies as a deductible expense under Article 28 of Federal Decree-Law No. 47 of 2022 on Corporate Tax. Qaspro Global advises all UAE businesses to accrue gratuity provisions monthly in their financial accounts. Monthly accrual achieves two things: it aligns with IFRS financial reporting standards for accurate balance sheet presentation, and it ensures the correct deduction is available each tax year rather than creating a large, potentially disputed deduction at the point of payment. Underprovided or undocumented gratuity can trigger FTA audit adjustments.

For a full breakdown of allowable deductions, see our guide to UAE Corporate Tax Deductible Expenses 2026.

Frequently Asked Questions

What is the UAE gratuity calculation for 5 years of service?

For 5 years of service, gratuity equals 21 days of basic salary multiplied by 5, giving 105 days total. On a monthly basic salary of AED 10,000, this equals AED 35,000. The formula is 105 x (AED 10,000 / 30) = AED 35,000.

Do I get gratuity if I resign in UAE?

Yes. Under Federal Decree-Law No. 33 of 2021, which has applied since February 2022, resigned employees receive the same full gratuity as terminated employees. The old reduced-gratuity penalty for resignation was abolished. You must have completed at least one full year of continuous service.

What counts as basic salary for UAE gratuity?

Basic salary for gratuity purposes is the fixed wage stipulated in the employment contract. It excludes housing allowance, transport allowance, utilities, bonuses, commissions, overtime pay, and any in-kind benefits. Only the amount listed as basic salary in the contract is used to calculate the daily rate.

What is the maximum gratuity in UAE?

Under Article 53 of Federal Decree-Law No. 33 of 2021, total gratuity cannot exceed the equivalent of two full years of basic salary. For an employee earning AED 10,000 basic monthly salary, the cap is AED 240,000. This cap typically applies only to employees with very long service periods.

When must an employer pay gratuity in UAE?

UAE employers must pay all outstanding gratuity within 14 days of the contract termination date. Failure to meet this deadline entitles the employee to file an immediate complaint through MOHRE, which can escalate to court proceedings and employer penalties.

Is gratuity the same in free zones and mainland UAE?

Yes for most free zones. JAFZA, DMCC, RAKEZ, IFZA, and other non-financial free zones all follow Federal Decree-Law No. 33 of 2021. The exception is DIFC, which uses the DEWS monthly contribution scheme (5.83% or 8.33% of basic salary depending on tenure) instead of the lump-sum model.

Do part-time employees get end of service gratuity in UAE?

Yes. Under Article 52 of Federal Decree-Law No. 33 of 2021, part-time employees receive gratuity proportional to their working hours relative to a full-time equivalent. The minimum one-year continuous service requirement still applies.

How should UAE companies account for gratuity in their books?

Companies should accrue gratuity as a liability on a monthly basis using the formula prescribed under Federal Decree-Law No. 33 of 2021. This is required under IFRS for SMEs for accurate financial statements and also supports correct deduction under Article 28 of the Corporate Tax Law. Monthly accruals avoid large one-time charges and reduce the risk of FTA audit adjustments on corporate tax returns.

Need Help with Payroll and Gratuity Compliance?

Qaspro Global’s accounting and HR compliance team helps UAE businesses set up accurate gratuity provisions, process WPS-compliant payroll, and maintain records that satisfy both MOHRE and FTA requirements. Contact us today for a free consultation.