End-of-service gratuity is the lump sum a private-sector employee in the UAE receives when their employment ends. Getting it right matters for employees, who want what they are owed, and for employers, who need to budget and settle correctly. Here is how the standard calculation works under the UAE Labour Law (Federal Decree-Law No. 33 of 2021).
Who qualifies
Full-time private-sector employees normally qualify after completing at least one year of continuous service. Gratuity is calculated on the last basic salary, not on allowances such as housing or transport.
The basic formula
- First five years: 21 days of basic salary for each year of service.
- Each year after five: 30 days of basic salary per year.
- Cap: the total cannot exceed two years' basic salary.
- Part years are paid in proportion to the days worked.
Daily basic pay is usually worked out as monthly basic salary × 12 ÷ 365.
Worked example 1: three years' service
Basic salary AED 6,000 per month. Daily rate = 6,000 × 12 ÷ 365 = AED 197.26. Gratuity = 21 days × 3 years × 197.26 = AED 12,427 (rounded).
Worked example 2: seven and a half years' service
Basic salary AED 10,000. Daily rate = AED 328.77.
- First 5 years: 21 × 5 × 328.77 ≈ AED 34,521
- Next 2.5 years: 30 × 2.5 × 328.77 ≈ AED 24,658
- Total: about AED 59,178 (using the unrounded daily rate), well under the two-year cap of AED 240,000.
Things that change the figure
- Unpaid leave days are usually excluded from the service period.
- Amounts the employee owes the employer, such as an outstanding salary advance, may be deducted.
- Free-zone employers (for example DIFC and ADGM) have their own schemes, and some employers use approved savings schemes instead of traditional gratuity.
Final settlement: more than gratuity
When someone leaves, the final settlement usually also includes salary for days worked in the final month, encashment of unused annual leave, any notice-period pay and other dues, minus deductions. Our Final Settlement Calculator puts all of these on one sheet.
Do it in minutes: download the End-of-Service Gratuity Calculator (UAE) (instant download, works in Excel and Google Sheets). Need the related files too? Browse UAE business templates or get 25 business templates for AED 29 in our value packs.
This guide is general information, not legal, tax or financial advice. Rules change, so check the latest official guidance or ask a qualified adviser for your situation.