UAE Gratuity Law: The Ultimate Guide to Calculating Your End of Service Benefits
What is End of Service Gratuity?
End of Service Gratuity is a monetary payment eligible to foreign employees in the UAE upon the termination of their employment. It serves as a form of severance pay and is a statutory right under UAE Labor Law.
The calculation is strictly based on your Basic Salary. This means allowances for housing, transport, and utilities are excluded from the final gratuity calculation. Understanding this distinction is crucial when using any Gratuity Calculator.
The Golden Formula: How It Works
Under the current UAE Labor Law (Federal Decree-Law No. 33 of 2021), the calculation method has been standardized for full-time employees. Provided you have completed at least one year of continuous service, your gratuity is calculated as follows:
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First 5 Years of Service You are entitled to 21 days' basic salary for each year.
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Exceeding 5 Years For every year thereafter, you are entitled to 30 days' basic salary per year.
*Note: The total gratuity cannot exceed two years' worth of total salary.
Limited vs. Unlimited Contracts
Historically, the type of contract (Limited vs. Unlimited) and the reason for leaving (Resignation vs. Termination) significantly impacted the final amount.
However, under the New Labor Law, most private sector contracts have been converted to fixed-term (Limited) contracts. This allows for a fairer, standardized calculation where the employee is entitled to full gratuity regardless of whether they resign or are terminated, provided they finish the notice period and have served more than one year.
Disclaimer
The information provided in this guide is for general informational purposes only and does not constitute legal advice. UAE Labor Laws are subject to updates. We recommend consulting with a legal professional or the Ministry of Human Resources and Emiratisation (MOHRE) for official legal counsel regarding your specific End of Service benefits.
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