If you work in the United Arab Emirates, you have probably come across the term gratuity or end-of-service benefits. But what does it mean, and how can you know the exact amount you are entitled to when you leave your job?
A gratuity is a one-time payment given to employees at the end of their service. It is a legal right under UAE Labour Law, and it serves as a financial cushion when you leave your job, whether due to resignation, end of contract, or termination.
Many expats in the UAE are either unaware of how gratuity works or unsure of how to calculate it correctly. However, understanding your gratuity entitlement is important. It helps you plan your finances, avoid misunderstandings, and ensure you receive fair compensation for your service.
Whether you are finishing a job, considering a new opportunity, or simply want to be prepared, this guide will explain everything you need to know about gratuity in the UAE.
Who is Eligible for Gratuity
- You are entitled to receive gratuity if the following conditions are met
- You have completed at least one full year of continuous service
- You are employed under a limited or unlimited contract
- You were not terminated for gross misconduct
- Even if you resign, you may still be eligible for gratuity depending on your contract type and how long you have worked with the company
What Affects the Gratuity Amount
- Several factors play a role in determining how much gratuity you will receive
- Your basic monthly salary only. Allowances like housing or transportation are not included
- Type of employment contract, whether limited or unlimited
- Total years of service with the company
- Now, let’s look at the calculation methods based on your contract type
Gratuity Calculation for Limited Contracts
If your limited contract ends normally or is terminated by the employer, the gratuity is calculated as follows:
- 21 days of your basic salary for each year of service during the first five years
- 30 days of your basic salary for every year beyond five years
You can use this Gratuity Calculator UAE tool to know your end of service.
Calculation Formula
Gratuity = (21 or 30 days ÷ 30) × Basic Salary × Years of Service
Example
If your basic salary is AED 6000 and you worked for 6 years
For the first 5 years: (21 ÷ 30) × 6000 × 5 = AED 21000
For the 6th year: (30 ÷ 30) × 6000 × 1 = AED 6000
Total gratuity = AED 27000
Gratuity Calculation for Unlimited Contracts
If you resign under an unlimited contract, the gratuity amount depends on how long you have worked
From 1 to 3 years: You are entitled to one-third of 21 days of salary for each year
From 3 to 5 years: You get two-thirds of 21 days of salary per year
More than 5 years: You get the full 21 days per year for the first five years and 30 days for each year after that
Example
If your basic salary is AED 5000 and you resign after 6 years
For the first 5 years: (21 ÷ 30) × 5000 × 5 = AED 17500
For the 6th year: (30 ÷ 30) × 5000 × 1 = AED 5000
Total gratuity = AED 22500
Important Points to Remember
- Your gratuity cannot exceed the total of two years’ salary
- Any unpaid leaves will not be counted in the total years of service
- If you are dismissed due to serious misconduct, you may lose your right to gratuity
- Always double-check your final settlement to ensure it matches your calculations
Gratuity Calculator Tools
If you prefer not to do the math manually, you can use online tools like the Gratuity Calculator UAE. Just enter your basic salary, contract type, and years of service to get an estimate in seconds.
Conclusion
Knowing how to calculate your gratuity in the UAE is more than just understanding numbers. It’s about being aware of your legal rights, planning your next move wisely, and ensuring you receive the benefit you have worked hard for.
Many employees make the mistake of assuming that their full salary, including allowances, is used in the calculation. Others are not aware of how their contract type or resignation timing can influence the final amount. These small misunderstandings can lead to big disappointments.
By learning the correct way to calculate your gratuity, you are in a better position to negotiate your final settlement and protect your financial future. If you are nearing five years of service, consider how that milestone might affect your benefit. It could be worth staying a little longer before you resign.
Keep in mind that UAE labour laws continue to evolve to serve both employees and employers. It’s always a good idea to stay updated and speak to HR or legal experts if you are uncertain.
So whether you are moving on to new opportunities or simply planning, this knowledge will help you transition with confidence and clarity.
