How UAE Gratuity is Calculated
The UAE end of service gratuity — sometimes called EOSG or end of service pay — is a mandatory payment that every employer in the UAE must make to an employee at the end of their employment. The entitlement is governed by the UAE Labour Law, Federal Decree-Law No. 33 of 2021, Article 51.
The calculation is based on your basic monthly salary only. Housing allowance, transport allowance, food allowance, school fees, medical cover, and any other benefits are not included. This is one of the most common misunderstandings expats have — your "total package" is not what gratuity is calculated on.
The Formula Step by Step
- Daily wage = Basic monthly salary ÷ 30
- For the first 5 years of service: 21 days' pay per year
- For each year beyond 5: 30 days' pay per year
- Add the two amounts together to get the base entitlement
- Apply any resignation reduction (if applicable)
- Check against the 2-year cap (max = 24 × basic salary)
Example Calculation
Employee with AED 10,000 basic salary, 7 years of service, terminated by employer:
- Daily wage: AED 10,000 ÷ 30 = AED 333.33
- First 5 years: AED 333.33 × 21 × 5 = AED 35,000
- Years 6 & 7: AED 333.33 × 30 × 2 = AED 20,000
- Total base: AED 55,000
- No resignation reduction (terminated by employer)
- Cap check: AED 10,000 × 24 = AED 240,000 — not exceeded
- Final gratuity: AED 55,000
UAE Gratuity Law: Key Rules for Expats
Minimum Service Requirement
You must have completed at least 1 year of continuous service to be eligible for any gratuity payment. If you leave before completing one year, you receive nothing regardless of the reason.
Resignation vs Termination (Unlimited Contracts)
The 2021 UAE Labour Law distinguishes between resignation and termination for unlimited contracts:
| Service Period | Terminated by Employer | Resigned (Unlimited) | Limited Contract Completed |
|---|---|---|---|
| Less than 1 year | No gratuity | No gratuity | No gratuity |
| 1 to 3 years | Full gratuity | 1/3 of gratuity | Full gratuity |
| 3 to 5 years | Full gratuity | 2/3 of gratuity | Full gratuity |
| 5+ years | Full gratuity | Full gratuity | Full gratuity |
The 2-Year Salary Cap
UAE law caps the total gratuity at 2 years' total salary (i.e., 24 months of basic salary). Employees with very long service periods (typically 25+ years with the same employer) may hit this cap. Our calculator automatically applies the cap when reached.
When Must Your Gratuity Be Paid?
Under Article 53 of the UAE Labour Law, your employer must pay all end-of-service dues — including gratuity — within 14 days of the last working day. Failure to pay on time entitles you to file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).
Limited Contract vs Unlimited Contract
The UAE phased out unlimited contracts under the 2021 Labour Law reforms. All new employment contracts from February 2022 onward are limited (fixed-term) contracts. If you have an existing unlimited contract, it may still apply depending on your employer's transition policy.
For limited contracts, the resignation deduction rule does not apply — you receive full gratuity after 1 year regardless of whether you resign or are terminated.