Every expat working in the UAE is legally entitled to an end of service gratuity payment when they leave their job, provided they have completed at least one year of continuous service. The amount is based on your basic salary and how long you worked, not your total package. On a AED 10,000 basic salary with 5 years of service, your gratuity is AED 35,000. On 10 years, it is AED 85,000. Most employees either do not know the formula, use the wrong salary figure, or do not realise that resigning on an older unlimited contract reduces their payout. This guide covers the exact calculation, common mistakes, and what to do if your employer underpays.
What is end of service gratuity
End of service gratuity (also called EOSB or end of service benefits) is a lump sum payment that UAE employers are legally required to pay to employees when their employment ends. It is governed by Federal Decree Law No. 33 of 2021 (the UAE Labour Law) and applies to all private sector employees across all emirates.
Gratuity is not a bonus or a gesture of goodwill. It is a legal obligation. Your employer must pay it within 14 days of your last working day. Failure to pay within this period can result in fines, trade licence suspension, and legal action through MOHRE (Ministry of Human Resources and Emiratisation).
Who is eligible
You are eligible for gratuity if you meet all of the following conditions:
Minimum one year of continuous service. If you leave before completing 12 months, you are not entitled to any gratuity regardless of the reason for leaving.
Private sector employment. Gratuity rules under Federal Decree Law No. 33 apply to private sector employees. Government employees (federal and local) are covered by separate pension and benefits schemes.
Not dismissed for gross misconduct. If you are terminated under Article 120 of the Labour Law (for reasons such as fraud, theft, or serious workplace violations), your employer may withhold gratuity.
Your probation period counts toward the one year minimum. If you worked 4 months on probation and then 8 months as a confirmed employee, you have completed 12 months and are eligible.
The gratuity formula
The formula is straightforward:
First 5 years of service: 21 days of basic salary for each year.
After 5 years: 30 days of basic salary for each additional year.
Maximum cap: Total gratuity cannot exceed 2 years (24 months) of basic salary, regardless of how long you worked.
The daily rate is calculated as: basic monthly salary divided by 30.
| Years of service | Gratuity days per year | Formula |
|---|---|---|
| Year 1 to 5 | 21 days | (Basic salary / 30) x 21 x years |
| Year 6 onwards | 30 days | (Basic salary / 30) x 30 x additional years |
This formula applies identically to limited contracts whether you resign or are terminated. For older unlimited contracts, resignation reduces the amount (see below).
Limited (fixed term) contract calculation
Since February 2023, all new employment contracts in the UAE are fixed term (limited). If your contract was signed or renewed after February 2022, this is your calculation. The formula is the same whether you resign or are terminated.
| Service period | Gratuity entitlement |
|---|---|
| Less than 1 year | No gratuity |
| 1 to 5 years | 21 days of basic salary per year |
| More than 5 years | 21 days per year for the first 5 years, plus 30 days per year for each year after 5 |
Example: AED 15,000 basic salary, 7 years of service on a limited contract. Daily rate = AED 15,000 / 30 = AED 500. First 5 years: AED 500 x 21 x 5 = AED 52,500. Next 2 years: AED 500 x 30 x 2 = AED 30,000. Total gratuity: AED 82,500.
Unlimited contract calculation (pre 2023 contracts)
If you are still on an unlimited contract that was signed before February 2022 and has not been renewed since, different rules apply when you resign. If your employer terminates you, the calculation is the same as a limited contract (full 21/30 days). But if you resign, a progressive reduction applies:
| Service period (resignation) | Gratuity entitlement |
|---|---|
| Less than 1 year | No gratuity |
| 1 to 3 years | One third of 21 days per year |
| 3 to 5 years | Two thirds of 21 days per year |
| More than 5 years | Full 21 days for first 5 years, full 30 days per year thereafter |
This reduction can cost you thousands. On a AED 10,000 basic salary with 3 years of service, the full gratuity is AED 21,000. If you resign on an unlimited contract, you receive one third: AED 7,000. That is a AED 14,000 difference. If you are on an unlimited contract and planning to resign with fewer than 5 years of service, check whether your employer is willing to convert your contract to fixed term before you resign. Many employers will agree because the law now requires it anyway.
Important: if your unlimited contract was renewed after February 2022, it should have been converted to a fixed term contract automatically. In that case, the resignation reduction no longer applies. Check your current contract carefully.
Worked examples at 3 salary levels
AED 5,000 basic salary
| Years of service | Gratuity (limited contract) | Gratuity (unlimited, resigned) |
|---|---|---|
| 1 year | AED 3,500 | AED 1,167 |
| 3 years | AED 10,500 | AED 3,500 |
| 5 years | AED 17,500 | AED 11,667 |
| 10 years | AED 42,500 | AED 42,500 |
AED 10,000 basic salary
| Years of service | Gratuity (limited contract) | Gratuity (unlimited, resigned) |
|---|---|---|
| 1 year | AED 7,000 | AED 2,333 |
| 3 years | AED 21,000 | AED 7,000 |
| 5 years | AED 35,000 | AED 23,333 |
| 10 years | AED 85,000 | AED 85,000 |
AED 20,000 basic salary
| Years of service | Gratuity (limited contract) | Gratuity (unlimited, resigned) |
|---|---|---|
| 1 year | AED 14,000 | AED 4,667 |
| 3 years | AED 42,000 | AED 14,000 |
| 5 years | AED 70,000 | AED 46,667 |
| 10 years | AED 170,000 | AED 170,000 |
| 15 years | AED 270,000 | AED 270,000 |
After 5 years of service, the unlimited contract resignation penalty disappears and both contract types pay the same amount.
What counts as basic salary
Gratuity is calculated on your basic salary only. This is the fixed base amount stated in your employment contract. It does not include:
Housing allowance. Transport allowance. Phone allowance. Commissions. Bonuses. Overtime pay. Any other variable or supplementary payments.
If your contract shows a total package of AED 15,000 with a AED 8,000 basic and AED 7,000 in allowances, your gratuity is calculated on AED 8,000, not AED 15,000.
Watch out for low basic salary structures. Some employers deliberately set the basic salary low (for example AED 3,000 basic out of AED 15,000 total) to minimise their gratuity liability. On a AED 3,000 basic with 10 years of service, your gratuity is AED 25,500. On a AED 10,000 basic with the same service, it is AED 85,000. When negotiating a job offer, the basic to total salary ratio directly affects your EOSB. A higher basic salary means a larger gratuity.
Common mistakes that cost you money
Using total salary instead of basic salary. The most common error. Employees calculate gratuity on their total package and expect AED 50,000, then receive AED 25,000 because the calculation uses basic salary only.
Not knowing your contract type. If you are on a pre 2023 unlimited contract and you resign before 5 years, your gratuity is reduced by up to two thirds. Many employees do not check their contract type until they resign and discover the reduction.
Counting unpaid leave in service duration. Days of unpaid leave are excluded from your service period. Two months of unpaid leave reduces your total service by two months, which can push you below a year threshold and affect your gratuity calculation.
Not serving the notice period. If you resign without serving the required notice period (typically 30 to 90 days), your employer can deduct an amount equivalent to the unserved notice period from your gratuity.
Accepting the employer’s calculation without verifying. MOHRE provides an official gratuity calculator on their website and app. Use it before accepting your final settlement. Employer errors (intentional or not) are common, particularly around the basic salary figure used and the treatment of partial years.
What to do if your employer does not pay
UAE law requires employers to pay gratuity within 14 days of the employee’s last working day. If your employer delays or refuses to pay:
Step 1: Send a written request (email) to your employer’s HR department asking for the payment timeline and a breakdown of the gratuity calculation.
Step 2: If no response within 14 days, file a complaint through the MOHRE website (mohre.gov.ae), the MOHRE Smart App, or by calling 800 60. Filing is free and does not require a lawyer.
Step 3: MOHRE initiates a mediation period (typically two weeks) where both parties are contacted to reach a resolution.
Step 4: If mediation fails, the case is automatically referred to the UAE Labour Court. At this stage, you may want to engage a lawyer, though it is not required.
Prepare the following documents before filing: your employment contract, salary certificate confirming your basic salary, payslips covering your employment period, the final settlement document (if received), and any written communication with your employer about the dispute.
Frequently asked questions
How is gratuity calculated in the UAE?
Gratuity is calculated based on your basic salary and length of service. For the first 5 years: 21 days of basic salary per year. After 5 years: 30 days of basic salary per additional year. The daily rate is your monthly basic salary divided by 30. The total gratuity cannot exceed 2 years (24 months) of basic salary.
Do I get gratuity if I resign?
Yes, if you have completed at least one year of service. On a limited (fixed term) contract, resignation does not reduce your gratuity. On an older unlimited contract (signed before February 2022), resigning before 5 years reduces your gratuity: one third for 1 to 3 years, two thirds for 3 to 5 years, and full amount after 5 years.
Is gratuity calculated on basic salary or total salary?
Basic salary only. Housing allowance, transport allowance, commissions, bonuses, and any other supplementary payments are excluded. Only the fixed base salary stated in your employment contract is used for the calculation.
What is the maximum gratuity I can receive?
The total gratuity cannot exceed 2 years (24 months) of your basic salary, regardless of how long you have worked. For example, on a AED 10,000 basic salary, the maximum gratuity is AED 240,000. This cap is typically reached after approximately 15 or more years of service.
How long does my employer have to pay gratuity?
Within 14 days of your last working day. If your employer fails to pay within this period, you can file a complaint with MOHRE for free through their website, app, or by calling 800 60.
Does unpaid leave affect my gratuity?
Yes. Days of unpaid leave are excluded from your total service period. If you took 2 months of unpaid leave during your employment, your service period for gratuity purposes is reduced by 2 months. Paid annual leave, sick leave, and maternity leave do not reduce your service period.
Are unlimited contracts still valid in the UAE?
No new unlimited contracts have been issued since February 2022. Existing unlimited contracts were required to be converted to fixed term by February 2023. If your contract has not been renewed or converted since then, it may still technically be an unlimited contract, and the resignation reduction rules would apply. Check with your employer or HR department to confirm your current contract type.
Is gratuity taxable in the UAE?
No. The UAE has no personal income tax. Gratuity payments are not taxed locally. However, if you are a tax resident of another country, you may need to report the payment in your home jurisdiction. Consult a tax advisor if you hold citizenship in a country with global tax obligations (such as the United States).