End-of-service gratuity is the largest single payroll liability most UAE employers carry, and the one most often calculated wrongly. The rules sit in Article 51 of Federal Decree-Law No. 33 of 2021.
The formula
- Eligibility begins after one year of continuous service
- 21 days of basic wage for each of the first five years
- 30 days of basic wage for each year beyond the fifth
- Daily wage is basic monthly salary divided by 30
- Partial years are pro-rated once the first year is complete
- Total gratuity is capped at two years of wages
An employee on AED 10,000 basic leaving after five years accrues 105 days, which is AED 35,000.
Basic salary, not total salary
This is where disputes come from. Gratuity is calculated on the basic wage in the MOHRE-registered contract, with housing, transport and other allowances excluded. Where a package of AED 12,000 is structured as AED 6,000 basic plus allowances, gratuity is built on the AED 6,000. That is lawful, and it roughly halves what an employee expects. Better to be explicit at offer stage than at exit.
Resignation no longer reduces it
Under the pre-2022 regime an employee who resigned had gratuity cut on a sliding scale. That was abolished. An employee who resigns after one year receives the full entitlement, exactly as one whose contract was ended by the employer. The myth still circulates in negotiations and is simply out of date. Forfeiture is now limited to dismissal on the specific grounds in Article 44, which the employer must document properly.
Payment within 14 days
Final dues including gratuity must be paid within 14 days of the contract ending. That is a short window for a figure that can reach six digits.
Provision monthly, or feel it all at once
UAE law does not require gratuity to be funded in a segregated account, which is exactly why employers are unprepared when a long-serving employee leaves. Accruing monthly turns a shock into a planned cost. For someone on AED 10,000 basic in their first five years, that is roughly AED 575 a month.
Two exceptions
DIFC employees fall under the funded DEWS scheme rather than classic gratuity, and UAE nationals accrue pensionable service through the relevant pension authority. A voluntary alternative savings scheme also exists, replacing the accruing liability with funded monthly contributions.
See payroll and WPS and bookkeeping for how the provision should sit in your accounts.
General guidance, not advice on a specific business. Figures checked against published sources in September 2026; UAE rules change, so confirm current MOHRE, Ministry of Finance or FTA guidance, or ask us to review your position, before acting.