1 AED = ₹25.63Reference rateUpdated 7 Nov 2026, 22:58 GST
UAE gratuity is calculated on your last basic salary only, at 21 days of basic pay for each of the first five years of service and 30 days for each year after that — that is the whole formula, set by Article 51 of Federal Decree-Law No. 33 of 2021, and everything else in this guide is the detail that decides whether the number comes out right. If you just want your own figure, use the UAE gratuity calculator now and come back for the rules; if you want to check an employer’s settlement line by line, read on.
The 21-day / 30-day rule, exactly
Article 51 gives a full-time foreign employee in the private sector who has completed at least one year of continuous service an end-of-service gratuity calculated as follows. For each year of the first five years of service: a wage of 21 days. For each year beyond five: a wage of 30 days. A “day” of wage means your monthly basic salary divided by 30 — the law expresses the entitlement in days of basic wage, and dividing the monthly basic by 30 is the standard way employers and MOHRE-facing guidance turn that into dirhams.
So the formula, in full: gratuity = (monthly basic salary ÷ 30) × [21 × years up to five, plus 30 × years beyond five]. Service beyond a full year is counted pro-rata once the first year is complete — a person with four years and eleven months is not rounded down to four years. Days of unpaid absence are excluded from the service period: they neither earn gratuity nor count towards the year thresholds. And there is a hard ceiling — the total gratuity can never exceed two years’ wage, however long the service.
Worked examples: basic salary AED 10,000
All five examples use the same basic salary, AED 10,000 a month, so a day of basic pay is AED 10,000 ÷ 30 throughout. The dirham figures are the exact arithmetic of Article 51; the rupee figures are rendered live from today’s reference rate, so they stay current after publication.
| Service | Gratuity days | How the days are built | Gratuity (AED) | In rupees (live) |
|---|---|---|---|---|
| 1 year | 21 days | 1 × 21 | AED 7,000 | AED 7,000 (≈ ₹1,79,400) |
| 3 years | 63 days | 3 × 21 | AED 21,000 | AED 21,000 (≈ ₹5,38,300) |
| 5 years | 105 days | 5 × 21 | AED 35,000 | AED 35,000 (≈ ₹8,97,100) |
| 7 years | 165 days | (5 × 21) + (2 × 30) | AED 55,000 | AED 55,000 (≈ ₹14,09,700) |
| 10 years | 255 days | (5 × 21) + (5 × 30) | AED 85,000 | AED 85,000 (≈ ₹21,78,600) |
Notice the step-up after year five. Each of the first five years adds 21 days — seven-tenths of a month’s basic salary. Each year after that adds a full month’s basic salary. That is why two extra years of service between year five and year seven add AED 20,000 at this salary level, while two extra years between year one and year three add AED 14,000. When you are deciding whether to leave in year four or stay into year six, this table is the maths of that decision. To run your own salary through the same table, use the gratuity calculator.
Basic salary only: what counts and what does not
Article 51 calculates gratuity on the basic wage — the wage stated as basic in your contract, without allowances or benefits in kind. Housing allowance, transport allowance, utilities, phone, education allowances, overtime, bonuses and sales commission are all outside the calculation, even if together they are larger than the basic salary itself. The salary used is your last basic wage: if your basic salary rose over your service, the whole gratuity is worked out at the final figure, not averaged across the years. This is also why the basic-versus-allowances split in a UAE offer letter deserves real attention before you sign — employers structure packages differently, and a higher-basic offer can be worth considerably more at exit than a higher-package offer with a thin basic line. Salary context for those negotiations is in our guide to the average salary in Dubai.
What the old law said — and why it no longer applies
Much of the confusion around UAE gratuity comes from the previous law, Federal Law No. 8 of 1980, which Federal Decree-Law No. 33 of 2021 replaced with effect from 2 February 2022. Two features of the old system are gone completely. First, the distinction between limited and unlimited contracts, which used to change a resigning employee’s entitlement, no longer exists for gratuity purposes — under the current framework, private-sector contracts are fixed-term and the gratuity formula is the same either way. Second, the old resignation reductions — under which an employee who resigned at certain service lengths received only a third or two-thirds of the gratuity — were abolished. Under the current law, an eligible employee who resigns receives the full amount the formula gives; termination and resignation are calculated identically. If a settlement statement, an HR handbook or a colleague’s advice applies a resignation reduction, it is applying a law that no longer governs your contract.
Under one year, part-years and unpaid absence
Less than one year of continuous service means no gratuity at all — the entitlement starts at the one-year mark, it does not phase in from day one. From one year onward, fractions of a year count pro-rata: six extra months in the first five years add ten and a half days, and six extra months beyond year five add fifteen days. Unpaid absence runs the other way: days of absence without pay are deducted from the service period before the formula is applied, so a long unpaid break earlier in your service reduces the total even though your start and end dates look unchanged. Paid annual leave, by contrast, is part of service — it is absence without pay that is excluded.
The cap, and the 14-day payment rule
Article 51 caps the total gratuity at two years’ wage. At a basic salary of AED 10,000 that ceiling is the value the formula reaches only after very long service, so for most employees the cap never binds — but for long-serving senior staff it is a real limit, and it is a limit on the total, not a per-employer resetting figure if service is continuous. Payment timing is set separately, by Article 53: the employer must pay the worker’s wages and all other entitlements arising under the law within 14 days of the contract’s end date. Gratuity is one of those entitlements, alongside final salary and any accrued leave payment. If the 14 days pass without settlement, the route is a complaint through MOHRE — and our overview of end-of-service benefits in the UAE sets out the full settlement picture, including what else should appear in that final payment.
How to check your employer’s settlement statement
When your final settlement arrives, check it in the same order the law builds it. Start with the basic salary printed on the statement: it must be the basic wage from your contract as it stood at the end of your service, not the basic from your first offer letter if the salary was revised. Next, check the service period — your start date, your end date, and any unpaid absence deducted in between; an unexplained deduction of days is the most common honest error and the easiest to document. Then rebuild the days yourself: 21 days for each year up to five, 30 for each year after, pro-rata for the final part-year, and compare the total days with the statement before you look at the money at all. Only then multiply: days times basic divided by 30. If the employer’s figure is lower, ask which input differs — in practice, disputes are almost always about the basic salary figure or the service period, not about the formula, because the formula is fixed by Article 51.
Two deductions questions come up repeatedly. An employer may set off amounts that are genuinely owed under the law’s permitted deductions — for example, a salary advance that was never repaid — but a deduction must have a legal basis and should be itemised, not folded silently into a smaller gratuity. And gratuity is separate from other end-of-service amounts: pay for accrued but unused annual leave and any owed salary are calculated under their own rules and should appear as their own lines, not be netted against gratuity. If the statement bundles everything into one unexplained lump sum, ask for the breakdown in writing — you are entitled to understand how the figure was reached, and MOHRE’s channels exist for exactly the cases where a clear breakdown is not provided.
DIFC, ADGM and the voluntary Savings Scheme
The formula in this guide is the federal private-sector system. It does not cover everyone who works in the UAE. The Dubai International Financial Centre (DIFC) runs its own employment law and replaced gratuity for its employers with the DIFC Employee Workplace Savings plan (DEWS), a funded workplace savings scheme; the Abu Dhabi Global Market (ADGM) likewise applies its own employment regulations and end-of-service provisions. If your employer is a DIFC or ADGM entity, ask which system your contract sits under before using any mainland calculator.
There is also now an alternative inside the federal system itself. Under the voluntary Alternative End-of-Service Benefits System — the Savings Scheme, established by Cabinet Resolution No. 96 of 2023 and administered with MOHRE — an employer may choose to fund the benefit monthly into an approved investment fund instead of paying a lump sum at exit. The employer’s monthly contribution is 5.83% of the employee’s monthly basic salary while the employee has under five years of service, and 8.33% once the employee has passed five years — percentages you will recognise as the 21-day and 30-day accruals expressed monthly. The scheme is voluntary for the employer, it is an alternative to the gratuity for enrolled periods rather than an addition to it, and the amount the employee eventually receives depends on the fund, not on the Article 51 formula. If your employer enrols you, the switch should be documented — ask what happens to the gratuity you had already accrued before enrolment, because that accrued entitlement is meant to be preserved.
Frequently asked questions
What is the 21-day / 30-day rule exactly?
21 days of basic wage for each year of the first five years of service, and 30 days of basic wage for each additional year, under Article 51 of Federal Decree-Law No. 33 of 2021. A day is your monthly basic salary divided by 30.
Does the limited vs unlimited contract distinction still matter?
No. That distinction belonged to the pre-2022 law and was abolished when Decree-Law 33 of 2021 took effect on 2 February 2022. The gratuity formula is the same for every covered fixed-term contract.
What is the maximum gratuity?
Two years’ wage in total, however long the service. Most employees never reach the cap; it binds only after very long service.
What do I get with less than one year of service?
Nothing. Gratuity requires at least one year of continuous service; from one year onward, part-years count pro-rata.
Does resigning reduce my gratuity?
No. The resignation reductions of the old law were abolished. Resignation and termination produce the same Article 51 figure for an eligible employee.
Sources and method
Primary rules: Federal Decree-Law No. 33 of 2021, Articles 51 and 53, as published by the UAE Government portal (u.ae) on its end-of-service benefits page for private-sector employees, and MOHRE’s October 2026 guidance as reported by Gulf News and Arabian Business. Savings Scheme rates: u.ae’s Savings Scheme description (5.83% / 8.33% of monthly basic salary) under Cabinet Resolution No. 96 of 2023 and Ministerial Resolution No. 668 of 2023, summarised also in Legal500’s MoHRE guidance note. Worked examples: calculated directly from the Article 51 formula and cross-verified against this site’s gratuity calculator on identical inputs. Rupee figures: rendered live by this site’s FX tool from the stored reference rate. This guide is information, not legal advice.