Are you working in the UAE and wondering about your end of service gratuity entitlements? Online Gratuity Calculator (Updated with MOHRE) provides accurate calculations based on the latest UAE Labour Law (Federal Decree-Law No. 33 of 2021). Calculate your gratuity benefits with confidence while understanding all the legal provisions that affect your final settlement.
UAE Gratuity Calculator
Calculate your end-of-service benefits according to UAE Labor Law (2021)
Calculation Results
Total Service Duration: 0 years
Adjusted Service Duration: 0 years
Total Gratuity Payable: AED 0
Example Calculation
Example: 6 years service with AED 10,000 basic salary
- First 5 years: 10,000 ÷ 30 × 21 × 5 = 35,000 AED
- Remaining 1 year: 10,000 ÷ 30 × 30 × 1 = 10,000 AED
- Total Gratuity: 45,000 AED
Table of Contents
Understanding Gratuity in the UAE
End of service benefit, commonly known as gratuity, is a financial benefit that employers must pay to employees upon termination of their employment contract. This benefit is mandated by Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relationships in the UAE.
What is Gratuity?
Gratuity is essentially a sum of money that serves as a token of appreciation for the services rendered by an employee during their tenure with a company. It is calculated based on the employee’s basic salary and the duration of their service.
Who is Eligible for Gratuity?
- Minimum Service Requirement: To be eligible for gratuity in the UAE, an employee must complete at least one year of continuous service with an employer. Employees who resign or are terminated before completing one year of service are not entitled to gratuity payments
- Continuous Service Definition: As defined in Article 1 of Federal Decree-Law No. 33 of 2021, “Continuous Service” refers to uninterrupted service with the same employer or its legal successor, from the date of commencement of work. This means even if your company changes ownership or merges with another entity, your service period remains continuous for gratuity calculation purposes.
- Impact of Unpaid Leave: Periods of unpaid leave are not counted in the calculation of gratuity. This is why our calculator specifically asks for unpaid leave days to ensure accurate calculation. These days are subtracted from your total service period before calculating the gratuity amount.
How Gratuity is Calculated in UAE
Basic Calculation Formula:
According to Article 51 of Federal Decree-Law No. 33 of 2021, the gratuity calculation for full-time employees is as follows:
- For service between one and five years:
- 21 days of basic salary for each year of service
- For service exceeding five years:
- 21 days of basic salary for each of the first five years
- 30 days of basic salary for each year beyond five years
The total gratuity shall not exceed two years’ salary.
Daily Wage Calculation: The daily wage for gratuity calculation is determined by dividing the basic monthly salary by 30, regardless of the actual number of days in the month.
Legal Provisions for End of Service Benefits
The UAE Labour Law (Federal Decree-Law No. 33 of 2021) specifically addresses end of service benefits in Articles 51, 52, and 53. Below are the key provisions:
Article 51: End of Service Benefits for Full-Time Workers
This article outlines the calculation method for gratuity for full-time employees:
- For service less than one year: No gratuity is payable
- For service between one and five years: 21 days of basic salary for each year of service
- For service exceeding five years: 30 days of basic salary for each year after the first five years
Gratuity is calculated on the basic salary, which excludes allowances and additional benefits. The total gratuity shall not exceed two years’ salary.
Article 52: End of Service Benefits for Other Work Patterns
This article addresses gratuity calculations for part-time employees, temporary workers, and those working under other flexible arrangements. The gratuity for these categories is calculated proportionally based on their working hours compared to full-time employees.
Article 53: Payment of Workers’ Entitlements
This article mandates that all end of service entitlements must be paid to the employee within 14 days from the date of termination of the employment contract. Failure to do so may result in penalties for the employer.
Special Cases Affecting Gratuity Calculation
Dismissal for Cause
If an employee is dismissed for gross misconduct under Article 44 of the UAE Labour Law, they may forfeit their right to gratuity. Grounds for dismissal without gratuity include:
- Assuming a false identity or nationality
- Committing an error causing substantial material loss to the employer
- Violating safety instructions after warnings
- Revealing trade secrets
- Being convicted of a crime involving honor, honesty, or public morals
- Being found intoxicated or under the influence of drugs during working hours
- Assaulting colleagues or the employer during work
- Unauthorized absence exceeding the limits specified in the law
Key Terms Explained
Basic Salary
The portion of the total salary specified in the employment contract that does not include allowances or benefits in-kind. Gratuity is calculated based on the basic salary only.
Continuous Service
Uninterrupted employment with the same employer from the commencement date of work. Even a legal successor of the company is considered the same employer for gratuity calculation purposes.
Employment Contract
The agreement between employer and employee that defines the terms of employment, including salary, benefits, and duration.
Limited Contract (Fixed-Term)
A contract with a specified duration agreed upon by both parties. Under the new labour law, all employment contracts must be limited (fixed-term) contracts not exceeding three years.
Notice Period
The time frame that must be given by either party before terminating the employment relationship. This period is specified in the employment contract and must be adhered to.
Common Scenarios Affecting Gratuity Calculation
1. Resignation vs. Termination
Based on Federal Decree-Law No. (33) of 2021, the entitlement to and calculation of end-of-service benefits (gratuity) for full-time foreign workers who have completed at least one year of continuous service is generally the same whether the employment contract ends due to resignation by the employee or termination by the employer. Here’s a breakdown:
Resignation:
If a full-time foreign employee resigns after completing one year or more of continuous service, they are entitled to end-of-service benefits calculated based on their basic wage as follows :
- Twenty-one days’ wage for each year of the first five years of service.
- Thirty days’ wage for each year exceeding five years.
- A proportional benefit for any part of a year worked after completing one year of service.
Termination by Employer (with notice or other legitimate reasons):
Similarly, if the employer terminates the contract (for reasons other than dismissal without notice for specific misconduct), the full-time foreign employee with at least one year of continuous service is entitled to end-of-service benefits calculated using the same formula based on the basic wage.
Important Considerations:
- Dismissal Without Notice: If an employer dismisses an employee without notice under the conditions outlined in Article (44) (e.g., serious misconduct), the employee still retains their right to end-of-service benefits according to Article (82), which mentions “Termination of service while preserving the worker’s right of end of service benefits” as one of the disciplinary sanctions. However, they may not be entitled to a notice period allowance.
- Illegitimate Termination: If the termination by the employer is deemed unlawful according to Article (47) (e.g., due to the employee filing a legitimate complaint or lawsuit against the employer), the employee is entitled to fair compensation determined by the court (up to three months’ wages), in addition to their notice period allowance and end-of-service benefits.
- Resignation Without Notice (with retained rights): In specific cases where the employer breaches their obligations, assaults the worker, or if there’s grave danger at the workplace (Article (45)), the worker can resign without notice and still retain their end-of-service rights.
- Payment Timeline: Regardless of whether the contract ends due to resignation or termination (except possibly in cases of ongoing disputes), the employer must pay all wages and entitlements, including end-of-service benefits, within fourteen days from the end date of the contract term.
- Basic Wage: The calculation of end-of-service benefits is based on the basic wage only, not including allowances.
- Maximum Limit: The total end-of-service benefit for a foreign worker cannot exceed two years’ wage.
In summary, for a full-time foreign worker with more than one year of service, the entitlement to and calculation of gratuity under Federal Decree-Law No. (33) of 2021 are generally the same whether they resign or their employment is terminated by the employer (unless it’s a dismissal without notice for severe misconduct, which still preserves the right to end-of-service benefits). However, the reasons for termination might affect other entitlements like notice period allowance or lead to additional compensation in cases of illegitimate termination.
2. Dismissal for Cause
An employee dismissed for gross misconduct or other justified reasons as specified in Article 44 of the Labour Law may not be entitled to gratuity payments.
3. Death During Employment
In case of the employee’s death, the gratuity amount is payable to the nominated beneficiaries or legal heirs as per Article 15 of the Labour Law.
Recent Changes in UAE Labour Law
The Federal Decree-Law No. 33 of 2021, which came into effect on February 2, 2022, introduced several significant changes to the previous labour law. Key changes affecting gratuity include:
- All employment contracts must now be fixed-term (limited) contracts
- Introduction of flexible and remote work patterns with proportional gratuity calculations
- Enhanced protection for employees against discrimination
- New work models including part-time, temporary, and project-based employment
Frequently Asked Questions
Is gratuity calculated on basic salary or total salary?
Gratuity is calculated on basic salary only, not including allowances or other benefits, unless otherwise specified in the employment contract.
Is gratuity taxable in the UAE?
No, the UAE does not impose income tax, so gratuity payments are not subject to taxation.
Can gratuity be paid in installments?
No, the law requires gratuity to be paid in full within 14 days of employment termination.
How is gratuity affected by unpaid leave?
Periods of unpaid leave are not counted in the calculation of gratuity.
Can an employer withhold gratuity?
An employer can only withhold gratuity if the employee has outstanding debts or liabilities to the company, and only to offset those amounts.
What if the employer refuses to pay gratuity?
Employees can file a complaint with the Ministry of Human Resources and Emiratization (MOHRE) or raise a labour dispute case.
Does gratuity apply to free zone companies?
Yes, the Federal Labour Law applies to all private sector companies in the UAE, including those in free zones, unless the free zone has its own specific employment regulations.
Resources and External Links
For more information on UAE labour laws and gratuity calculations, visit these authoritative resources:
- Ministry of Human Resources and Emiratisation (MOHRE)
- UAE Government Portal – Labour Law
- Federal Authority for Identity and Citizenship
- MOHRE Dispute Resolution
- UAE Labour Law Full Text
Conclusion
Understanding your gratuity entitlements is essential for all employees working in the UAE. The end of service benefit represents an important financial consideration for expatriate workers in particular, functioning as a form of retirement benefit upon concluding employment in the country.
Our calculator provides a comprehensive tool for estimating your gratuity based on the latest UAE Labour Law provisions. However, for complex cases or specific legal guidance, we recommend consulting with a legal professional specialized in UAE employment law.
Remember that your employment contract may contain specific clauses regarding gratuity calculation, so always review your contract terms alongside the general legal provisions. If you believe your gratuity has been incorrectly calculated, you have the right to raise the matter with your employer or with MOHRE through their dispute resolution channels.