How to calculate gratuity in the UAE: divide the employee’s last monthly basic salary by 30, multiply the daily basic wage by 21 days for each of the first five years, and use 30 days for each year after five. A partial year is calculated proportionally after at least one year of continuous service.
UAE gratuity formula at a glance
| Step | Calculation | What to use |
|---|---|---|
| Daily basic wage | Monthly basic salary ÷ 30 | The last basic salary, excluding allowances |
| First five years | Daily basic wage × 21 × eligible years | Years 1 through 5 |
| Years after five | Daily basic wage × 30 × later years | Only service beyond year 5 |
| Partial year | Relevant annual rate × fraction of year | Available after one completed year |
Step 1: Confirm that the standard formula applies
The standard federal calculation is mainly for a foreign worker in the UAE private sector. The employee must normally complete at least one year of continuous service. Unpaid days of absence are excluded from the service period. UAE nationals, domestic workers, DIFC employees, ADGM employees and workers enrolled in an alternative end-of-service savings scheme may fall under a different system.
Step 2: Use basic salary, not the full package
Gratuity is calculated from the last basic wage. Housing, transport, telephone, school, travel and similar allowances are not added to the daily gratuity rate. For example, if the total package is AED 9,000 but the contract shows AED 6,000 as basic salary, use AED 6,000 for the core formula.
Example: AED 6,000 basic salary ÷ 30 = AED 200 daily basic wage.
Step 3: Count eligible service accurately
Use the first working day and the last working day shown in official records. Subtract unpaid absence. Once the worker has completed at least one year, a remaining fraction of a year is included proportionally. Paid annual leave and the ordinary notice period should not be casually removed from service.
Step 4: Apply 21 days and 30 days
For service up to five years, multiply each eligible year by 21 days. For service above five years, the first five years remain at 21 days each and only the later portion moves to 30 days per year.
Example: 4 years and 6 months
- Basic salary: AED 7,500
- Daily basic wage: AED 250
- Gratuity days: 4.5 × 21 = 94.5 days
- Estimate: AED 250 × 94.5 = AED 23,625
Example: 8 years
- Basic salary: AED 10,000
- Daily basic wage: AED 333.33
- First five years: 105 gratuity days
- Next three years: 90 gratuity days
- Total: 195 days, approximately AED 65,000
How part-time or job-sharing gratuity is calculated
MOHRE explains that the annual hours in the worker’s contract are divided by the annual hours in an equivalent full-time contract, then multiplied by 100. That percentage is applied to the full-time gratuity value. Use a ratio only when it is supported by the contract or the employer’s verified calculation.
How the two-year wage cap works
The federal law states that the total end-of-service gratuity must not exceed two years’ wage. The daily benefit itself is based on basic wage. Because “wage” can be broader than “basic wage,” the online calculator has a separate optional total-wage field for the cap and clearly shows the assumption used.
Does resignation or termination change the formula?
The old resignation fractions are not part of the current standard federal formula. The reason the employment ends can affect notice pay, unlawful-termination compensation, leave salary and deductions, but it does not create separate 21-day and 30-day gratuity formulas. Read the focused guides for resignation and termination.
Official sources used for this guide
- UAE Labour Relations LawArticle 51 covers full-time end-of-service gratuity and Article 53 covers payment timing.
- MOHRE: Dear Worker – Know Your RightsOfficial summary of the standard formula, proportional years, unpaid absence and other work patterns.
- UAE Government: end-of-service benefitsGovernment overview for private-sector workers.