FREE GUIDE · MAINLAND UAE
How UAE gratuity is calculated: the complete guide
If you've just received a settlement or end-of-service letter, the gratuity line is where most errors hide. This guide walks through the mainland (MOHRE) formula under Federal Decree-Law No. 33 of 2021 — in plain language, with a worked example — so you can check the number yourself before you sign anything.
THE FORMULA AT A GLANCE
- 21 days of basic salary for each of your first 5 years of service
- 30 days of basic salary for each year after the fifth
- One daily wage = monthly basic salary ÷ 30
- Pro-rated for part years · requires at least 1 full year of service
- Capped at 2 years' total pay
First: are you eligible?
Gratuity is due after one full year of continuous service (Article 51, FDL 33/2021). Below one year, no gratuity is owed — but don't stop reading your letter there: unpaid salary, leave encashment, and notice pay are owed regardless of how long you worked.
Basic salary, not gross — where most letters go wrong
Gratuity is calculated on your basic salary only: housing, transport, and other allowances are excluded. Two errors to watch for. First, some letters quietly use a number lower than your actual contractual basic. Second, if you had raises, the calculation must use your last basic salary, not an old one. Check the basic salary shown on your letter against your most recent contract or salary certificate.
The calculation, step by step
- Work out your daily wage: monthly basic ÷ 30.
- For each of the first 5 years of service: 21 days of that daily wage.
- For each year beyond 5: 30 days per year.
- Part years count pro-rata (e.g. 3.5 years = 3 years + half of a year's entitlement).
- Cap the total at 2 years' pay.
WORKED EXAMPLE
Basic salary AED 12,000 · 7 years of service.
Daily wage: 12,000 ÷ 30 = AED 400
First 5 years: 21 days × 5 × 400 = AED 42,000
Years 6–7: 30 days × 2 × 400 = AED 24,000
Total gratuity: AED 66,000 (well under the 2-year cap of AED 288,000).
Want your own numbers? Use the free gratuity calculator.
Resigning? You still get the full amount
This is the change most people — and some employers — haven't caught up with. Under the old law, resigning before 5 years reduced your gratuity to a fraction. Federal Decree-Law 33/2021 removed that reduction: since February 2022, you receive the full calculation whether you resigned or were terminated. If your settlement letter applies a resignation penalty, it is applying a law that no longer exists.
What can legitimately lower the number
- Unpaid leave: days of unpaid leave don't count toward your service period.
- Amounts you owe your employer: documented debts (e.g. a salary advance) can be deducted from the end-of-service settlement.
- The 2-year cap: total gratuity can't exceed two years' pay.
What cannot lower it: visa costs, recruitment fees, or training costs your employer chose to invest in you — these are generally the employer's to bear.
DIFC, ADGM, and free zones are different
Everything above applies to mainland UAE (MOHRE) employment. In DIFC, gratuity was replaced in 2020 by the DEWS scheme — your employer pays monthly contributions into a savings plan instead, and you can check the balance in the Zurich portal. ADGM and several free zones have their own employment frameworks. If your contract is in one of these jurisdictions, the mainland formula on your letter may itself be the error.
Before you sign: a 60-second check
- Is the basic salary on the letter your actual, latest basic?
- Does the service period match your start date (minus any unpaid leave)?
- Are the 21-day and 30-day bands applied correctly?
- If you resigned: is there an outdated 'resignation reduction'?
- Are leave encashment and notice pay shown as separate lines — not silently netted off?
- Are any deductions itemised and actually lawful?
Frequently asked questions
Is gratuity calculated on basic or gross salary?
Basic salary only. Housing, transport, and other allowances are excluded. This is the single most common place settlement letters go wrong — a calculation quietly run on a lower figure, or an inflated "basic" that was never updated after a raise.
Do I still get full gratuity if I resign?
Yes. Under Federal Decree-Law 33/2021 (in force since February 2022), you receive your full gratuity whether you resign or are terminated. The old rule that reduced gratuity for resigning before 5 years no longer applies. If your letter applies a 'resignation reduction', it is using the old law.
What if I worked less than one year?
No gratuity is due below one full year of continuous service. But leave encashment, notice pay, and any unpaid salary are still owed to you regardless of length of service.
Is there a maximum gratuity?
Yes. Total gratuity is capped at two years' worth of pay, however long you served.
Do unpaid leave days count toward my service period?
No. Days of unpaid leave are excluded when calculating your period of continuous service, which can slightly lower the total.
I work in DIFC — does this guide apply to me?
No. Since February 2020, DIFC employers pay monthly contributions into the DEWS scheme instead of end-of-service gratuity. You can check your balance through the Zurich portal. ADGM and some free zones also have their own frameworks.
Numbers not adding up?
Kaoutar personally checks your settlement letter against UAE Labour Law — every line, your jurisdiction — with written findings in 48 hours. AED 999 flat.
Review my settlement →This guide is general information about mainland UAE employment, not legal advice. Last reviewed July 2026 against Federal Decree-Law No. 33 of 2021.