Employees working in the UAE are entitled to end-of-service gratuity, a statutory payout granted upon the conclusion of employment. This benefit is regulated by Federal Decree-Law No. 33 of 2021, which came into force in February 2022 and outlines the legal parameters governing gratuity calculations across the private sector.
To qualify for this payout, workers must complete at least one year of continuous service with the same employer. The amount paid depends on both the length of service and the type of employment contract, which can be either limited (fixed-term) or unlimited (open-ended).
For employees under limited contracts, gratuity is calculated at 21 days of basic salary for each of the first five years of service. Beyond that, the rate increases to 30 days of basic salary per additional year. For those under unlimited contracts, the payout is tiered depending on the total duration of service. Workers who resign with between one and three years of service receive one-third of the 21-day formula per year; those who leave after three to five years receive two-thirds. Once the five-year mark is crossed, they are entitled to the full 21 days of basic salary for every year worked.
Importantly, gratuity is based only on the last drawn basic salary, excluding allowances such as housing, transport, or commissions. The law also imposes a ceiling: the total gratuity payment cannot exceed the equivalent of two years’ basic salary.
The employer must settle the gratuity within 14 days of the contract’s termination. If the employee owes any outstanding financial dues to the employer, those can be deducted from the final gratuity payout.
Certain exceptions apply. For instance, if the employee is terminated for cause under Article 44 of the labour law, gratuity may be forfeited. Additionally, any period of unpaid leave is excluded from the service duration used to calculate gratuity.
Since navigating these calculations can be complex, various online tools have emerged to help estimate expected payouts.
With more expatriate workers seeking clarity on entitlements and employers under increasing scrutiny to comply with labour laws, understanding how gratuity works remains critical. The legal framework continues to align with broader labour reforms across the Gulf aimed at improving transparency, mobility, and financial protection for private sector workers.
