- It is calculated on basic salary only — not gross. Allowances do not count.
- It is capped at two years of basic pay, no matter how long you stayed.
- DIFC and ADGM operate on different gratuity rules under their own employment frameworks. This article is about mainland UAE.
- Since 2 February 2022, all employment contracts in the mainland are limited-term (fixed-term) by law. The old "unlimited contract" gratuity formula no longer applies. ## The formula the calculator actually runs The math is simpler than the language around it. There are only two tiers: For the first 5 years of service:
21 days of basic salary per year worked. For every year of service beyond 5:
30 days of basic salary per year worked. To convert annual entitlement to a daily rate, the calculator uses: > Daily basic salary = monthly basic salary ÷ 30 That "÷ 30" is the convention written into the law, not the calendar — it standardises the day-count regardless of how many actual days are in the month. Partial years count proportionally. Six months of service in your sixth year is not zero — it is half of that year's 30-day entitlement. The total is then capped: gratuity cannot exceed two years' total basic pay, regardless of tenure. We will see what that means at the 15-year mark below. ## Why basic salary and not gross UAE employment contracts list two numbers: basic salary and allowances (housing, transport, education, etc.). Gratuity is calculated on the basic component only. This is the single largest source of disputed gratuity calculations on LEXAI. Some employers structure salaries with a deliberately low basic and a high allowance load — which legally reduces the gratuity pool. If your basic salary is AED 5,000 and your allowances are AED 15,000, your gratuity base is AED 5,000, not AED 20,000. If this looks wrong on your offer letter, it is worth a conversation with an employment lawyer in Dubai before signing. Once signed, the structure is binding for gratuity purposes. ## Worked example 1: One year of service This is the threshold case. Less than one full year of continuous service and there is no statutory gratuity entitlement at all. Exactly one year and the meter starts. Assume:
- Basic salary: AED 8,000/month
- Tenure: 1 year (exactly) Daily basic = 8,000 ÷ 30 = AED 266.67
Gratuity = 266.67 × 21 days = AED 5,600 That is the floor. If you resigned at 11 months and 29 days, you get nothing under Article 51. ## Worked example 2: Three years of service A common tenure for mid-career professionals on a first UAE contract cycle. Assume:
- Basic salary: AED 12,000/month
- Tenure: 3 years Daily basic = 12,000 ÷ 30 = AED 400
Gratuity = 400 × 21 × 3 = AED 25,200 No tier-two math applies yet — all three years are inside the first-5-years bracket. ## Worked example 3: Seven years of service This is where the formula actually splits into two tiers. Assume:
- Basic salary: AED 15,000/month
- Tenure: 7 years Daily basic = 15,000 ÷ 30 = AED 500 First 5 years: 500 × 21 × 5 = AED 52,500
Years 6 and 7: 500 × 30 × 2 = AED 30,000
Total: AED 82,500 Notice the year-6 entitlement (AED 15,000 of gratuity) is nearly 43% larger than each of the year-1-through-5 entitlements (AED 10,500 each). The 21-to-30 jump is real money — it is the reason staying past five years often pays. ## Worked example 4: Fifteen years of service Long-tenure case, where the two-year cap starts to bite. Assume:
- Basic salary: AED 20,000/month
- Tenure: 15 years Daily basic = 20,000 ÷ 30 = AED 666.67 First 5 years: 666.67 × 21 × 5 = AED 70,000
Years 6 through 15 (10 years): 666.67 × 30 × 10 = AED 200,000
Uncapped total: AED 270,000 Two-year cap on basic pay: 20,000 × 24 = AED 480,000 The cap is higher than the uncapped total here, so the employee receives the full AED 270,000. The cap only bites at extreme tenures — typically 16+ years on a stable basic salary. The LEXAI gratuity calculator handles the cap automatically. ## Limited vs unlimited contracts — what changed in 2022 If you signed a UAE employment contract before 2 February 2022, you may remember a sharper distinction between "limited" (fixed-term) and "unlimited" contracts. The unlimited contract used a reduced gratuity formula when the employee resigned before completing certain service thresholds — 1/3 of entitlement under three years, 2/3 between three and five years, full entitlement after five. Federal Decree-Law No. 33 of 2021 removed the unlimited contract category entirely. Every mainland employment contract is now limited-term, and resignation no longer triggers the old graduated reductions. You get the full 21-day / 30-day calculation regardless of whether you resigned or were terminated. The single exception sits in Article 44 of the same law: if you are dismissed for one of the specific listed grounds (gross misconduct, conviction for certain offences, etc.), gratuity may be forfeited entirely. The list is narrow and the dismissal must follow the statutory procedure. ## What the calculator does not do The LEXAI calculator returns the statutory base figure. There are several things it deliberately does not include: - Unused annual leave. Paid out separately at your daily basic salary rate.
- Notice-period pay. A separate Article 43 entitlement, distinct from gratuity.
- Unpaid commissions or bonuses. Not part of gratuity; pursued separately.
- Air-ticket allowance home. Contractual benefit, varies by employer.
- DIFC or ADGM employment. Different frameworks — see your contract.
- Domestic workers. Covered by Federal Decree-Law No. 9 of 2022, not No. 33 of 2021. Different rules apply. If any of these are missing from your final settlement, that is a separate conversation with your employer — and, if needed, with an employment lawyer in Dubai. ## When the employer's number does not match yours Here is the practical sequence we see most often on LEXAI: 1. Employee resigns or is terminated.
- Employer issues a final settlement number.
- Employee runs the gratuity calculator, gets a different number.
- Gap is usually one of three things: wrong basic-salary base, missed second tier, or unilateral deduction. The most common discrepancy is the second tier. Some employers calculate the whole tenure at 21 days, ignoring the 30-day uplift after five years. On a seven-year tenure at AED 15,000 basic, that mistake costs the employee AED 9,000. The second most common is the basic-salary base — the employer applies allowances or a recently-reduced basic rather than the contractual basic at the time gratuity accrued. If your numbers do not match the employer's by more than rounding error, file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE) on
mohre.gov.ae. The complaint route is free and is the formal first step before any labour-court referral. An employment lawyer in Dubai can advise on whether the dispute warrants escalation past MOHRE. ## Employment Lawyers in Dubai Gratuity disputes are one of the most frequent reasons people contact employment lawyers on LEXAI. The math itself rarely needs a lawyer — the calculator gives you the number in a few seconds. The lawyer's value is in three places: - Reading the contract structure. Whether the basic-salary split your employer used is the one that legally governs gratuity accrual.
- Advising on the MOHRE complaint. When to file, what to include, what evidence holds up.
- Escalation to [labour court](/ar/dictionary/labour-court). If MOHRE conciliation does not resolve, the case moves to court — that is where a lawyer is no longer optional. Every employment lawyer on LEXAI is bar-licensed and identity-checked before their profile goes live. You contact them directly through their profile, in writing, with the question you actually have — and they reply at the consultation rate they publish on their own profile. ## Frequently asked questions ### Does the gratuity formula apply during my probation? No. The one-year continuous-service minimum has to be cleared before gratuity accrues. Probation periods count toward that year only if you continue into a confirmed role. ### What if I resigned in my fourth year — do I still get the full 21 days per year? Yes. The old unlimited-contract reductions for early resignation were removed by Federal Decree-Law No. 33 of 2021. Resignation and termination now produce the same gratuity calculation. ### My employer says my gratuity is capped at one year. Is that right? No. The statutory cap is two years of total basic pay. Some employer handbooks predate the law change and still cite a one-year cap. Run the calculator and compare. ### Does gratuity get taxed? There is no personal income tax on gratuity in the UAE. Your home-country tax position may differ — that is a tax-residency question, not a labour-law one. ### What about DIFC? DIFC operates a separate Employment Law (DIFC Law No. 2 of 2019, as amended) and the gratuity rules are different — DIFC employers contribute to a workplace-savings plan rather than paying a single end-of-service lump sum. If your employment contract is registered with the DIFC, this article does not apply to you. ## Run your number Plug your basic salary and tenure into the LEXAI gratuity calculator. It applies the 21/30 split, handles partial years, and enforces the two-year cap automatically. If the number it returns is materially higher than what your employer offered, that gap is worth a closer look — either with MOHRE or with an employment lawyer in Dubai.
Direct answer. Your end-of-service gratuity in the UAE equals 21 days of basic salary per year for the first 5 years of service, then 30 days per year thereafter, capped at 2 years of total pay. The calculation uses basic salary only, not the full package. Federal Decree-Law No. 33 of 2021 (Article 51) is the controlling rule. This article walks through the formula with worked examples for 1-, 3-, 7-, and 15-year tenures, plus the change from the pre-2022 limited-vs-unlimited contract regime.
Related reading
Articles that cluster around this topic on LEXAI:
آخر تحديث 25 مايو 2026