End of Service Gratuity in the UAE (2026): How It Is Calculated and What It Costs the Employer

End of service gratuity in the UAE is calculated on the last basic wage, not on the package your payroll pays out. For a full-time foreign worker who has completed one year or more of continuous service, it accrues at 21 days' basic wage for each of the first five years of service and 30 days' basic wage for each year beyond that, and the whole benefit cannot exceed two years' wage.¹ Onshore private-sector employment runs on Federal Decree-Law No. 33 of 2021, in force since 2 February 2022, which abrogated Federal Law No. 8 of 1980.² An accrual policy still written against the older law is provisioning the wrong number.

Two details decide most of the liability. One. Basic wage is the contractual figure before allowances, and the law excludes allowances and benefits in kind from it.³ Two. Unpaid days of absence are excluded from the service term the calculation runs on.¹

That is the whole mechanism. What follows is the formula, the wage base, the payment deadline you are held to, and the points where a settlement turns into a complaint.

How is end of service gratuity calculated in the UAE?

The calculation has three moving parts, and each one is fixed by the law rather than by the employer.

One. The wage base. End of service benefits are calculated on the last basic wage the worker was entitled to, for workers paid monthly, weekly or daily, and on the average daily wage for those paid on a piecework basis.¹ It is the final basic wage that counts, not an average across the years.

Two. The daily wage. For statutory calculations the Gregorian year counts as 365 days and the month represents 30 days.⁴ A monthly basic wage divided by 30 gives the daily basic wage that the accruals are applied to.

Three. The accrual. Twenty-one days of basic wage for each year of the first five years of service, then 30 days of basic wage for each year exceeding that period.¹

An illustration makes the shape of it clear. Take a hypothetical monthly basic wage of AED 10,000, which is a worked example and not a figure drawn from any real settlement. The daily basic wage is AED 333.33. Each of the first five years accrues 21 days, or AED 7,000, so five completed years reach AED 35,000. Each further year accrues 30 days, or AED 10,000. Seven completed years therefore land at AED 55,000 before any lawful deduction. Change the basic wage and the whole result moves with it, which is exactly why the wage base is where most disagreements start.

What counts as basic salary for gratuity, and what does not?

This is the single line that decides whether a settlement is right or short.

The law defines basic wage as the wage stipulated in the employment contract, paid to the worker in consideration of the work under that contract, and it does not include any other allowances or benefits in kind.³ Housing, transport and similar components are part of what you are paid. They are not part of what gratuity is calculated on.

The practical consequence runs both ways, and both ways cost you. An employee who calculates on the full package arrives expecting more than the law provides, which is where an ordinary exit becomes an argument. Reclassifying part of the basic wage as an allowance cuts the accrual, and the contract is the document that will be read when that is questioned, so a split designed for a lower liability has to survive being read back years later. The place to settle how the package is split is the contract template, before it is issued to anyone.

Which of your employees accrue it?

The entitlement described above is written for one specific population: the full-time foreign worker who has completed a year or more in continuous service.¹ Three groups sit outside that frame, and a workforce that mixes them carries more than one calculation.

UAE national workers. Their end of service entitlement follows the legislation regulating pensions and social security in the State, not the accrual set out for foreign workers.⁵

Workers on other work patterns. For part-time, temporary and flexible arrangements, the Implementing Regulation, not Article 51, defines the mechanism for regulating end of service benefits.⁶

Workers under an approved alternative scheme. The Cabinet may approve other schemes in place of the statutory end of service benefits, with the conditions, rules and contribution mechanism set by the resolution that approves them.⁷ Where such a scheme applies, the accrual above is not the operative rule.

Confirm which row a departing employee sits in before you calculate anything. The arithmetic in this article answers one question, and it is the first row of that table.

When must you pay it?

Within 14 days from the end date of the contract term, the employer must pay the worker their wages and all other entitlements provided by the Decree-Law, the resolutions issued for its implementation, the contract or the establishment's by-laws.⁸ The gratuity is one line inside that settlement, not a separate process with its own timetable. Fourteen days is short if the final figure is still being agreed internally, which is the argument for calculating it before the notice period ends rather than after.

One lawful reduction exists. The employer may deduct from the end of service benefits any amounts payable under the law or under a judgment, in accordance with the conditions and procedures specified in the Implementing Regulation.⁹ A deduction that does not rest on either of those bases is not a deduction the law provides for.

Does resignation or dismissal change what you owe?

Less than most employers assume. The entitlement is built into the end of the relationship, not into how gracefully it ended, and the routes out of a contract are written to preserve it.

• Termination as a disciplinary sanction. The sanction of terminating service is expressly applied while preserving the worker's right to end of service benefits.¹⁰
• Resignation without notice, for a statutory reason. A worker may leave without notice while retaining their end of service rights in defined cases, including an employer breach of its obligations, provided the worker notifies the Ministry 14 working days before leaving and the employer has not rectified the breach after being notified.¹¹
• Unlawful termination. Compensation for unlawful termination is a separate head, assessed by the court and capped at three months' wage, and it does not prejudice the notice period allowance or the end of service benefits otherwise payable.¹² It is added to the settlement, not substituted for it.

The pattern is consistent. Gratuity is an entitlement earned by service, and the statutory routes out of a contract are written to preserve it rather than to forfeit it.

What happens when your figure is contested?

Start with the arithmetic, not the argument. Recalculate on the contractual basic wage, apply 21 days a year to the first five years and 30 days a year after that, remove unpaid absence days from the service term, and check the result against what was paid inside the 14-day window.¹⁸ A settlement that gets challenged usually has one identifiable cause, and it is normally the wage base.

Then price the downside honestly. Labour claims that do not exceed AED 100,000 are exempt from judicial fees at all stages of litigation and execution, and that exemption covers requests filed by workers or their heirs.¹³ For most single settlements this means the employee faces no fee barrier to contesting your figure. A calculation that is defensible on paper is the cheaper position, because the other side's cost of testing it is close to nothing.

Paid help earns its place at three points. When the wage structure itself is in question, because the split between basic wage and allowances decides the whole figure. When a final settlement and its supporting documentation have to survive scrutiny. When more than one regime touches the same employment, because a move between an onshore entity and a free zone one puts two rulebooks in one file.

That is coordination work rather than a directory search. LawyersDubai coordinates access to licensed specialists in employment and labour law in the UAE and, where a matter reaches past the settlement itself, to broader legal advisory. The article on when you actually need an employment lawyer in Dubai covers that choice in more depth.

The mistakes that turn a settlement into a complaint

None of these is exotic. Each is avoidable with the contract in one hand and the law in the other, and each costs more than the checking would have.

• Letting the employee calculate on the total package. Gratuity runs on basic wage, and allowances and benefits in kind are excluded by definition.³ This single assumption produces most of the gap between the figure expected and the figure offered, and stating the basis in the settlement letter removes the argument before it starts.
• Provisioning against the pre-2022 rules. Federal Law No. 8 of 1980 was abrogated and the current regime has applied since 2 February 2022.² An accrual policy or a template inherited from before that date is calculating under a law that no longer governs it.
• Forgetting the service term is net. Unpaid days of absence do not count towards the service used in the calculation.¹ Payroll has that record and the calculation should use it.
• Ignoring the ceiling. After long service the accrual keeps running in the spreadsheet but the benefit in its entirety is capped at two years' wage.¹ Over-provisioning is a smaller problem than under-paying, but it is still a wrong number in the accounts.
• Applying a deduction without a basis. Deductions are for amounts payable under the law or under a judgment, on the conditions the Implementing Regulation sets.⁹ A deduction resting on anything else is the part of the settlement that will be challenged first.
• Letting the 14-day window pass. Wages and all other entitlements are due within 14 days of the end of the contract term.⁸ Missing that date converts a calculation disagreement into a late payment, which is a different and worse conversation.

Where LawyersDubai fits

The formula is public and it is not complicated. What decides a real settlement is the material around it: how your contracts split basic wage from allowances, how the service term is counted, which regime the company is registered in, and whether the payment landed inside the statutory window.

LawyersDubai is a law consultancy firm. It is a single, confidential point of contact that coordinates access to licensed UAE professionals across the mainland and the free zones, from reviewing a contract template before it is issued to preparing the file behind a contested final settlement with employment and workplace law specialists. It does not provide legal advice and it is not a law firm. It connects you to the professional who does.

The companies that do not end up defending a figure are the ones that fixed the wage structure in the template, years before anyone resigned. The earlier a specialist sees the contract, the less of the settlement is left to argument.