How UAE End-of-Service Gratuity Works in 2026

What end-of-service gratuity is

End-of-service gratuity, also called severance or end-of-service benefits, is a lump sum that a private-sector employer in the UAE owes a worker when the job ends. It exists because the UAE does not run a general pension scheme for expatriate employees, so the law builds up a payment for long service instead.

The rule is set by Article 51 of Federal Decree-Law No. 33 of 2021, which governs labour relations in the private sector and took effect in February 2022. It applies to full-time employees who have completed at least one continuous year of service. It is paid on top of your other final dues, such as unused annual leave and your last salary, and it is not a bonus: it is a statutory entitlement, and under the current law resigning does not reduce it.

The formula, step by step

1. Find your basic monthly salary from your contract. Leave out allowances.
2. Divide it by 30 to get one day of pay.
3. Count your years of service from your first day to your last day. Part-years count pro rata, so six months is half a year.
4. Multiply one day of pay by 21 for each of your first five years, and by 30 for each year after the fifth.
5. Add the two amounts. If the total is more than two years of basic salary, the gratuity is limited to two years of basic salary.

The step up from 21 to 30 days happens once, at the fifth anniversary. A person with seven years of service is therefore paid at 21 days for five years and at 30 days for two years, not at 30 days for all seven.

Worked examples

The table works through five cases. In each, one day of pay is the basic salary divided by 30. A basic salary of AED 10,000 is AED 333.33 a day, so four years at 21 days is 21 × 333.33 × 4 = AED 28,000.

For the eight-year case, one day of pay is AED 400. The first five years give 21 × 400 × 5 = AED 42,000 and the next three give 30 × 400 × 3 = AED 36,000, which together make AED 78,000.

The two-year cap

The law limits the total gratuity to two years of the employee’s wage, which in the calculator is 24 times the basic monthly salary. Many online calculators leave this out. It only matters for very long service: the 21-day and 30-day rates reach 24 months of basic pay after 25 years and 6 months, so most employees never hit it.

In the 31-year example above, the formula gives AED 442,500 but two years of a AED 15,000 salary is AED 360,000, so AED 360,000 is paid. After the cap is reached, extra years of service do not raise the gratuity any further.

What counts as basic salary

Gratuity is worked out on basic salary only, which is the fixed amount in your contract before any allowance is added. Check the exact figure in your offer letter, your contract or the basic-salary line on your payslip, because an employer’s “total package” is not the same thing.

How your length of service is counted

• Service runs from your first working day to your last working day, and both days count.
• You must complete one continuous year before you qualify. Under a year, no gratuity is due.
• After the first year, each part-year is paid in proportion, so 3 years and 6 months is 3.5 years.
• Days of unpaid leave do not count as service, so they move your qualifying date and reduce the length of service used in the calculation.

Who this formula does not cover

• UAE nationals, who are covered by the pension and social-security system and not by gratuity.
• Domestic workers and government employees, which have their own rules.
• Staff of financial free zones such as DIFC and ADGM, which run separate employment frameworks.
• Anyone whose contract promises more than the law. The formula here is the legal minimum, and a contract can be more generous.

The savings scheme as an alternative

Cabinet Resolution No. 96 of 2023 created a voluntary alternative for private-sector employers. Instead of building up a gratuity that is paid at the end, the employer pays a share of the employee’s basic salary into an approved investment fund every month: 5.83% of basic salary for the first five years of service and 8.33% after that. Employees may add voluntary contributions up to a limit set in the scheme, and the money plus any investment returns is paid out when they leave.

For the eight-year example on a AED 12,000 salary, the employer contributions alone come to AED 77,962, compared with AED 78,000 under the standard formula. That is only the employer’s contributions: the final payout also depends on how the fund performed, so it can be higher or lower. The scheme has no one-year minimum and no two-year cap, and it only applies if your employer has joined it.

When and how it is paid

The employer must pay gratuity with the rest of your final dues within 14 days of the end of your contract. The law lets an employer deduct certain amounts that you owe, such as an unpaid loan or an overpayment, so the sum you receive can be lower than the calculated figure. If you are not paid, the Ministry of Human Resources and Emiratisation (MoHRE) handles complaints from private-sector employees on the mainland.

Common mistakes

• Using total salary instead of basic salary, which overstates the result.
• Forgetting the two-year cap on very long service.
• Counting unpaid leave days as service.
• Assuming that resigning reduces the amount. It no longer does under the current law, as the guide on resignation and termination explains.
• Adding unused leave pay into the gratuity figure. It is paid separately.

Common questions

Sources

Reviewed on 18 Oct 2026 against the published sources below. Laws and prices change, so check the current position before you rely on a figure.

• Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, Article 51 (gratuity)
• Cabinet Resolution No. 96 of 2023 on the voluntary end-of-service savings scheme
• EY Tax Alert: UAE introduces voluntary alternative end-of-service benefits scheme
• Gulf News: New UAE Labour Law, how is gratuity calculated?
• Gulf News: Can my employer deduct from my end-of-service payments?

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