UAE Gratuity 2026: Calculation Formula & Rules

As of October 2026, UAE gratuity is calculated at 21 days of basic salary for each year of service up to five years, then 30 days for each additional year, capped at two years’ wages. The formula is prorated for 4-day workweeks and must be paid within 30 days of termination, or employers face fines up to AED 20,000 and possible imprisonment.

What is the UAE gratuity calculation formula for 2026?

Under Federal Decree Law No. 33 of 2021, private-sector employees who complete at least one year of continuous service are entitled to an end-of-service gratuity payment. The calculation depends strictly on your basic salary and your total duration of service. For the first five years, you receive 21 days of basic pay per year. For every year beyond five, you accrue 30 days of basic pay per year.

The mathematical formula for the first five years is: (Basic Salary / 30) × 21 × Years of Service. For service exceeding five years, the formula adds: (Basic Salary / 30) × 30 × Additional Years. The total payout is legally capped at two years' worth of total basic wages. For instance, an employee with a basic salary of AED 10,000 who works for exactly 5 years receives AED 35,000 in gratuity. You can verify and cross-check these computations using official tools provided by the Ministry of Human Resources & Emiratisation (MOHRE).

How does the UAE labour law define basic salary for gratuity?

A crucial 2025 circular by MOHRE reaffirmed that end-of-service calculations must rely solely on the basic salary recorded in the employment contract. Allowances—such as housing, transport, utilities, education, or telecommunications—alongside overtime pay and commission bonuses, are strictly excluded from the calculation. This distinction prevents inflated payouts but also protects employees by ensuring baseline consistency.

For expats, reviewing your monthly payroll slip is essential. Your basic salary is typically listed at the top before allowances are added. According to GulfTalent, the average expatriate basic salary in the UAE private sector sits between AED 12,000 and AED 15,000 per month, directly influencing the typical Dubai end-of-service payout of AED 45,000 to AED 70,000 for a five-year tenure reported by Bayt.com.

Can gratuity be calculated for part-time or 4-day workweek employees?

The 2026 updates introduced specific rules for alternative work models, including the newly popular 4-day workweek. Gratuity for employees on a compressed 4-day schedule is prorated based on the actual days worked per month relative to a standard 5- or 6-day contract. Part-time employees also qualify for gratuity, provided their cumulative continuous service reaches the mandatory 1-year threshold under uae.gov.ae guidelines.

For example, an employee on an approved 4-day workweek earning a basic salary of AED 10,000 will have their daily wage factor adjusted by their monthly working ratio, ensuring fair compensation without penalizing flexible corporate arrangements.

What are the gratuity calculation rules for private-sector workers in Dubai?

Private-sector workers registered under the Dubai Department of Economic Development and MOHRE follow federal statutory guidelines. While Dubai's high-cost-of-living environment often means larger basic salaries—averaging higher corporate brackets—the legal formula remains identical across all emirates. Upon resignation or termination, the employer must settle the dues within 30 days, verified through electronic employment records monitored by the Emirates ID Authority.

Is there an Excel template for UAE gratuity calculation?

Yes, MOHRE released version 3.2 of its official Excel calculation template in March 2026. This updated spreadsheet features built-in error checks for incorrect date inputs, fractional service years, and statutory caps. With approximately 12,000 downloads recorded in Q1 2026 alone, it is the gold standard for HR departments and expats alike. You can download the verified spreadsheet directly via the MOHRE portal by searching for end-of-service calculation tools.

How is gratuity paid out if an employee resigns before completing one year?

If you resign before completing one full year of continuous service, you are legally entitled to zero gratuity under UAE Labour Law. The one-year mark is a hard statutory floor. Employees who complete between one and three years of service while resigning are generally entitled to one-third of the 21-day calculation, though specific contract clauses and resignation types (unlimited vs limited contracts under older frameworks, or resignation provisions under Decree Law 33) can alter exact fractions. Always check your specific termination clause.

What penalties do employers face for not paying gratuity on time?

Under recent legal amendments highlighted in reports by The National, failing to disburse end-of-service entitlements within the mandated 30-day window carries severe legal consequences. Employers face administrative fines of up to AED 20,000 per affected employee, and repeat or severe violations can result in criminal prosecution and imprisonment of corporate officers for up to six months, strictly enforced by MOHRE inspection units.

How does gratuity differ between UAE and other GCC countries in 2026?

End-of-service benefits vary across the Gulf Cooperation Council. While the UAE uses a 21-to-30 day sliding scale capped at two years, countries like Saudi Arabia mandate full 21 days for the first five years and 30 days thereafter, but with different resignation scaling rules. Qatar follows a similar 21-day model regulated by the Ministry of Administrative Development, Labour and Social Affairs.

Related: Oman Visa for Expats: 2026 Rules, Fees & 5 ROP Steps

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