Private-sector employees in the UAE earn gratuity of 21 days' basic pay for each of the first five years of service and 30 days' basic pay for each year after that. It is calculated on the last basic wage and paid with other dues within 14 days of the end of employment.
What is the gratuity formula?
21 days of basic wage for each year of the first five years, and 30 days for each further year, under Federal Decree-Law No. 33 of 2021 (Morgan Lewis). Daily basic wage is usually monthly basic × 12 ÷ 365.
Worked example
An employee with a basic salary of AED 10,000 leaving after seven years: daily wage AED 328.77. First five years: 5 × 21 days = AED 34,520.55. Next two years: 2 × 30 days = AED 19,726.03. Total AED 54,246.58. Allowances do not count unless the contract includes them in basic pay.
When must it be paid?
Within 14 days of the end of employment, with other dues (Morgan Lewis). Salaries and final settlements run through the Wage Protection System (UAE Government portal).
How should employers provide for it?
Accrue it monthly in the accounts, so the balance sheet shows the liability. Under-accrual is a common audit adjustment and a due diligence finding.
Gratuity at a glance, for AED 10,000 basic salary
| Years of service | Gratuity (approx.) |
|---|---|
| 3 | AED 20,712 |
| 5 | AED 34,521 |
| 7 | AED 54,247 |
| 10 | AED 83,836 |
Using daily basic pay of AED 328.77 (monthly × 12 ÷ 365), 21 days a year for the first five years and 30 days after (Morgan Lewis).
Mistakes employers make
- Calculating on total salary instead of basic.
- Forgetting part years after eligibility.
- Paying late: the law allows 14 days.
- Not accruing the liability monthly, so the accounts understate it.
- Deducting amounts the employee never agreed to.
Our view
Accrue gratuity every month in the accounts. It turns a surprise payment into a known liability, keeps your audit clean, and makes valuation and due diligence far simpler if you ever sell.
Frequently asked questions
Is gratuity based on total salary?
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No. It is based on basic wage.
Does gratuity apply to part years?
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Yes, pro rata for part years once eligibility is met.
Does this apply in DIFC or ADGM?
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No. DIFC and ADGM have their own employment laws and end-of-service rules, so check those regimes separately.
Is gratuity paid if an employee resigns?
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Under the 2021 law, eligible employees are entitled to gratuity whether they resign or are dismissed, subject to the law's conditions.
Sources
- United Arab Emirates updates federal labour law (Federal Decree-Law No. 33 of 2021) — Morgan Lewis. Checked 17 October 2026.
- Payment of wages (Wage Protection System) — The official portal of the UAE Government (u.ae). Checked 17 October 2026.