Gratuity is the single most misunderstood number in a UAE final settlement. People routinely expect a figure two or three times larger than what actually arrives, and the disappointment almost always comes down to the same two misunderstandings.
It is calculated on basic salary, not your package
This is the big one. Your end of service benefit is worked out on your basic salary — the basic line on your contract — not the total you receive each month.
If you earn AED 15,000 made up of AED 7,000 basic plus AED 8,000 in housing, transport and other allowances, your gratuity is built on the 7,000. Everything else is invisible to the calculation. A generously structured salary can therefore produce a surprisingly small gratuity, and there is nothing irregular about it.
The formula
- First five years: 21 days of basic pay for each year of service
- After five years: 30 days of basic pay for each additional year
- Cap: total gratuity cannot exceed two years’ total pay
Under one year of service, there is no entitlement at all. Beyond that, part-years are paid pro rata.
The daily rate is your basic salary divided by 30. So on an AED 9,000 basic, a day is AED 300, and one full year in the first five earns 21 × 300 = AED 6,300.
Work out your own figure
Rather than doing this by hand, run your numbers through the UAE Gratuity & Salary Calculator — it applies the 21/30 day split, the two-year cap and the pro-rata rules for you.
The resignation myth
Under the old law, resigning early cost you dearly — an employee who quit before five years lost a large slice of their gratuity on a sliding scale. Many people still believe this, and some employers are still happy to let them.
Federal Decree-Law No. 33 of 2021 removed that penalty. Whether you resign or are terminated, the calculation is now the same. If someone tells you that resigning at three years means you only get a third of your gratuity, they are quoting a law that no longer exists.
What else is in your final settlement
Gratuity is only one line. A proper final settlement also includes:
- Unused annual leave, paid out on basic salary
- Your notice period, worked and paid at full rate
- Any outstanding salary, overtime or approved expenses
There is a subtlety here that catches almost everyone. Leave you actually take is paid on your full wage, including allowances. Leave you do not take, and get cashed out on exit, is paid on basic only. Two different rules for the same entitlement — and it is why the final payout so often looks smaller than expected.
You can work out leave, notice and overtime with the UAE Labour Law Calculator.
When you should get paid
Your final settlement is due within 14 days of the contract ending. An employer holding your gratuity hostage — pending a handover, a visa cancellation, or anything else — is not acting lawfully. MOHRE handles complaints, and the process is free.
Before you sign anything
Check the basic salary line on your contract before you accept a job, not when you leave it. A package that looks generous but is 80% allowances will quietly cost you every year you stay. It also affects your family sponsorship eligibility, since immigration assesses basic salary too.
That single line on your contract determines your gratuity, your overtime rate, your sick pay and whether you can bring your family. It is worth negotiating.