Gratuity, formally the end-of-service benefit, is a lump-sum payment UAE labour law entitles most private-sector employees to when their employment ends, calculated based on basic salary and length of service. Since the 2021 labour law reform, the calculation no longer penalises employees who resign before completing five years of service.
How It's Calculated
Gratuity is generally calculated as a portion of basic salary for each year of service, with the exact formula varying by length of tenure. It's calculated on basic salary only — not the full package including housing or transport allowances.
What Changed in 2021
Before the 2021 reform, resigning before five years of service reduced or eliminated the gratuity payout under the old unlimited-contract rules. That penalty no longer applies — gratuity today is calculated the same way regardless of whether the employee resigns or is terminated, subject to minimum service requirements.
Who Is Entitled to It
Most private-sector employees who complete the minimum qualifying service period are entitled to gratuity; specific eligibility can vary for free zone employees under their own regulations, and government-sector employment typically follows separate rules entirely.
Check Your Own Numbers
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Frequently Asked Questions
Is gratuity taxed in the UAE?
The UAE has no personal income tax, so gratuity payments are not subject to income tax deduction.
Does gratuity include my housing allowance?
No — the calculation is based on basic salary only, not your full package including allowances.
Do free zone employees get the same gratuity calculation?
Most free zones follow UAE federal labour law for gratuity, though it's worth confirming with your specific free zone authority since a few maintain their own regulations.
Is there a minimum service period to qualify for gratuity?
Yes — UAE labour law sets a minimum qualifying period of continuous service before gratuity becomes payable.
Can my employer deduct anything from my gratuity?
Certain deductions may apply depending on your specific circumstances, such as unpaid absences or contractual obligations — check your contract and current labour law for specifics.