An employee with a basic salary of AED 10,000/month is resigning after exactly 4 years of continuous service and wants to know their gratuity entitlement.
The Walkthrough
- Confirm the basic salary figure
Gratuity is calculated on basic salary only — AED 10,000/month in this example — not the full package including housing or transport allowances, which may be significantly higher. - Confirm there's no old resignation penalty
Since the 2021 labour law reform, resigning before five years no longer reduces gratuity — this employee's 4 years of service is calculated the same way as if they'd been terminated. - Run the calculator with basic salary and years of service
Enter AED 10,000 basic salary and 4 years of service into the gratuity calculator to get the exact entitlement based on current labour law formulas. - Check for any applicable deductions
Review your specific contract for any deduction clauses (like unpaid absences) that might apply on top of the standard calculation. - Add unused leave encashment separately
Gratuity and unused annual leave payout are calculated separately — run both figures to see the full end-of-service payment, not just gratuity alone.
The Takeaway
A 4-year tenure used to mean a reduced gratuity under the old rules — under current law, this employee is entitled to the full calculation based on their basic salary and complete years of service, with no resignation-timing penalty applied.
Try It With Your Own Numbers
This example used specific figures to make the process concrete, but the same steps apply whatever your actual numbers are. Run the Salary & Gratuity Calculator with your own details — free, in under a minute, no sign-up required.
Frequently Asked Questions
Does this calculation apply to both resignation and termination?
Yes — since the 2021 reform, gratuity calculation no longer differs based on whether the employee resigned or was terminated, subject to minimum service requirements.
What if the employee worked 4 years and 6 months, not exactly 4?
Partial years are generally factored into the calculation on a pro-rata basis — run the calculator with your exact tenure rather than rounding down.
Does housing allowance ever factor into gratuity?
No — the calculation is specifically based on basic salary, regardless of how large the allowance portion of the total package is.
Is gratuity paid immediately on the last working day?
Timing can vary by employer and specific circumstances — check your contract and current labour law guidance for standard payment timing.
Does this differ for free zone employees?
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.