How to Calculate Gratuity in the UAE (2025 Guide)

Planning to resign, retire, or relocate from your job in the UAE? Understanding your end-of-service benefits, commonly known as gratuity, is essential for protecting your financial rights. 

This updated 2025 guide will walk you through everything you need to know about gratuity calculation in the UAE, including:  

✅ What is gratuity under the UAE Labour Law
✅ Who is eligible for end-of-service benefits
✅ Gratuity calculation for limited vs. unlimited contracts
✅ Latest changes in UAE gratuity rules (2023–2025)
✅ Step-by-step formulas and examples
✅ Answers to the most common gratuity FAQs

What is Gratuity in UAE Labour Law? 

Gratuity, also referred to as end-of-service benefits (ESB), is a lump-sum payment mandated by UAE Labour Law that employers must pay employees upon the termination or completion of their employment contract.

This benefit is calculated based on your last basic salary (excluding allowances like housing, transportation, or bonuses) and the number of years you've worked for the company. 

Who Is Eligible for Gratuity in the UAE?

As per the UAE Labour Law (Federal Decree Law No. 33 of 2021) and the latest 2025 updates, you are entitled to receive gratuity if:

✅You have worked continuously for at least 1 full year
✅Your contract is a limited-term or was previously unlimited
✅You were not terminated for misconduct under Article 120
✅You resigned with appropriate notice, if under an unlimited contract
✅You are a UAE national or expatriate worker

Note: Employees who leave before completing one year of service are not entitled to gratuity.

Key Factors Affecting Gratuity Calculation in the UAE

To calculate gratuity accurately, you must consider the following:

1. Type of Contract

Is your employment under a limited or unlimited contract? The calculation method differs based on this.

2. Basic Salary (Not Total Salary)

Only your final basic salary is used to calculate your gratuity. Perks and benefits such as accommodation, transport, or overtime are excluded.

3. Length of Service

The longer your continuous service, the higher your gratuity entitlement. Gratuity increases after 5 years of service.

4. Nature of Exit

Resignation and termination may result in different gratuity calculations, especially for old unlimited contracts.

Types of Employment Contracts in the UAE

1) Limited Contract (Fixed-Term Contract)

• Specifies a clear start and end date
• Common in project-based roles
• Early resignation may result in loss of benefits or compensation owed to the employer.
  
  

2) Unlimited Contract (Now Replaced by Limited Contracts)

• Open-ended with flexible termination rules
• Still applies to older contracts before the 2023 law change.
• Gratuity depends heavily on whether the employee resigned or was terminated.
  
  

Gratuity Calculation for Limited Contract Employees (2025) 📊 

Here’s how to calculate gratuity under a limited contract, per UAE Labor Law 2025:

 If You’ve Worked Less Than 5 Years:

Gratuity = (Basic Salary ÷ 30) × 21 × Years of Service

If You’ve Worked More Than 5 Years:

Gratuity = [(Basic Salary ÷ 30) × 21 × 5] + [(Basic Salary ÷ 30) × 30 × Years Beyond 5]

Example:

• Basic Salary: AED 12,000
• Service: 6 years
  
  

Daily Wage = AED 12,000 ÷ 30 = AED 400

First 5 Years: 400 × 21 × 5 = AED 42,000

6th Year: 400 × 30 = AED 12,000

Total Gratuity = AED 54,000

Gratuity cap: It must not exceed the equivalent of 2 years’ total salary.

Gratuity Calculation for Unlimited Contract Employees (2025)

Although unlimited contracts are being phased out, many employees are still under them. Here's how gratuity is calculated:

If You Resign:

If You Are Terminated:

Example (Resignation after 4 years):

• Basic Salary: AED 15,000
• 2/3 of 21 = 14 days
• Daily Wage: AED 15,000 ÷ 30 = AED 500
• 14 × 500 × 4 = AED 28,000

UAE Gratuity Calculator Formula (Quick Reference)

You can use this universal formula to calculate end-of-service benefits:

Gratuity = (Basic Salary ÷ 30) × Eligible Days × Years of Service

Replace "Eligible Days" with:

• 7 days = 1/3 of 21 days (1–3 years)
• 14 days = 2/3 of 21 days (3–5 years)
• 21 days = full gratuity
• 30 days = for service beyond 5 years
  
  

UAE Gratuity Law Changes (2023–2025)

• All contracts are now limited-term only, max 5 years
• Gratuity calculation is now unified for resignation and termination.
• Employees receive 30 days per year after 5 years of service.
• Gratuity must be paid within 14 days of contract end.
• The two-year salary cap on gratuity still applies.
  
  

Frequently Asked Questions (FAQs) 

📌 How is gratuity calculated in the UAE in 2025?

Your gratuity is based on your last basic salary. For the first 5 years of service, you receive 21 days of salary per year. After 5 years, it increases to 30 days per year.

📌 What’s the difference between gratuity and end-of-service benefits?

There is no difference; gratuity is the commonly used term for end-of-service benefits in the UAE.

📌 Is gratuity paid on gross salary or basic salary?

Gratuity is always based on basic salary only; allowances and bonuses are not included.

📌 Do I lose gratuity if I resign?

If you’ve completed at least 1 year of service, you are entitled to gratuity. Under old unlimited contracts, resignation may result in a reduced payout (⅓ or ⅔ of the full amount).

📌 Can my employer deduct from my gratuity?

Yes. Employers can legally deduct unpaid loans, fines, or damages from your gratuity payout under UAE labor law.

📌 When is gratuity paid?

Within 14 days after the employee’s final working day.

Try Our Free UAE Gratuity Calculator

Want to skip the math? Use ZenHR’s free, compliant UAE Gratuity Calculator to get an instant, accurate estimate of your end-of-service benefits based on:

• Contract type (limited or unlimited)
• Length of service
• Final basic salary
  
  

Calculate My Gratuity Now

Protect Your End-of-Service Rights

Whether you’re changing jobs or planning your retirement, understanding how to calculate gratuity in the UAE empowers you to make informed decisions. Keep this guide bookmarked and use the formulas above to ensure your payout is fair and compliant with the latest UAE labor laws.