UAE End-of-Service Gratuity in 2026: How It Is Calculated for Private Employers

Who qualifies and what counts as basic wage

Gratuity is governed by Federal Decree-Law No. 33 of 2021, which the Ministry of Human Resources and Emiratisation (MoHRE) confirmed came into force on 2 February 2022. Under Article 51, a foreign full-time employee who completes one year or more of continuous service is entitled to a gratuity when the employment ends. Emirati employees are covered by the pensions and social security legislation instead. Once the first year is complete, part-years count pro rata, and a probation period counts as service if the employee passes it and stays on.

The calculation uses the basic wage only. The law defines basic wage as the wage set in the employment contract, excluding any allowances or benefits in kind, so housing, transport and other allowances drop out even when they make up a large share of the package. Article 51 also uses the last basic wage the employee received, not an average, which means a pay rise shortly before an exit increases the gratuity for every year of service.

Days of absence without pay do not count as service. The total gratuity cannot exceed two years’ wage; measured against the basic wage, that cap is only reached after roughly 25 years. The employer may deduct amounts the employee owes under the law or a court ruling, following the Executive Regulations in Cabinet Resolution No. 1 of 2022. The Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) have their own employment laws and are outside the scope of this guide.

A worked example

The law does not say how to convert a monthly basic wage into a daily rate. The most common method in published calculations divides the monthly basic wage by 30. Take an employee who joined on 1 April 2019 and whose last working day is 30 September 2026: 7 years and 6 months of service with no unpaid leave. The basic wage is AED 12,000 a month, plus AED 6,000 of allowances that are ignored. The daily basic wage is AED 400.

The first five years earn 5 × 21 × AED 400, or AED 42,000. The remaining 2.5 years earn 2.5 × 30 × AED 400, or AED 30,000. The gratuity is AED 72,000, well below the two-year cap of AED 288,000 on the basic wage. Had the employee taken one month of unpaid leave, service would fall to 7 years and 5 months and the gratuity to AED 71,000.

Some employers instead spread the annual basic wage over 365 days, giving AED 394.52 a day and about AED 71,014 here. Both methods appear in practice, so set one out in your HR policy and use it for every leaver and for monthly accruals. The gratuity is paid with the rest of the final settlement, including unpaid salary and other dues.

Part-time staff and the alternative savings scheme

For part-time employees, Article 30 of the Executive Regulations prorates the full-time gratuity by hours. The annual working hours in the contract are divided by the annual hours of a full-time contract, and that percentage is applied to the gratuity a full-time employee would receive. An employee contracted for 1,040 hours a year, where a full-time contract has 2,080, receives 50% of the full-time amount.

Cabinet Resolution No. 96 of 2023 created a voluntary alternative. According to the UAE Government portal, employers in the private sector and free zones can enrol employees in MoHRE-approved investment funds instead of accruing a lump sum. The employer contributes 5.83% of the monthly basic wage for employees with under five years’ service and 8.33% from five years, and contributions must reach the fund within 15 days of the start of each month. Employees may add voluntary contributions on top.

Gratuity stops accruing from the enrolment date. The amount earned up to that date is preserved, calculated on the basic wage at enrolment, and paid when the employment ends. Law firm commentary notes that the scheme is optional for employers but binding for the employees an employer chooses to enrol, and that DIFC and ADGM employers are outside it.

Gratuity checklist for employers

• Confirm who is in scope: foreign full-time and part-time staff accrue gratuity; Emiratis are covered by the pension system.
• Keep the basic wage separate from allowances in every contract and payroll record.
• Record unpaid leave days, because they do not count as service.
• Choose one daily-rate method, write it into your HR policy and use it for accruals and settlements.
• Pay the gratuity and all other dues within 14 days of the contract ending, and document the legal basis for any deduction.
• If considering the savings scheme, model contributions at 5.83% and 8.33% of basic wage and record each employee’s preserved gratuity at enrolment.
• Keep payroll, leave and settlement records for at least two years after an employee leaves, the period in which claims can be brought.