How UAE End-of-Service Gratuity Is Calculated

For many Gulf expats, the end-of-service gratuity is the single biggest cheque they'll ever receive in one go — and one of the most misunderstood. People routinely overestimate it, because they assume it's based on their whole salary. It isn't. This guide shows exactly how it's worked out, with a worked example. To get your own figure, use the gratuity calculator on the repatriation hub.

The two bands: 21 days and 30 days

UAE end-of-service gratuity (EOSG) becomes payable once you've completed one year of continuous service. After that, it accrues in two bands:

• 21 days' basic wage for each of the first five years of service.
• 30 days' basic wage for each year beyond five years.

Part-years are pro-rated. So the longer you stay, the faster it accrues — the jump from 21 to 30 days after year five is a meaningful step up.

The detail everyone misses: basic salary, not package

Here's the catch that shrinks most people's expectations: gratuity is calculated on your basic salary only, not your total package. Housing, transport, schooling and other allowances are excluded.

This is not an accident. Many Gulf employment contracts are deliberately structured with a small basic and large allowances — which keeps the employer's gratuity (and other basic-linked) liabilities down. If your AED 40,000 package is only AED 15,000 basic, your gratuity is built on the 15,000, not the 40,000. Always check your contract's basic figure before estimating.

The two-year cap

There's a ceiling: total gratuity can't exceed two years' total wage. For very long-serving employees this cap eventually becomes the binding constraint, so service beyond a certain point stops adding to the gratuity.

A worked example

Meet Raj. He's leaving Dubai after 8 years. His basic salary is AED 18,000 a month (his total package is AED 32,000, but only basic counts).

1. Daily rate = 18,000 ÷ 30 = AED 600 per day.
2. First 5 years at 21 days each = 5 × 21 × 600 = AED 63,000.
3. Years 6–8 (3 years) at 30 days each = 3 × 30 × 600 = AED 54,000.
4. Total = 63,000 + 54,000 = AED 117,000.

Notice that if Raj had estimated on his AED 32,000 package, he'd have expected almost double. The basic-salary rule nearly halved the figure he was imagining. Run your own numbers in the gratuity calculator so you're working from the real entitlement.

Resignation, termination and the 2021 law

Under the UAE labour law in force since 2022, once you've completed a year, your gratuity is based on your length of service whether you resign or are terminated. This is a change from the older system, which could reduce gratuity for resignations under "unlimited" contracts. We cover the current rules in detail in UAE gratuity and the MOHRE rules. Note that free zones such as the DIFC (with its DEWS scheme) and ADGM operate their own end-of-service arrangements.

Don't let the lump sum sit idle

A six-figure gratuity that lands in a current account and slowly gets spent is a wasted opportunity. The smart move is to treat it as seed capital — see how to invest your end-of-service gratuity, and model how it fits your wider picture in the Gulf expat retirement calculator.

This article is educational information, not legal or tax advice. UAE labour rules have detailed conditions and free zones differ. Check your contract and the current MOHRE guidance, and take professional advice on your specific entitlement.