How to Calculate Gratuity in the UAE: A Step-by-Step Guide
Four steps turn your basic salary and years of service into your UAE end-of-service gratuity. Here they are, with a full worked example.
Calculating your UAE gratuity by hand is straightforward once you know the four steps. The rules come from Federal Decree-Law No. 33 of 2021, and they apply the same way whether you resign or are terminated (after one year of service).
Step 1 — Find your daily wage
Take your basic monthly salary and divide by 30:
Daily wage = basic monthly salary ÷ 30
Use basic salary only — housing, transport and other allowances do not count toward gratuity.
Step 2 — Calculate the first 5 years
For each of your first 5 years, you earn 21 days of daily wage:
First-5-years amount = daily wage × 21 × (years up to 5)
Step 3 — Calculate the years beyond 5
For every year past the fifth, the rate rises to 30 days:
Beyond-5 amount = daily wage × 30 × (years above 5)
Step 4 — Add them up and check the cap
Add the two amounts. The total is your gratuity, subject to one ceiling: it cannot exceed two years' total wages. You also need at least one completed year of service for any gratuity to be due.
Full worked example
An employee on AED 6,000 basic with 7 years of service:
| Step | Calculation | Result |
|---|---|---|
| 1. Daily wage | 6,000 ÷ 30 | AED 200 |
| 2. First 5 years | 200 × 21 × 5 | AED 21,000 |
| 3. Years 6–7 | 200 × 30 × 2 | AED 12,000 |
| 4. Total gratuity | 21,000 + 12,000 | AED 33,000 |
Because this figure is well under two years' wages (AED 144,000), the cap does not bite. And because the 2021 law removed the resignation penalty, the AED 33,000 is the same whether this employee resigns or is terminated.
Common pitfalls to avoid
- Using total salary instead of basic. The most frequent error. If your AED 6,000 example were actually part of a AED 10,000 package, only the AED 6,000 basic counts — see basic vs total salary.
- Forgetting the rate step at five years. The first five years are 21 days each; only years beyond five earn 30. Applying 30 days to the whole tenure overstates the figure.
- Assuming resignation reduces it. It does not, after one year — that rule was repealed in 2021.
- Ignoring the one-year minimum. Under a year of service, nothing accrues.
How partial years and the cap behave
Service is pro-rated, so a partial year is credited proportionally rather than rounded. And the two-year-wages ceiling only matters at very long tenures on higher salaries: on the AED 6,000 example you would need well over 20 years before the cap even came into view. For a full band-by-band table from 1 to 40 years, see how the 21 vs 30-day bands work.
Let the calculator do it
Rather than run the arithmetic yourself, enter your basic salary and years into the UAE Gratuity Calculator — it applies both rate bands and the two-year cap instantly, in your browser. To dig into the wording of the law, read the UAE gratuity guide; to understand the resignation position, see UAE gratuity after resignation.
Frequently asked questions
What is the formula for UAE gratuity?
Daily wage (basic ÷ 30) × 21 days for each of the first five years, plus daily wage × 30 days for each year beyond five, capped at two years' total wages, after at least one year of service.
Is UAE gratuity calculated on basic or gross salary?
Basic salary only. Housing, transport and other allowances are excluded, so gratuity is usually lower than people expect from their full package.
Does the calculation change if I resign?
No. Under Federal Decree-Law 33/2021, resignation and termination pay the same gratuity once you have completed one year of service.
When must UAE gratuity be paid?
All end-of-service dues must be settled within 14 days of your last working day.
What if I have a partial year of service?
Once you pass the one-year minimum, partial years are pro-rated in the calculation — you are credited proportionally for the extra months rather than rounded up or down.