Is there a maximum limit on the gratuity amount?
Yes, the total gratuity payable to an employee under the UAE Labour Law cannot exceed the amount equivalent to two years' (24 months) total salary calculated based on the last drawn salary.
UAE Labour Law sets a clear ceiling on gratuity payments to prevent excessive liabilities:
Maximum Limit Rule
- Cannot exceed 24 months of last drawn salary
- Calculated using total salary (basic + allowances)
- Applies regardless of years of service
- Protects employers from unlimited liability
Calculation Example
- Last drawn total salary: AED 10,000
- Maximum gratuity: AED 10,000 × 24 = AED 240,000
- Even if calculated gratuity is higher, cap applies
When Cap Applies
- Long-serving employees (typically 15+ years)
- High-salary positions
- Employees with significant salary increases over time
- Senior management and executive positions
Important Notes
- Cap uses total salary, not just basic salary
- Different from gratuity calculation (which uses basic only)
- Employers cannot set lower caps than legal minimum
- Some companies may offer enhanced benefits above legal minimum
