What exactly is Gratuity or End-of-Service Benefit (EOSB)?

Gratuity/EOSB is a statutory payment made by an employer to an employee at the end of their service period in the UAE. It's mandated by the UAE Labour Law as a form of recognition for the employee's service, provided they have completed at least one continuous year with the company.

Who is eligible for gratuity payments in the UAE?

Primarily, expatriate employees working in the UAE's private sector who complete at least one year of continuous service are eligible. UAE nationals traditionally had pension schemes, but recent voluntary schemes allow them to opt into end-of-service benefits too. Certain exclusions might apply based on employment type or specific free zone regulations.

Is gratuity calculated on the total salary or just the basic salary?

Gratuity is calculated based only on the employee's last drawn basic salary. Allowances such as housing, transport, or other benefits are not included in the gratuity calculation.

What is the minimum service period required to receive gratuity?

An employee must complete a minimum of one full year of continuous service with the employer to be eligible for any gratuity payment.

How does the contract type (Limited vs. Unlimited) affect gratuity?

Historically, under Unlimited contracts, resigning significantly reduced gratuity entitlement in the early years (1-5 years). Under Limited contracts (and the current legal framework pushing towards them), the entitlement calculation (21 days for years 1-5, 30 days thereafter) generally applies regardless of whether the employee resigns or is terminated, provided minimum service is met. Note: Unlimited contracts are legally required to be converted to Limited contracts.

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).

When should the gratuity be paid?

The employer must pay the gratuity along with all other final settlement dues within 14 days from the employee's last working day (end date of the employment contract).

Is the gratuity calculation different in free zones like DIFC?

Yes, some free zones have different regulations. For example, the Dubai International Financial Centre (DIFC) uses the 'DIFC Employee Workplace Savings' (DEWS) plan, where employers make monthly contributions to a savings plan instead of a lump-sum gratuity payment at the end of service. Always check the specific regulations of the free zone you work in.

Can an employer deduct money from the gratuity payment?

Yes, under specific circumstances outlined in the Labour Law, an employer may deduct amounts owed by the employee to the employer (e.g., outstanding loans, damages caused by the employee) from the final settlement, including the gratuity amount. However, these deductions must be legally justifiable.

What exactly is Gratuity or End-of-Service Benefit (EOSB)?

Gratuity, also known as End-of-Service Benefit (EOSB), is a crucial component of UAE employment law: Definition & Purpose Statutory payment from employer to employee at service end Recognition of employee's service and loyalty Mandated by UAE Labour Law (Federal Decree-Law No. 33 of 2021) Provides financial security for employees transitioning between jobs Key Requirements Minimum one year of continuous service required Applies to both resignation and termination scenarios Calculated based on last drawn basic salary Payment due within 14 days of service end Legal Framework Governed by UAE Labour Law Updated regulations effective from 2023 Applicable across all UAE emirates Enforceable through UAE courts and labor departments

Who is eligible for gratuity payments in the UAE?

Gratuity eligibility in the UAE depends on several factors: Eligible Employees Expatriate employees in UAE private sector UAE nationals (under new voluntary schemes) Employees with minimum one year continuous service Both limited and unlimited contract holders Sector Coverage Private sector companies Free zone establishments Some semi-government entities Domestic workers (under specific conditions) Exclusions Federal government employees (have pension schemes) Employees terminated for misconduct Workers with less than one year service Certain categories in specific free zones Special Considerations Free zone variations (e.g., DIFC DEWS scheme) Company-specific enhanced benefits Voluntary schemes for UAE nationals

Is gratuity calculated on the total salary or just the basic salary?

Gratuity calculation in the UAE is specifically based on basic salary only: What's Included Basic salary (last drawn amount) Fixed monthly allowances (if specified in contract as part of basic) What's Excluded Housing allowance Transport allowance Mobile/communication allowance Medical insurance Performance bonuses Overtime payments Commission earnings Any variable or discretionary payments Calculation Base Uses the last drawn basic salary amount Monthly basic salary divided by 30 for daily rate Daily rate multiplied by service days per calculation rules Important Notes Contract should clearly define basic salary component Salary changes during service don't affect calculation Only the final basic salary amount is used

What is the minimum service period required to receive gratuity?

The minimum service period is a fundamental requirement for gratuity eligibility in the UAE: Basic Requirement Minimum one full year (365 days) of continuous service Service must be with the same employer Breaks in service may affect eligibility Probation period counts towards service period Continuous Service Definition Uninterrupted employment with same employer Annual leave and sick leave count as service Maternity/paternity leave included Authorized unpaid leave may be excluded Service Calculation From first working day to last working day Partial years calculated proportionally Contract extensions maintain continuity Job transfers within same company group may continue service Special Cases Termination due to misconduct: No gratuity regardless of service Death or permanent disability: Gratuity payable to heirs/employee Resignation before one year: No gratuity entitlement Contract non-renewal: Gratuity payable if minimum service met

How does the contract type (Limited vs. Unlimited) affect gratuity?

Contract type significantly affects gratuity calculation, though Unlimited contracts are being phased out: Limited Contracts (Current Standard) Full gratuity entitlement regardless of leaving reason 21 days' basic salary per year for first 5 years 30 days' basic salary per year after 5 years Same calculation for resignation, termination, or contract end Unlimited Contracts (Being Phased Out) Termination by Employer: Full gratuity as per calculation Resignation by Employee: 1-3 years: 1/3 of calculated gratuity 3-5 years: 2/3 of calculated gratuity 5+ years: Full gratuity Legal Changes (2022-2023) All unlimited contracts must be converted to limited Conversion deadline was February 2022 New labor law favors limited contract structure Enhanced employee protections under new system Practical Implications Limited contracts provide more certainty Employees have better mobility between jobs Employers have clearer cost calculations Reduced disputes over gratuity calculations

Is there a maximum limit on the gratuity amount?

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

When should the gratuity be paid?

UAE Labour Law mandates strict timelines for gratuity payment to protect employee rights: Payment Deadline Within 14 days of last working day Includes weekends and public holidays Cannot be delayed without legal justification Late payment may incur penalties Final Settlement Components Outstanding salary and overtime Unused annual leave balance End-of-service gratuity Any other contractual benefits Acceptable Deductions Outstanding loans to company Advance salary payments Damages caused by employee negligence Notice period shortfall (if applicable) Employee Rights Right to detailed settlement statement Can dispute deductions through labor courts Interest may be payable on delayed payments Ministry of Human Resources can intervene Enforcement Labor courts handle disputes Ministry of Human Resources mediation Potential business license implications Criminal liability for willful non-payment

Is the gratuity calculation different in free zones like DIFC?

Free zones in the UAE may have different end-of-service benefit structures: DIFC Employee Workplace Savings (DEWS) Monthly contributions instead of lump-sum gratuity Employee and employer contributions Portable benefits when changing jobs within DIFC Investment growth potential Other Free Zone Variations ADGM: Similar to DIFC with workplace savings JAFZA: Generally follows UAE mainland rules DMCC: Standard UAE labor law applies Various others: Check specific free zone regulations Key Differences Contribution-based vs. lump-sum systems Portability between employers Investment components and growth Different vesting schedules Employee Considerations Understand your specific free zone rules Compare benefits when job hunting Consider portability of benefits Review investment options in savings plans Employer Obligations Clearly communicate benefit structure Make timely contributions Provide regular statements Comply with free zone regulations

UAE Gratuity Calculator 2025

Estimate your End-of-Service Benefits (EOSB) in the UAE for 2025

Last Drawn Basic Salary (AED)

First Working Day

Last Working Day

Type of Contract

Note: As of Dec 2023, unlimited contracts are being converted to limited contracts by law.

Reason for Exit (for Limited Contract)

Understanding Gratuity (End-of-Service Benefits) in UAE 2025

Gratuity, also known as End-of-Service Benefit (EOSB), is a mandatory payment employers in the UAE owe to their employees upon the end of their service period, provided they meet certain criteria (like completing at least one year of continuous service). It serves as a token of appreciation for the employee's contribution and loyalty. This calculator helps estimate this amount based on the UAE Labour Law (Federal Decree-Law No. 33 of 2021), updated for 2025.

How Gratuity is Calculated in UAE (Limited Contracts) 2025

For employees under **Limited (Fixed-Term) Contracts**, the calculation is based on the last drawn basic salary:

**1 to 5 years of service:** Gratuity = (Basic Salary / 30) * 21 * Number of Years Served. You receive 21 days' basic salary for each year of the first five years.
**More than 5 years of service:** Gratuity = [(Basic Salary / 30) * 21 * 5] + [(Basic Salary / 30) * 30 * (Total Years Served - 5)]. You receive 21 days' basic salary for each of the first five years, and 30 days' basic salary for each subsequent year.

Note: The reason for leaving (resignation, termination, end of contract) generally does not reduce the gratuity entitlement under the latest Labour Law for limited contracts, assuming the minimum service period is met.

Gratuity Calculation for Unlimited Contracts (Phasing Out, 2025)

While **Unlimited Contracts** are being phased out (employers were required to transition them to limited contracts), the historical calculation method differed based on the reason for leaving:

**Termination by Employer:** Calculated the same way as limited contracts (21 days/year for first 5 years, 30 days/year after).
**Resignation by Employee:**
- Less than 1 year: No gratuity.
- 1 to 3 years: One-third (1/3) of the 21 days' basic salary per year.
- 3 to 5 years: Two-thirds (2/3) of the 21 days' basic salary per year.
- More than 5 years: Full gratuity entitlement (21 days/year for first 5, 30 days/year after).

Our calculator reflects these rules. Remember that unlimited contracts must be converted.

Key Eligibility Points for UAE Gratuity 2025

Applies mainly to expatriate employees in the private sector.
Minimum of one year of continuous service is required.
Calculation is based on the **last drawn basic salary** (excluding allowances).
Total gratuity amount cannot exceed the equivalent of two years' total salary.
Payment is due within 14 days of the employment end date.

Disclaimer (2025)

This calculator provides an estimate based on standard interpretations of the UAE Labour Law as of 2025. It does not account for specific contract clauses, unpaid leave deductions, free zone variations (e.g., DIFC's DEWS scheme), or potential legal changes. Always verify with your HR department or seek legal advice for official calculations.

Frequently Asked Questions (FAQ)

All in one app for your UAE business, manage Field Service, CRM, and Projects seamlessly in one place.

Book a Free Demo

Company

Apps

Help

Instagram