UAE Gratuity Calculator — Limited & Unlimited Contract

End-of-service gratuity — commonly called مكافأة نهاية الخدمة — is a mandatory payment that UAE private-sector employers must make to eligible employees when their employment ends. Whether you are leaving after 2 years or 20, understanding exactly how your gratuity is calculated can mean the difference of tens of thousands of dirhams. **What is UAE End-of-Service Gratuity?** Gratuity is a statutory benefit enshrined in UAE labour law. It is not a bonus or a gift — it is a legal entitlement that accrues with every year of service. The primary legislation governing it today is Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (effective February 2, 2022), which replaced the old Federal Law No. 8 of 1980 for most new contracts. **Who is Eligible for UAE Gratuity?** Gratuity applies to expatriate and national private-sector employees who complete at least one full year of continuous service. It does not apply to federal government employees (who have their own pension scheme), armed forces, domestic workers under separate regulation, or employees who have been insured under an approved alternative end-of-service benefits scheme. Part-time workers are eligible on a pro-rated basis relative to full-time hours. **Limited Contract Gratuity (Current Law — Federal Decree-Law No. 33 of 2021)** Under the 2021 law, all new employment contracts must be fixed-term (limited). The gratuity formula is uniform regardless of whether the employee resigned or was terminated — a significant change from the old law: - **Years 1–5:** 21 calendar days of basic salary per year of service - **Beyond 5 years:** 30 calendar days of basic salary per additional year The total entitlement is capped at 2 years of basic salary. Fractions of a year are pro-rated on a daily basis after completing the first full year. Unpaid leave periods are excluded from the service calculation. **Example (Limited Contract):** An employee with 7 years of service and a basic salary of AED 10,000/month: - Daily salary = (10,000 × 12) / 365 = AED 328.77/day - First 5 years: 5 × 21 × 328.77 = AED 34,520.55 - Next 2 years: 2 × 30 × 328.77 = AED 19,726.03 - **Total: AED 54,246.58** (well under the 2-year cap of AED 240,000) **Unlimited Contract Gratuity (Legacy Rules — Federal Law No. 8 of 1980)** Contracts entered before the 2022 transition deadline that have not been converted to fixed-term remain governed by the old law. The key difference is that gratuity entitlement under unlimited contracts depends on how the employment ended: *If terminated by the employer (full rate):* - Years 1–5: 21 days per year - Beyond 5 years: 30 days per year - Cap: 2 years of basic salary *If resigned by the employee (reduced rates):* - Less than 1 year: No gratuity - 1–3 years: 1/3 of the full 21-days-per-year entitlement - 3–5 years: 2/3 of the full entitlement - 5+ years: Full entitlement (same as termination) This reduction on resignation was the defining feature of the old law and the primary reason the 2021 law was seen as more employee-friendly. Under current law, resignation and termination yield the same gratuity. **Key Rules: What is Included and Excluded** Gratuity is always based on your *last basic salary* only. The following are excluded from the calculation base: - Housing allowance - Transport allowance - Education allowance - Overtime pay - Annual bonuses - Commission - Any other allowances This is why it is critically important to negotiate a higher basic salary rather than shifting compensation into allowances — the basic salary directly determines your gratuity entitlement. **The 2-Year Cap** Regardless of your years of service or contract type, UAE law caps the total gratuity at 2 years of basic salary. An employee earning AED 20,000/month basic salary has a maximum gratuity cap of AED 480,000. In practice, this cap typically affects employees with very long service periods (usually 15+ years at high salary levels). **Unpaid Leave and Deductions** Periods of unpaid leave are excluded from the service period calculation. If you took 60 days of unpaid leave over your tenure, those days are subtracted before computing total years of service. Additionally, any outstanding debts owed to the employer (such as salary advances) may be deducted from the gratuity amount at the time of settlement. **Payment Timeline** UAE law requires employers to pay end-of-service gratuity within 14 days of the contract end date. Failure to comply entitles the employee to file a formal complaint with MOHRE (Ministry of Human Resources and Emiratisation) or pursue the matter through the UAE Labour Courts. **Gratuity for Limited Contract in UAE vs. Unlimited Contract: Key Differences** | Factor | Limited (Fixed-Term) | Unlimited (Legacy) | |---|---|---| | Law | Federal Decree-Law No. 33 of 2021 | Federal Law No. 8 of 1980 | | Resignation penalty | None | Yes (sliding reduction for <5 years) | | New contracts | All new contracts | Pre-2022 only | | Formula (1–5 yrs) | 21 days/year | 21 days/year (full) or reduced | | Formula (5+ yrs) | 30 days/year | 30 days/year | | Cap | 2 years basic salary | 2 years basic salary | **Practical Tips for Employees** Use this calculator as a planning tool before you resign or when evaluating a job offer. Understanding your gratuity entitlement helps you: - Time your resignation strategically (e.g., completing a full year rather than leaving 2 weeks short) - Negotiate your basic salary vs. allowance split - Plan your finances when relocating or transitioning between jobs - Verify the settlement amount your employer proposes Always request a written calculation breakdown from your employer. If you believe the amount is incorrect, consult MOHRE's official online calculator or seek advice from a UAE-licensed legal professional before signing any settlement acknowledgment. *Disclaimer: This tool provides general guidance based on standard rules. Individual circumstances may vary. This is not legal advice. Consult MOHRE or a qualified professional for your specific situation.*