Part of the guide: Saudi HR & Payroll Toolkit 2026: GOSI, End of Service, Days

UAE Gratuity Calculation 2026: Formula & Examples

By Faizan Published October 26, 2026 16 min read HR & Payroll

How much gratuity should an employee receive after seven years in the UAE? The answer depends on the basic salary, length of service and any unpaid leave taken during employment.

A UAE gratuity calculation is based on the employee's last basic wage. Under Article 51 of Federal Decree-Law No. 33 of 2021, most qualifying full-time expatriate employees receive 21 days of basic wage for each of their first five years of service and 30 days for each additional year.

That sounds easy enough. The mistakes usually happen when payroll counts the wrong joining date, uses total salary instead of basic salary, or calculates the entire service period at the higher 30-day rate.

Quick answer: An eligible full-time foreign employee who completes at least one year of continuous service receives gratuity based on the last basic wage. Unpaid absence is excluded from the qualifying service calculation. Partial years are counted proportionately, and the benefit is subject to a statutory ceiling of two years' wage.

The current UAE Labour Law took effect on 2 February 2022. The usual one-third and two-thirds resignation deductions found in older UAE payroll sheets do not apply automatically under the current Article 51 framework.

Employers must also pay outstanding wages and other contractual or statutory entitlements within 14 days of the employment contract ending.

Here is how to calculate the amount and check it before approving a final settlement.

Who qualifies for UAE gratuity in 2026?

Article 51 covers full-time foreign employees working under the federal private-sector Labour Law.

The main conditions are straightforward.

One year of continuous service: An employee generally needs at least one year of continuous employment before qualifying for gratuity.

Probation counts: Article 9 treats the probation period as part of the employee's service. HR should use the actual joining date rather than the confirmation date.

Basic salary matters: The ordinary gratuity calculation uses the employee's last basic wage. Housing, transport and other allowances are excluded from that accrual calculation.

Unpaid absence is excluded: Days of absence without pay do not count toward the service period used to calculate gratuity.

Part years count: Once an employee meets the minimum service requirement, the remaining fraction of a year is calculated proportionately.

Basic salary versus total salary

Suppose an employee receives the following monthly salary:

Salary component	Amount
Basic salary	AED 8,000
Housing allowance	AED 4,000
Transport allowance	AED 1,000
Other allowance	AED 1,000
Total salary	AED 14,000

For the ordinary gratuity accrual, the calculation starts with AED 8,000.

It does not start with AED 14,000.

That difference is significant. Using total salary for the 21-day and 30-day calculation would overstate the ordinary accrued benefit.

There is a separate question about the maximum gratuity payment. Article 51(6) refers to a ceiling of two years' "wage," while Article 51(5) refers specifically to "basic wage" for calculating the accrued benefit.

Because the law defines these terms separately, an employer should confirm the applicable interpretation when the ceiling actually affects an employee's settlement.

For the ordinary service examples below, the amount remains below the ceiling, so this distinction does not change the result.

Does probation count toward gratuity?

Yes.

Consider someone who joined on 1 January 2025 and completed six months of probation.

If that employee remains employed until January 2026, payroll should not start counting service from July 2025.

The probation period forms part of employment.

Using the confirmation date could incorrectly reduce a qualifying employee's entitlement or make it appear that the employee worked for less than one year.

Which employees follow different rules?

Not everyone working in the UAE uses the same gratuity formula.

Employee group	Applicable treatment
Full-time expatriate private-sector employees	Federal Labour Law, Article 51
UAE nationals	Applicable pension and social security legislation
Part-time employees	Proportionate calculation under the Executive Regulations
Temporary employees with service below one year	Generally no statutory gratuity
DIFC employees	DIFC employment law and qualifying savings arrangements
ADGM employees	ADGM Employment Regulations
Domestic workers	Separate domestic-worker legislation
Government employees	Relevant government employment rules
Employees enrolled in an approved Savings Scheme	Alternative end-of-service arrangement

Many ordinary UAE free zones follow the federal Labour Law, but DIFC and ADGM have separate frameworks.

Check the employer's jurisdiction before applying a standard gratuity calculator.

How is part-time gratuity calculated?

Article 30 of Cabinet Resolution No. 1 of 2022 provides a proportional calculation for qualifying part-time and other work patterns.

The calculation compares contracted annual working hours with the comparable full-time contract.

Part-time ratio =
Annual contracted hours
/ Annual full-time contracted hours

The applicable full-time gratuity is multiplied by that ratio.

For example, if the relevant annual contracted hours are exactly half those of a comparable full-time employee, the proportional factor is 50%.

Check the full-time comparator and salary basis carefully. Applying an additional reduction to an already proportionally adjusted amount could result in paying too little.

The official UAE Government end-of-service guide explains these rules.

UAE gratuity calculation formula step by step

For an ordinary full-time expatriate employee, the calculation has four parts.

Step 1: Calculate the eligible service period

Start with the actual employment commencement date and the employment termination date.

Then remove applicable unpaid absence days.

Counted service days =
Applicable employment service days
- Unpaid absence days

Article 67 uses a 365-day statutory year and a 30-day statutory month.

For a day-based calculation:

Service years = Counted service days / 365

Payroll systems should retain the original dates and the service-day convention used.

A period described casually as "three years and seven months" may not contain the same number of actual calendar days in every case.

For a quick date check, use the HeadsNTail days calculator.

Step 2: Calculate the gratuity days

The first five years earn 21 days of basic wage per year.

Gratuity days = 21 × Service years

For employees who have served more than five years:

Gratuity days =
(21 × 5) + (30 × Additional years)

The first five years always produce:

21 × 5 = 105 days

Only service beyond those five years earns 30 days per year.

Take an employee with seven years of service.

First 5 years:
5 × 21 = 105 days

Additional 2 years:
2 × 30 = 60 days

Total:
105 + 60 = 165 days

That employee is entitled to 165 days of basic wage before applying the statutory ceiling or any lawful adjustment.

A frequent payroll error is to multiply all seven years by 30 days. That is not how the two service bands work.

Step 3: Calculate the daily basic wage

For a monthly-paid employee, a commonly used payroll method is:

Daily basic wage = Monthly basic salary / 30

If the monthly basic salary is AED 8,000:

8,000 / 30 = AED 266.666666...

Do not round the daily amount to AED 266.67 before completing the calculation.

Keep the full precision and round the final payable amount to two decimal places.

Article 67 sets the statutory year and month conventions, but the legislation does not expressly prescribe one daily-wage conversion formula for every monthly-paid gratuity arrangement.

Some payroll calculations instead use annualized basic salary divided by 365.

That gives a different daily result.

The following examples use monthly basic salary divided by 30. Employers should confirm that the method fits their applicable employment and payroll circumstances.

Step 4: Multiply the gratuity days by daily basic wage

The ordinary accrued benefit is:

Accrued gratuity =
Gratuity days × Daily basic wage

Using the seven-year employee:

Gratuity days = 165

Daily basic wage = 8,000 / 30

Accrued gratuity = 165 × (8,000 / 30)

Accrued gratuity = AED 44,000

The result must also be checked against the two-year wage ceiling in Article 51(6).

For employees with service long enough to reach that ceiling, the legal interpretation of "wage" matters.

The ordinary accrual uses basic wage. The ceiling is separately worded as two years' wage. For a capped case involving allowances, get the treatment confirmed rather than assuming the ceiling is always 24 months of basic salary.

Excel or Google Sheets formula

For an illustrative calculation, enter:

Cell	Value
B1	Monthly basic salary
B2	Monthly total contractual wage
B3	Eligible service days after unpaid absence

This formula assumes the monthly basic salary divided by 30 method and a two-year ceiling based on total contractual wage:

=IF(OR(B1<=0,B2<B1,B3<0),"CHECK INPUTS",IF(B3<365,0,ROUND(MIN((B1/30)*(21*MIN(B3/365,5)+30*MAX(B3/365-5,0)),B2*24),2)))

It returns zero if eligible service is below 365 days and calculates the first five years separately from the later period.

The formula does not determine employment dates or whether a particular absence legally counts. Payroll must establish the correct B3 value first.

The cap treatment used here is an explicit assumption for this example, not a substitute for legal confirmation in a disputed settlement.

PHP and Laravel gratuity function

For a PHP 8 or Laravel payroll application, a reusable calculation function can look like this:

<?php

function calculateUaeGratuity(
    float $basicSalary,
    float $totalWage,
    int $serviceDays
): float {
    if (
        !is_finite($basicSalary) ||
        !is_finite($totalWage) ||
        $basicSalary <= 0 ||
        $totalWage < $basicSalary ||
        $serviceDays < 0
    ) {
        throw new InvalidArgumentException(
            'Invalid gratuity inputs.'
        );
    }

    if ($serviceDays < 365) {
        return 0.00;
    }

    $years = $serviceDays / 365;

    $dailyBasic = $basicSalary / 30;

    $firstFiveYears = min($years, 5);

    $additionalYears = max($years - 5, 0);

    $gratuityDays =
        ($firstFiveYears * 21)
        + ($additionalYears * 30);

    $accruedAmount = $gratuityDays * $dailyBasic;

    // Assumed cap interpretation for this example.
    $maximumAmount = $totalWage * 24;

    return round(
        min($accruedAmount, $maximumAmount),
        2
    );
}

Test the seven-year example:

$result = calculateUaeGratuity(
    basicSalary: 8000,
    totalWage: 14000,
    serviceDays: 2555
);

echo number_format($result, 2);

// Expected output: 44,000.00

A few checks belong in the payroll application before this reaches production.

Validate joining and termination dates, unpaid absence, contract type and the applicable employment jurisdiction. Keep these records separate from the final amount so HR can explain any settlement later.

For accounting systems, use a decimal-safe approach to monetary calculations. PHP floating-point values are suitable for demonstrating the formula but should not be the only source of truth for financial ledgers.

Also make sure the function is not used for employees whose enrolled service falls under the approved alternative Savings Scheme.

Worked UAE gratuity examples with AED 8,000 basic salary

All five examples use a monthly basic salary of AED 8,000.

To make the long-service ceiling example straightforward, assume total monthly wage also equals AED 8,000 in this table.

The daily basic wage is AED 8,000 divided by 30.

Example	Eligible service	Gratuity days	Amount
A	3 statutory years and 7 statutory months	75.0822	AED 20,021.92
B	Same period, minus 30 unpaid days	73.3562	AED 19,561.64
C	7 years	165	AED 44,000.00
D	27 years	765 before cap	AED 192,000.00
E	11 months	Not eligible	AED 0.00

Example A: Three years and seven months

For this illustration, seven statutory months equal 210 days.

3 years = 3 × 365 = 1,095 days

7 months = 7 × 30 = 210 days

Total counted days = 1,305

The gratuity is:

21 × (1305 / 365) × (8000 / 30)

= AED 20,021.92

Actual HR calculations should start with the employee's dates rather than use rounded years.

Example B: Thirty days of unpaid leave

Suppose the employee in Example A also took 30 days of absence without pay.

Counted service = 1,305 - 30

Counted service = 1,275 days

The calculation becomes:

21 × (1275 / 365) × (8000 / 30)

= AED 19,561.64

The difference is AED 460.28.

Unpaid leave affects the period used for gratuity. It should not simply be deducted as 30 days of salary from the final gratuity amount.

Example C: Seven years of service

This is a useful example for checking payroll software.

First five years:
5 × 21 = 105 days

Years six and seven:
2 × 30 = 60 days

Total:
165 days

Final calculation:

165 × (8000 / 30)

= AED 44,000

If a calculator produces AED 56,000 by using seven years multiplied by 30 days, it has applied the higher rate incorrectly.

Example D: Twenty-seven years of service

For 27 years:

First five years = 105 days

Remaining 22 years = 22 × 30 = 660 days

Total gratuity days = 765

The accrued amount is:

765 × (8000 / 30)

= AED 204,000

Assume both basic and total wage are AED 8,000.

The two-year ceiling is:

24 × 8000 = AED 192,000

The capped amount is AED 192,000.

Now consider a different employee with AED 8,000 basic salary and AED 12,000 total contractual wage.

The accrued gratuity would still be AED 204,000, but the two-year ceiling based on total wage would be AED 288,000 under that interpretation.

The higher ceiling would not reduce the accrued amount.

This example shows why the statutory wording needs attention. The distinction generally matters only when service is long enough for the ceiling to affect the result.

Example E: Eleven months of service

An employee with only eleven months of counted service has not met the ordinary one-year gratuity requirement.

The gratuity under Article 51 would therefore be zero.

That does not mean the employee should receive no final settlement. Outstanding wages, unused leave pay and other lawful entitlements must be assessed separately.

For any employee close to the one-year threshold, check the dates and absence records before finalizing the calculation.

UAE resignation, termination and final settlement rules

The biggest source of confusion is older UAE HR advice that still circulates online.

Under the former Federal Law No. 8 of 1980, resignation could reduce gratuity depending on service length and contract type.

The current framework no longer applies those ordinary resignation reductions in the same way.

Does an employee lose gratuity after resigning?

For qualifying service under Article 51 of the current Labour Law, ordinary resignation does not automatically cut the gratuity to one-third or two-thirds.

The employee's service duration and basic wage determine the ordinary accrued amount.

For example, a seven-year employee with AED 8,000 basic salary would ordinarily calculate AED 44,000 under the assumptions used above.

The same basic formula applies whether the qualifying employee resigns or the employer terminates the contract, subject to the relevant legal circumstances.

Do not copy the old resignation percentages into a new UAE payroll calculator.

What about employment before February 2022?

Article 68 contains transitional rules for unlimited contracts that existed under the previous Labour Law.

These cases deserve closer review.

An employee who joined many years before 2022 may have an old unlimited contract, a subsequent conversion and service periods subject to different transitional treatment.

HR should check the original contract, the conversion date and the legal basis used for any earlier accrued amount.

A statement such as "you resigned, so you only receive one-third" is not enough.

Ask for a written calculation showing which legal provision applies to which service period.

Can dismissal without notice cancel gratuity?

Article 44 permits dismissal without notice in specified circumstances, subject to the law's requirements.

It does not create a general rule that every employee dismissed without notice automatically loses all accrued gratuity.

Notice obligations, disciplinary action and gratuity entitlement are separate questions.

If an employer proposes to withhold gratuity, the settlement should identify the relevant legal basis.

What deductions are allowed?

Article 51(7) allows certain amounts payable under the law or a judgment to be deducted from gratuity, subject to the applicable conditions.

That is not permission for unlimited deductions under internal company policy.

For a proper settlement, show the original gratuity amount, each proposed deduction, the reason and the supporting legal basis.

Employees should be able to see how the final payable amount was reached.

When must the employer pay?

Article 53 requires wages and other applicable entitlements to be paid within 14 days from the end of the employment contract.

A final settlement can include more than gratuity.

Settlement component	What HR should check
Unpaid salary	Actual outstanding wage period
Gratuity	Eligible service and last basic wage
Unused annual leave	Applicable leave balance and payment rules
Notice-related payment	Contract and statutory obligations
Other contractual amounts	Supporting documentation
Authorized deductions	Legal basis and evidence

The employer's internal clearance process should not be confused with a new statutory payment deadline.

Common payroll mistakes

Seven issues deserve a final check before payroll approves a settlement.

Wrong salary figure: Using the total package instead of basic wage for ordinary gratuity accrual.
Wrong joining date: Beginning service from confirmation rather than employment commencement.
Missing probation: Ignoring a qualifying probation period.
Wrong service band: Applying 30 days to all years after the fifth year is completed.
Incorrect unpaid leave: Deducting paid leave or failing to exclude applicable unpaid absence.
Outdated resignation percentages: Applying the former law without checking the current framework and transitional provisions.
Incomplete settlement: Treating gratuity as the only amount payable when other employment entitlements remain.

A useful habit is to calculate service days, gratuity days and the payment amount separately. It makes errors easier to find than a spreadsheet that produces one unexplained total.

The HeadsNTail paycheck calculator can help with ordinary payroll checks, but final gratuity should still be assessed under the employment rules.

Savings Scheme, MOHRE disputes and Saudi comparison

The UAE voluntary Savings Scheme

The UAE introduced a voluntary alternative to the ordinary end-of-service gratuity system under Cabinet Resolution No. 96 of 2023.

Participating employers make contributions to approved investment funds for enrolled employees.

For qualifying full-time employees, the published contribution rates are:

Service period	Employer monthly contribution
Up to 5 years	5.83% of basic salary
More than 5 years	8.33% of basic salary

The contributions are paid by the employer.

The approved system allows employees to receive the subscribed amounts and applicable investment returns under the scheme's terms.

Employers must transfer the required subscription within 15 days from the start of the relevant calendar month.

Employees may also make permitted voluntary contributions, subject to the applicable limit of 25% of total wage.

What happens to gratuity earned before enrolment?

An employee may join the Savings Scheme after already completing several years of service.

The gratuity accrued before enrolment must be calculated and handled under the applicable scheme requirements.

The employer then stops applying the traditional gratuity accrual for the enrolled period covered by the alternative system.

HR should keep the earlier gratuity component separate from the later investment-based component.

Otherwise, a payroll system could accidentally count the same service twice.

The official UAE Government Savings Scheme guidance provides the contribution and participation rules.

What if the employer refuses to pay gratuity?

Start by requesting a written final settlement from HR.

Include your joining date, termination date, basic wage, qualifying service and calculation.

If the dispute remains unresolved, employees covered by the federal private-sector framework can use MOHRE's labour complaint services.

Article 54, as amended by Federal Decree-Law No. 9 of 2024, allows MOHRE to issue enforceable decisions in specified disputes where the claim does not exceed AED 50,000.

The same decision-making provision can apply to failure to comply with a previous amicable settlement, regardless of the amount.

For a qualifying MOHRE decision, a party wishing to challenge it generally has 15 working days from notification to start the prescribed court proceedings.

The amended provision also includes a two-year limitation period measured from the end of the employment relationship for covered labour claims.

Do not delay a complaint simply because that longer limitation period exists. Evidence and payment records are easier to handle while they are still available.

MOHRE's Labour Claims and Advisory Call Centre is 80084.

DIFC and ADGM employees should use the relevant jurisdiction's employment dispute process.

UAE versus Saudi end-of-service benefits

Saudi Arabia uses different gratuity rates and resignation rules.

Rule	UAE	Saudi Arabia
First 5 years	21 days of basic wage per year	Half a month of applicable wage per year
After 5 years	30 days of basic wage per year	One month of applicable wage per year
Ordinary resignation	No automatic reduction under current Article 51	Article 85 resignation fractions apply
2 to under 5 years after resignation	Ordinary eligible gratuity	One-third entitlement
5 to under 10 years after resignation	Ordinary eligible gratuity	Two-thirds entitlement
10 years or more after resignation	Ordinary eligible gratuity	Full entitlement

For comparison, use an eligible monthly calculation wage of 8,000 currency units and seven years of service.

UAE:

105 + 60 = 165 gratuity days

165 × (8000 / 30)

= 44,000

Saudi Arabia:

First five years:
5 × 0.5 month = 2.5 months

Next two years:
2 × 1 month = 2 months

Total = 4.5 months

4.5 × 8000 = 36,000

For an ordinary Saudi resignation after seven years, Article 85 generally provides two-thirds of the entitlement:

36,000 × 2 / 3 = 24,000

These figures compare calculation methods, not currencies. The employee's qualifying wage and individual circumstances must still be assessed under each country's legislation.

For Saudi calculations, read End-of-service benefits under Saudi Labour Law.

Saudi GOSI contributions are a separate payroll obligation. The Saudi GOSI contribution rates guide explains those requirements.

FAQ

How do I calculate UAE gratuity in 2026?

Calculate 21 days of the last basic wage for each of the first five years of eligible service, followed by 30 days for every additional year.

Include qualifying fractions of a year and exclude applicable unpaid absence.

For a monthly-paid employee, dividing basic salary by 30 is a common daily-rate method. Confirm the applicable calculation convention and statutory ceiling before making a final payment.

Is UAE gratuity based on basic salary or full salary?

The ordinary gratuity accrual uses the employee's last basic salary.

Housing, transport and other allowances are not included in the 21-day and 30-day accrual calculation.

The separate statutory ceiling refers to two years' wage. If an employee has long service and substantial allowances, the ceiling's treatment should be confirmed under the applicable legal interpretation.

Will I receive gratuity if I resign?

Generally, yes, if you meet the statutory eligibility requirements under the current federal private-sector Labour Law.

Ordinary resignation does not automatically trigger the old one-third or two-thirds reductions.

Employees whose service began under an old unlimited contract before February 2022 should also check Article 68's transitional provisions.

What if I worked less than one year?

Under the ordinary Article 51 rule, a full-time foreign employee must complete at least one year of continuous service to qualify for gratuity.

Probation counts toward service, while applicable unpaid absence is excluded from the gratuity service calculation.

Even where no gratuity is payable, other outstanding wages and lawful final-settlement entitlements may remain due.