Formula
What is UAE end-of-service gratuity?
End-of-service gratuity is a statutory lump-sum benefit that a UAE employer must pay to a worker when the employment relationship ends, after at least one year of continuous service. It's defined by Federal Decree-Law No. 33 of 2021 - the current UAE Labor Law, which took effect on February 2, 2022. The law applies to all private-sector employees on the mainland (free zones may have their own regulations) and is non-waivable. The new law brought significant changes from the previous 1980 Labor Law, particularly around resignation and contract type.
Article 51 - the formula
Article 51 sets the gratuity as: 21 days of basic wage for each of the first 5 years of service, plus 30 days of basic wage for each subsequent year. The total cannot exceed 2 years' basic wage (the cap). Service of partial years is pro-rated. Example: a worker with 7 years of service on an AED 10,000 monthly basic wage: daily basic = 10,000 / 30 = AED 333.33. Days earned = (5 × 21) + (2 × 30) = 165. Gratuity = 165 × 333.33 = AED 55,000 - well below the AED 240,000 cap.
What changed in 2022
Federal Decree-Law 33/2021 took effect on February 2, 2022, replacing Federal Law No. 8 of 1980. The biggest change for gratuity: the resignation penalty was abolished. Under the old law, resigning before completing certain years reduced your gratuity (1/3, 2/3 tiers). Under the new law, you receive the FULL gratuity regardless of who initiated the termination - as long as you completed 1 year of continuous service. The 21-day + 30-day formula and the 2-year cap were carried over unchanged.
Why 'basic wage' only (not total)
UAE Article 51 explicitly limits the calculation to the BASIC wage (الراتب الأساسي) - excluding all allowances. This is a key contrast with Saudi Arabia, where the total wage (including housing, transport, etc.) is used. For a typical UAE expatriate package with AED 10,000 basic + AED 5,000 housing + AED 1,500 transport, the gratuity is computed on the AED 10,000 only. This is why two workers with the same TOTAL salary can have very different gratuity amounts depending on how their package is split.
When and how you get paid
Per Article 53 of Decree-Law 33/2021, the employer must pay all end-of-service dues - including the gratuity - within 14 days of the contract end date. Payment is in addition to your final salary, unused leave compensation, and any deferred bonuses. The Wages Protection System (WPS) records all wage transfers electronically; you can verify your basic wage history through this system. The employer should also issue a settlement letter (مخالصة) showing the breakdown.
How to claim if your employer doesn't pay
If your employer fails to pay or pays an incorrect gratuity, you can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE) through their app, online portal, or call center (800-60). MOHRE offers a free mediation service first; if unresolved, the case proceeds to the Labor Court within MOHRE's specialized labor judicial committees, then potentially to the Federal Court. Bring: signed employment contract, last 6 months of WPS-verified payslips, official termination notice, residency cancellation papers, and copies of any written communication with your employer about the gratuity.
Frequently asked questions
Federal Decree-Law No. 33 of 2021 took effect on February 2, 2022. It replaced the 1980 Labor Law and applies to all private-sector employment in the UAE mainland. The biggest change for gratuity: the resignation penalty was abolished. The 21-day + 30-day formula and the 2-year cap stayed the same.
Yes - under the new law (effective Feb 2, 2022), there is no resignation penalty. You receive the full gratuity regardless of whether you or your employer ended the contract, as long as you completed 1 year of continuous service. This is a major change from the old law's 1/3, 2/3 tiers.
Article 51 of Federal Decree-Law 33/2021 explicitly limits the calculation to the basic wage. Allowances - housing, transport, education, etc. - are excluded. For a package of AED 10,000 basic + AED 5,000 housing + AED 1,500 transport, the gratuity is computed on AED 10,000 only. This is also how the previous law handled it.
Yes - the total gratuity is capped at 2 years' basic wage. So for an AED 10,000 basic wage over 30 years of service, the cap is AED 240,000 (10K × 12 × 2), not AED 290,000 (the uncapped calculation). The cap typically applies after about 21-22 years of service for most workers.
Per Article 53 of Decree-Law 33/2021, all end-of-service dues - including the gratuity - must be paid within 14 days of the contract end date. This is in addition to your final salary and unused leave compensation. If your employer delays beyond this, you can file a complaint with MOHRE.
Sources
- UAE Federal Decree-Law No. 33 of 2021 - Article 51 (End-of-Service Benefits)— Ministry of Human Resources and Emiratisation (MOHRE), UAE
- MOHRE - Labor Law guide and worker services— MOHRE, UAE
- U.AE - Federal Decree-Law on Regulating Employment Relations— UAE Government Portal
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