UAE Gratuity Calculator Formula & How to Use It

The UAE gratuity calculator works out the end-of-service benefit you are entitled to under UAE Labour Law, based on your basic salary, years of service, and reason for leaving. You enter your basic monthly salary, your start and end dates, and your termination reason, and the calculator returns the gratuity amount in AED. The result is an estimate; the actual payment depends on your contract terms and the specific circumstances of your departure.

Formula

The standard UAE gratuity formula is based on your basic salary (not your total salary, which includes allowances). The calculation uses 21 days of basic pay per year of service for the first 5 years, and 30 days per year for each additional year. However, the total gratuity cannot exceed two years’ basic salary.

The formula for a worker terminated by the employer is:

Gratuity = Basic Salary ÷ 30 × 21 × Years of Service (for first 5 years)

For years beyond 5, the multiplier becomes 30 days instead of 21.

For a worker who resigns, the gratuity is reduced based on length of service:

• Less than 1 year: no gratuity
• 1 to 3 years: 1/3 of the full gratuity
• 3 to 5 years: 2/3 of the full gratuity
• More than 5 years: full gratuity

Variables:

• Basic Salary – the monthly basic wage in AED (excluding housing, transport, and other allowances)
• Years of Service – completed years (and months, calculated proportionally)
• Days per Year – 21 days for each of the first 5 years, then 30 days for each year after

Worked Example

Using the calculator defaults: basic salary = 10,000 AED, years of service = 5, termination by employer.

1. Daily wage = 10,000 ÷ 30 = 333.33 AED
2. Gratuity per year = 333.33 × 21 = 7,000 AED
3. Total for 5 years = 7,000 × 5 = 35,000 AED

The calculator returns 35,000 AED, matching the manual calculation.

If you resign after 3 years (with the same salary), the full gratuity would be 21,000 AED, but you receive only 2/3 of that = 14,000 AED.

When Is Gratuity Payable?

Gratuity is payable when an employee completes at least one full year of continuous service. It applies to both termination by the employer and resignation, but the amount differs. The law also covers employees who leave due to death or disability, in which case the full gratuity is paid to the family or the employee.

Key points:

• Gratuity is calculated on basic salary only, not total cost to company.
• Unlimited contracts and limited contracts are treated similarly for gratuity after 1 January 2022, when the UAE Labour Law was updated.
• If you are dismissed for gross misconduct, you may lose your gratuity entirely.
• If you resign before completing 1 year, you receive nothing.

Common Mistakes and Misconceptions

A frequent error is using total salary instead of basic salary. Many employment contracts list a total package, but the gratuity is based on the basic component. Another common mistake is ignoring the reduction for resignation. Some people assume they get the full 21 days per year regardless of why they left, but the law clearly scales it down for resignations.

Also, the 30-day cap for years beyond 5 is often forgotten. For example, someone with 10 years of service gets 21 days for the first 5 years and 30 days for the next 5, not 30 days for all 10.

How to Use the Calculator Correctly

To get an accurate estimate:

1. Find your basic salary on your employment contract or payslip. It is usually the line item before allowances.
2. Count your total service in years and months. If you have 4 years and 6 months, enter 4.5 years.
3. Select the correct termination reason – resignation or employer termination – because the calculator applies the appropriate reduction.
4. Read the result as a gross amount before any deductions (e.g., loans, advances).

Limitations of the Formula

The formula is a simplification of UAE Labour Law. Some situations require special handling:

• Contracts that started before 2022 may have different rules under the old law.
• Employees on part-time or flexible work arrangements may have gratuity calculated differently.
• If your basic salary is not clearly stated, the calculation may be disputed.
• The law caps the total gratuity at two years’ basic salary.

This calculator is for estimation only. For an exact figure, consult your HR department or the Ministry of Human Resources and Emiratisation (MOHRE).

Frequently Asked Questions

Is gratuity calculated on basic salary or total salary?

Gratuity is calculated on your basic salary only. Allowances like housing, transport, and phone are excluded. If your contract does not clearly separate basic salary, the labour court may determine it.

What if I resign before completing 1 year?

You are not entitled to any gratuity if you resign before completing one year of continuous service. This applies to both limited and unlimited contracts.

How is gratuity calculated for more than 5 years of service?

For the first 5 years, you get 21 days of basic pay per year. For each year after the 5th, you get 30 days of basic pay per year. The total cannot exceed two years’ basic salary.

Does the reason for leaving affect gratuity?

Yes. If you are terminated by the employer (not for misconduct), you get the full gratuity. If you resign, the amount is reduced: 1/3 for 1-3 years, 2/3 for 3-5 years, and full only after 5 years.

Can I lose my gratuity entirely?

Yes, if you are dismissed for gross misconduct or if you abandon your job without notice. Also, if you resign without serving your notice period, the employer may deduct from your gratuity to cover the notice shortfall.

Are there any taxes on gratuity in the UAE?

There is no personal income tax in the UAE, so gratuity is paid without any tax deduction. However, if you have outstanding loans or advances from your employer, those may be deducted from the final payment.

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in basic | Basic monthly salary (AED) | AED | 10000 | 0
in years | Years of service | years | 5 | 0
sel reason | Termination reason | Resignation=1, Termination by employer=2
out gratuity | Gratuity (AED) | AED | basic * (years * 21 / 30) * (reason == 2 ? 1 : (years < 5 ? 0.5 : 1)) | 0