Question 1

What is the formula for gratuity calculation in UAE?

Accepted Answer

UAE gratuity is calculated as follows: Daily rate = basic salary / 30. For the first 5 years: 21 days x daily rate x years. For years beyond 5: 30 days x daily rate x additional years. The total is capped at 2 years of your total (not basic) salary. You need at least 1 year of service to qualify.

Question 2

Is gratuity calculated on basic salary or total salary?

Accepted Answer

Gratuity is calculated on your basic salary only — not on total salary or allowances. This is why negotiating a higher basic-to-total salary ratio is important for maximizing your end-of-service entitlement. The 2-year cap, however, is based on your total salary.

Question 3

Do I get gratuity if I resign before 5 years?

Accepted Answer

Yes, under the new UAE Labour Law (effective February 2022), you are entitled to full gratuity after completing 1 year of service, regardless of whether you resign or are terminated. The old law had reduced gratuity for resignation before 5 years, but this no longer applies.

Question 4

What is the maximum gratuity amount in UAE?

Accepted Answer

The total gratuity cannot exceed 2 years of your total salary (all components). For example, if your total monthly salary is AED 25,000, your maximum gratuity is AED 25,000 x 24 = AED 600,000, regardless of how many years you have served.

Question 5

Is gratuity taxed in UAE?

Accepted Answer

No, gratuity payments are completely tax-free in the UAE. Since there is no personal income tax, the full gratuity amount is paid to the employee without any deductions. This applies to both UAE nationals and expatriates.

Question 6

When should I receive my gratuity after leaving?

Accepted Answer

Under UAE Labour Law, your employer must pay gratuity within 14 days of the end of your employment contract. If the employer fails to pay within this period, you can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).

Question 7

Does gratuity apply to part-time employees in UAE?

Accepted Answer

Yes, the new UAE Labour Law extends gratuity entitlement to part-time employees on a pro-rata basis. The calculation is based on actual working hours relative to full-time hours, applied to the same 21/30-day formula.

UAE Gratuity Calculator — End-of-Service Benefits