End of Service Gratuity Explained

The UAE has no state pension for expatriate workers, so end-of-service gratuity — a mandatory lump-sum payout when employment ends — functions as the closest thing most private-sector expats get to a retirement payout. Every employer with UAE-based staff needs to understand it; every employee should know how to check it.

The formula: 21 days, then 30 days

Under Article 51 of Federal Decree-Law No. 33 of 2021 (the UAE Labour Law), gratuity accrues at two different daily rates depending on length of service:

Partial years are pro-rated, but only once you've completed at least one full year of continuous service — someone who leaves before their first anniversary gets no gratuity at all.

Basic salary only — allowances don't count

This is the detail that catches the most people out. Gratuity is calculated on your last basic monthly salary, not your total package. If your contract lists a monthly salary of AED 15,000 split into AED 8,000 basic, AED 5,000 housing, and AED 2,000 transport, your gratuity is calculated on the AED 8,000 — not the full 15,000. Check the "basic salary" line on your MOHRE-registered contract before estimating anything.

Worked example

The two-year cap

No matter how long someone has worked, total gratuity can never exceed two years' worth of basic salary. For most people this ceiling only becomes relevant after roughly 20+ years of continuous service, since the 30-day rate accrues slower than two full years of pay per year worked.

Resignation no longer reduces your entitlement

Before February 2022, employees on unlimited contracts who resigned (rather than being terminated) received a reduced gratuity — as little as one-third of the full amount for short service. That penalty was abolished under the 2021 Labour Law. Since 2 February 2022, an employee who resigns after completing one year of service receives exactly the same gratuity as one who is terminated — the reason employment ended no longer affects the amount owed.

When it must be paid

Employers must settle all final dues, including gratuity, within 14 days of the employment contract ending. Lawful deductions — documented debts to the employer, for example — can be subtracted, but the gratuity itself can't be withheld or delayed beyond that window.

An exception: DIFC's DEWS scheme

Employees in the Dubai International Financial Centre (DIFC) don't accrue traditional gratuity at all. Since 2020, DIFC employers instead make monthly contributions into a funded scheme called DEWS (DIFC Employee Workplace Savings), which behaves more like a portable pension fund than a lump-sum entitlement calculated at exit.