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Employer Guide on End-of-Service Gratuity in the United Arab Emirates (UAE)
Summary:
- Gratuity is the UAE’s statutory severance for expat employees — there is no state pension for expats, so it is their core end-of-service entitlement.
- It accrues at 21 days of basic pay per year for the first 5 years and 30 days per year thereafter, calculated on the last basic salary (allowances excluded) and capped at 2 years’ total wages.
- Since Federal Decree-Law No. 33 of 2021, resignation no longer reduces gratuity — an employee who resigns gets the full rate, provided they have completed one year of service.
- All final dues, including gratuity, must be paid within 14 days of the contract ending; in the DIFC, gratuity has been replaced by the funded DEWS scheme.
Quick answer: UAE end-of-service gratuity is mandatory severance for expat employees with at least one year of service: 21 days of basic salary per year for the first five years, 30 days per year after that, based on the last basic salary and capped at two years’ wages. The old resignation reductions were abolished in 2021, and gratuity must be paid within 14 days of the contract ending. In the DIFC it is replaced by the DEWS savings scheme.
What is end-of-service gratuity?
End-of-service gratuity (often called the “gratuity” or, in Arabic, mukafaa) is the statutory lump sum a UAE employer owes an expatriate employee when their employment ends. Because expats are not enrolled in a state pension in the UAE, gratuity is effectively their retirement/severance entitlement — and a real, accruing liability every employer must budget for. It is governed by the federal labour law, Federal Decree-Law No. 33 of 2021.
Who is entitled?
Any non-GCC expatriate employee who completes at least one year of continuous service qualifies. Days of unpaid leave are excluded from the service count. GCC nationals and Emiratis are covered by GPSSA pensions instead, so gratuity applies specifically to the expat workforce that makes up most private-sector employment.
How gratuity is calculated
The calculation is based on the employee’s last basic salary — housing, transport, utilities and other allowances are excluded, which usually makes the gratuity base notably lower than total pay. The accrual rate steps up with tenure:
- First 5 years: 21 days of basic pay for each year of service.
- From year 6 onward: 30 days of basic pay for each additional year.
- Partial years are paid pro-rata once the one-year threshold is met.
- Overall cap: total gratuity may not exceed two years’ total wages.
A simple worked example: an employee on a basic salary of AED 10,000/month who leaves after 6 years would accrue 21 days × 5 years plus 30 days × 1 year. Converting the monthly basic to a daily rate (÷ 30) gives roughly AED 333/day, so 105 + 30 = 135 days ≈ AED 45,000. You can read the underlying definition in our end-of-service gratuity glossary entry.
Resignation vs termination — the 2021 change
This is the point that most often catches foreign employers out. Under the old law, an employee who resigned (rather than being dismissed) had their gratuity reduced on a sliding scale. Federal Decree-Law No. 33 of 2021 abolished those reductions: now an employee who resigns receives the full 21/30-day rate, exactly as if their contract had been ended by the employer — provided they have completed at least one year. The reform also made all private-sector contracts fixed-term, removing the old “limited vs unlimited” distinction that used to drive different gratuity outcomes.
When it must be paid
All final dues — gratuity, outstanding salary, payment in lieu of accrued leave — must be settled within 14 days of the employment ending. Late settlement is a labour-law breach and can attract penalties, so the gratuity figure should be calculated and ready before the employee’s last day.
DIFC: the DEWS exception
The Dubai International Financial Centre (DIFC) is a separate jurisdiction with its own employment law. From 1 February 2020 it replaced the traditional end-of-service gratuity with the funded DIFC Employee Workplace Savings (DEWS) scheme: instead of a lump sum calculated at exit, the employer contributes monthly (5.83% of basic salary for the first five years, 8.33% thereafter) into a managed savings plan. ADGM operates a comparable regime. If you employ in a financial free zone, check which scheme applies before modelling cost.
How an EOR handles gratuity for you
Gratuity is a liability that builds month by month, so it needs to be accrued, not improvised at termination. An Employer of Record in the UAE accrues each employee’s gratuity as it grows, calculates the final figure correctly on the basic-salary basis, and ensures it is paid within the 14-day window — alongside WPS-compliant payroll. If you already have a UAE entity, our managed payroll service handles gratuity accruals and end-of-service processing within your own books. Talk to our UAE team for help modelling the liability.
Frequently asked questions
Who is entitled to end-of-service gratuity in the UAE?
Any non-GCC expatriate employee who completes at least one year of continuous service is entitled to gratuity. Emiratis and GCC nationals are covered by GPSSA pensions instead, so gratuity applies to the expat workforce. Days of unpaid leave are excluded from the service count.
How is UAE gratuity calculated?
Gratuity is 21 days of basic salary for each of the first five years of service and 30 days for each year thereafter, based on the last basic salary and excluding allowances. Partial years are paid pro-rata once the one-year threshold is met, and the total is capped at two years’ wages.
Is gratuity calculated on basic salary or total salary?
It is calculated on the last basic salary only. Housing, transport, utilities and other allowances are excluded, which usually makes the gratuity base meaningfully lower than the employee’s total monthly pay.
Does an employee who resigns still get full gratuity?
Yes. Under Federal Decree-Law No. 33 of 2021 the old resignation-based reductions were abolished, so an employee who resigns receives the full 21/30-day rate, provided they have completed at least one year of service.
When must gratuity be paid?
All final dues, including gratuity, must be paid within 14 days of the employment contract ending. Late settlement is a labour-law breach and can attract penalties, so the figure should be ready before the employee’s final day.
Is there a maximum gratuity amount?
Yes — total end-of-service gratuity may not exceed the equivalent of two years’ total wages, regardless of how long the employee has served.
How does gratuity work in the DIFC?
The DIFC replaced traditional gratuity with the funded DEWS scheme from 1 February 2020. Instead of a lump sum at exit, the employer contributes monthly (5.83% of basic salary for the first five years, 8.33% thereafter) into a managed savings plan; ADGM has a similar regime.
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Mark is the Global Sales Director at Topsource Worldwide. He has been a pioneering figure in the global expansion space since 2013. He is the first salesperson to sell EOR services in Europe, a feat he accomplished in 2013.