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• All final dues, including gratuity, must be paid within 14 days of the contract ending; in the DIFC, gratuity has been replaced by the funded DEWS scheme.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.

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.

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.

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.

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.

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.

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.

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.