How to Calculate Gratuity in UAE – 2025 Rules

If you are working in the UAE, knowing how to calculate gratuity (also called End of Service Benefit or EOSB) is essential. In this guide, you’ll learn what gratuity means, the latest UAE labor law rules, and how to easily calculate your end of service payment step-by-step.

What is Gratuity in UAE?

Gratuity is a lump-sum payment given by your employer when your employment ends, provided you meet the eligibility criteria. It is a mandatory right under UAE Labour Law and serves as a financial safety net for employees between jobs.

Key points to remember:

• Gratuity is based on your last basic salary, not the gross salary.
• Allowances like housing, transport, or bonuses are not included in the calculation.
• The longer you work, the higher your gratuity.

Example:
If your gross salary is AED 15,000, but AED 7,000 is allowances, your basic salary is AED 8,000. Gratuity will be calculated on AED 8,000.

UAE Gratuity Eligibility Conditions

• Must complete at least 1 year of continuous service.
• Probation period does not count unless stated otherwise in your contract.
• No gratuity if terminated for misconduct as per Article 44 of UAE Labour Law.

How to Calculate Gratuity in UAE – 2025 Rules

1. Duration of Employment

1. Less than 5 years: 21 days of basic salary per year of service.

2. More than 5 years:

   1. First 5 years → 21 days per year.

   2. After 5 years → 30 days per year.

3. Maximum limit: Payment cannot exceed the equivalent of 2 years’ basic salary.

2. Type of Contract

1. Limited Contract: Gratuity is calculated on the total service period, regardless of resignation or termination.

2. Unlimited Contract:

   1. Resignation before 5 years → Pro-rata gratuity.
   2. Resignation after 5 years → Full gratuity as per rules.

3. 3. Termination vs Resignation

   1. Termination by Employer: Standard gratuity calculation applies unless dismissed for legal misconduct.
   2. Resignation: Amount depends on years of service and contract type

UAE Gratuity Calculation Formula

If your basic salary is AED 8,000 and you worked 6 years:

• First 5 years → (8000 ÷ 30) × 21 × 5 = AED 28,000

• 6th year → (8000 ÷ 30) × 30 × 1 = AED 8,000
  Total gratuity = AED 36,000

Use Our Free UAE Gratuity Calculator

Instead of manual calculations, try an online UAE gratuity calculator, just enter:

1. Basic Salary

2. Years of Service

3. Contract Type

4. Termination or Resignation

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