How End of Service Gratuity Works in the UAE (2026 Guide)
End of Service Benefits (EOSB), commonly referred to in the United Arab Emirates as Gratuity, is a statutory lump-sum payment mandated under Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations. Every full-time employee in the private sector who completes at least one year of continuous service is entitled to this benefit upon separation.
Core Rules of the UAE Gratuity Formula
- Eligibility Threshold: Minimum 1 continuous year of service. Employees leaving before 12 months receive zero gratuity.
- Calculation Base: Exclusively based on the employee's last basic salary. Housing, transport, travel tickets, bonuses, and commission are excluded.
- First 5 Years of Service: 21 days' basic wage for each year of service.
- Years Exceeding 5 Years: 30 days' basic wage for each additional year.
- Pro-Rata Entitlement: Fractions of a year are calculated proportionally, provided 1 full year has elapsed.
- Maximum Statutory Cap: Gratuity cannot exceed two years' basic salary (24 months).
- Deduction of Unpaid Leave: Days of absence without pay do not count toward continuous service tenure.
Gratuity Calculation Table (Sample Basic Salaries)
Assuming continuous service under a standard employment contract:
| Basic Salary | 1 Year Service | 3 Years Service | 5 Years Service | 8 Years Service |
|---|---|---|---|---|
| AED 5,000 | AED 3,500 | AED 10,500 | AED 17,500 | AED 32,500 |
| AED 10,000 | AED 7,000 | AED 21,000 | AED 35,000 | AED 65,000 |
| AED 15,000 | AED 10,500 | AED 31,500 | AED 52,500 | AED 97,500 |
| AED 25,000 | AED 17,500 | AED 52,500 | AED 87,500 | AED 162,500 |
Key Change: No Resignation Deduction Under the New UAE Labour Law
Prior to 2022 under Federal Law No. 8 of 1980, employees who resigned under unlimited contracts faced severe reductions: receiving only 1/3 of the gratuity for 1–3 years of service, and 2/3 for 3–5 years.
Under Federal Decree-Law No. 33 of 2021, this penalty was entirely abolished. All private-sector contracts are unified fixed-term contracts, and an employee who resigns after completing at least one year of continuous service receives 100% of their accrued gratuity.
Automating UAE Payroll and Gratuity Accruals with Qeemah
For UAE companies, manually calculating end-of-service provisions each month can lead to balance sheet discrepancies. Qeemah UAE Accounting Software automates end-of-service accruals on a monthly basis, tracks WPS-compliant salary processing, manages FTA VAT 201 compliance, and prepares your finance stack for the UAE E-Invoicing mandate.