End-of-service gratuity (ESG) under UAE Labour Law is calculated based on the employee's basic wage and length of continuous service. For the first five years of service, the employee is entitled to 21 days of basic wage per year, and for each additional year beyond five years, 30 days of basic wage per year, with the total capped at two years' wages [1].
How the calculation works
The calculation uses your basic wage only — not your gross salary. Allowances such as housing, transport, and other benefits are excluded from the ESG base [1]. To estimate your gratuity:
- Years 1–5: (basic wage ÷ 30) × 21 × number of years
- Year 6 onward: (basic wage ÷ 30) × 30 × number of years
- The combined total cannot exceed two years' worth of basic wage [1].
Partial years of service after the first completed year are typically pro-rated, though you should verify the exact pro-rata mechanism with the Ministry of Human Resources and Emiratisation or your employer.
Eligibility and reductions
Gratuity generally accrues only after completing one full year of continuous service. Periods spent on probation and unpaid leave are usually excluded from the service calculation. The law also permits gratuity to be reduced or forfeited in specific circumstances, particularly where an employee resigns under a limited-term contract before completing certain service thresholds [2]. The exact conditions for reduction depend on the contract type (limited vs. unlimited) [3] and the reason for termination.
Important jurisdictional note
The above applies to employees in onshore UAE governed by Federal Decree-Law No. 33 of 2021. Employees in DIFC and ADGM free zones are governed by separate employment laws with their own ESG or equivalent end-of-service regimes (e.g., DIFC's DEWS scheme), which are not addressed in the provided sources. If you work in a financial free zone, different rules apply.
Citations: [1] Federal Decree-Law No. 33 of 2021 — End-of-service gratuity calculation (FDL-33-2021, gratuity provisions) [2] Federal Decree-Law No. 33 of 2021 — Forfeiture/reduction of gratuity (FDL-33-2021) [3] Federal Decree-Law No. 33 of 2021, Article 8 — Limited-term and unlimited-term contracts (FDL-33-2021 Article 8)
For advice tailored to your situation, consult a licensed UAE lawyer.
Citations
- [1] Federal Decree-Law No. 33 of 2021 — End-of-service gratuity calculation (FDL-33-2021, gratuity provisions) ⚠
- [2] Federal Decree-Law No. 33 of 2021 — Forfeiture/reduction of gratuity (FDL-33-2021) ⚠
- [3] Federal Decree-Law No. 33 of 2021, Article 8 — Limited-term and unlimited-term contracts ✓
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More questions readers asked
Sub-questions our research cluster pulls together — each links to its full Tier-B/C answer.
+−What is the Wage Protection System (WPS) and is it mandatory?
WPS is mandatory for private-sector salary payments via approved UAE channels in AED. Wages must be paid within 15 days of pay-period end. Non-compliance triggers MOHRE penalties.
+−What notice period applies to contract termination under UAE Labour Law?
Standard notice is 30–90 days written notice (must be set in contract). The other party can pay in lieu. Probation termination requires 14 days. Notice not required for listed serious-misconduct grounds.
+−Can I be terminated during my probation period in the UAE?
Yes. Employer must give 14 days written notice. No gratuity if under 1 year. Discriminatory or retaliatory dismissal can still be challenged at MOHRE.
This is general legal information, not legal advice. For advice tailored to your specific situation, consult a UAE-licensed lawyer.
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