How is Gratuity Calculated in Dubai?
The UAE gratuity calculation is based on your basic salary and length of service. Here’s the exact formula used by employers across Dubai, Abu Dhabi, and all Emirates:
Important Notes (2025 Labor Law):
New Labor Law Update: Under Federal Decree-Law No. 33 of 2021 (now standard in 2025), employees who complete at least 1 year of service are entitled to full gratuity, even upon resignation, provided they serve their notice period properly.
Maximum Cap: The total gratuity cannot exceed 2 years of your basic salary, regardless of service length.
Unpaid Leave: Days of unpaid leave are deducted from your total service period, which may affect your final gratuity calculation.
Daily Wage Calculation: Your daily wage is calculated as: (Basic Salary × 12 months) ÷ 365 days
Common Questions
Q: Does unpaid leave count towards gratuity?
No, unpaid leave does not count towards your gratuity calculation. Only the actual days worked are considered when calculating your total service period for gratuity purposes.
Q: Is gratuity calculated on Gross or Basic salary?
Gratuity is calculated on your Basic Salary only, not your gross salary. Do not include allowances such as housing allowance, transport allowance, or any other benefits in the calculation.
Q: What happens if I resign before finishing my contract?
Under the 2025 UAE Labor Law (Federal Decree-Law No. 33 of 2021), if you resign after completing at least 1 year of service and serve your notice period properly, you are entitled to full gratuity. If you resign before completing 1 year, you receive no gratuity.
Q: When should I receive my gratuity payment?
According to UAE Labor Law, your employer must pay your gratuity within 14 days of the end of your employment. If there’s a delay, you can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).
Q: What is the difference between limited and unlimited contracts?
Limited contracts have a fixed end date (typically 2-3 years), while unlimited contracts have no specified end date. As of recent UAE Labor Law updates, most new contracts are limited contracts. The gratuity calculation differs based on contract type and reason for separation.
