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UAE Gratuity by Tenure: What You Get After 1, 3, 5, and 10+ Years
Ask five people in the UAE how much gratuity they are owed, and you will get five different guesses. That is because gratuity is not a fixed number. It scales with how long you have worked, and the accrual rate jumps after the fifth year, something many employees and employers only discover when a resignation is already on the table.
This guide lays out the exact calculation at every major tenure milestone, from 1 year all the way to 25 years, with worked examples you can apply to any basic salary. One important note before the numbers: gratuity under UAE labour law applies to all private-sector employees, but UAE and GCC nationals are typically enrolled in government pension schemes (such as GPSSA for Emiratis), which replace the gratuity entitlement. In practice, this makes gratuity primarily relevant to expatriate employees. For the broader picture on eligibility, edge cases, and special rules, see the UAE Gratuity: Complete Guide.
The Core Gratuity Formula
Article 51 of Federal Decree-Law No. 33/2021 lays out a two-tier formula. Every private-sector employee who completes at least one year of continuous service qualifies for end-of-service gratuity. The calculation is based entirely on the employee's final basic salary (not total package, allowances or overtime), and the rate depends on the tenure.
• Years 1 through 5: 21 calendar days of basic salary per year of service.
• Year 6 onward: 30 calendar days of basic salary for each additional year beyond five.
• Cap: Total gratuity cannot exceed 24 months (two full years) of basic salary, no matter how long the employee has served.
• Minimum tenure: At least one year of continuous service with the same employer. Anything less, and no gratuity is owed.
• Partial years: Calculated pro-rata for any partial year served, as long as the employee has completed at least one full year.
A quick note on what "21 days" and "30 days" actually mean: these are calendar days, not working days. The daily rate is your basic monthly salary divided by 30. For someone earning AED 5,000 per month, that comes to AED 166.67 per day.
One change worth flagging from the 2022 law: the old distinction between limited and unlimited contracts no longer affects gratuity. All employees now receive the same entitlement regardless of contract type.
Gratuity at Every Milestone
The table below uses a sample basic salary of AED 5,000 per month (daily rate: AED 166.67). To calculate for a different salary, scale the amounts proportionally.
The jump after year 5 is worth pausing on. From year 6 onward, each additional year adds 30 days of basic salary instead of 21. That is a 43% increase in the per-year accrual rate, and it is why the amounts accelerate so noticeably after the five-year mark. Also, the 25-year row is where the cap kicks in. At AED 5,000 basic, the formula would produce more than AED 120,000, but the law limits total gratuity to 24 months of basic salary (AED 5,000 x 24 = AED 120,000). Any tenure beyond that point does not increase the payout.
The foundation of an accurate gratuity calculation is an accurate basic salary record. If basic salary has changed over the years, the calculation uses the final basic salary at the time of termination. Zoho Payroll maintains a complete salary history for each employee, so the correct figure is always there when you need it. For a quick estimate based on your own numbers, try the free Zoho Payroll gratuity calculator.
How Partial Years Are Calculated
Employees rarely leave on exact year anniversaries, so partial-year calculations come up constantly. The good news: the law keeps it simple. Any partial year beyond the first full year is calculated proportionally.
Example 1: An employee works 3 years and 8 months at a basic salary of AED 5,000 per month.
• Full years: 3 x 21 x 166.67 = AED 10,500
• Partial year (8 months): (8/12) x 21 x 166.67 = AED 2,333
• Total: AED 12,833
Example 2 (crossing the 5-year mark): An employee works 6 years and 4 months. This one is trickier because two rates apply.
• First 5 years (at 21 days): 5 x 21 x 166.67 = AED 17,500
• Year 6 (full, at 30 days): 1 x 30 x 166.67 = AED 5,000
• Partial (4 months, at 30 days): (4/12) x 30 x 166.67 = AED 1,667
• Total: AED 24,167
What Gratuity Does Not Include
A few common misconceptions are worth clearing up, because they come up in almost every gratuity conversation.
• Not included in the calculation: Housing allowance, transport allowance, overtime, bonuses, commissions, and in-kind benefits. Only the basic salary component is used.
• Does not reduce tenure: Sick leave, annual leave, and maternity leave taken during employment all count toward total service. These absences do not subtract from the years used in the calculation.
• Possible forfeiture: If an employee is terminated for gross misconduct under Article 44 (such as assaulting a colleague, fabricating identity documents, or committing a crime related to employment), the employer may not be required to pay gratuity. This is the exception, not the rule.
• Cap reminder: Total gratuity cannot exceed 24 months of basic salary, regardless of tenure. For an employee earning AED 5,000 per month, the maximum is AED 120,000.
Three Departures, Three Calculations
Amira is the HR manager at a trading company in Dubai. Three employees are leaving in the same month, and she needs to calculate each one's gratuity for the final settlement.
Faisal has been with the company for 2 years. His basic salary is AED 8,000 per month. The calculation is straightforward: 21 x 2 x (8,000/30) = AED 11,200. All at the 21-day rate, quick and clean.
Priya has been with the company for 6 years and 3 months. Her basic salary is AED 15,000 per month. The first 5 years are at 21 days: 5 x 21 x 500 = AED 52,500. The remaining 1 year and 3 months are at the higher 30-day rate: (1 x 30 x 500) + ((3/12) x 30 x 500) = AED 15,000 + AED 3,750 = AED 18,750. Her total: AED 71,250.
Khalid has been with the company for 12 years. His basic salary is AED 25,000 per month. First 5 years: 5 x 21 x 833.33 = AED 87,500. Next 7 years at 30 days: 7 x 30 x 833.33 = AED 175,000. His total: AED 262,500. The cap is two years of his basic salary, which comes to AED 600,000, so the cap does not reduce his amount.
Amira pulls the exact basic salary and start date for each employee from Zoho Payroll. The records are current because every salary revision over the years was logged when it happened, not reconstructed from memory or old offer letters. When she initiates each employee's exit in Zoho Payroll, the system automatically calculates the gratuity based on the contract type, separation type, and free zone. She does not need to run the formula manually. The formula is simple. Getting the inputs wrong is where mistakes happen, and that is a payroll records problem, not a math problem.
Why Accurate Records Matter More Than the Formula
The gratuity formula is public knowledge. The calculation takes less than a minute. What trips companies up is the data behind the calculation: was the basic salary updated in April or June? Did the start date account for the probation period? Were salary changes documented at the time, or pieced together years later from offer letters and emails?
Zoho Payroll takes care of this by maintaining a timestamped record of every salary change, every employment start date, and every payroll run. When an employee departs and gratuity is due, the data is already there. No filing cabinets, no guesswork, no recalculating from old spreadsheets.
Frequently Asked Questions
Q1. Do I get gratuity if I resign before completing 1 year?
No. You need to complete at least one year of continuous service with the same employer to qualify. If you leave before one year, no gratuity is owed under UAE law.
Q2. Is gratuity calculated on basic salary or total salary?
Basic salary only. Allowances (housing, transport, etc.), overtime, bonuses, and commissions are not included. This is why the distinction between basic salary and total package matters so much for long-tenured employees.
Q3. What if my basic salary changed during my employment?
Gratuity is calculated using your final basic salary at the time of termination, not an average or the salary you started on. If your basic salary increased from AED 8,000 to AED 12,000 over five years, the entire gratuity is calculated at AED 12,000. This is exactly why maintaining accurate salary records matters. Zoho Payroll logs every salary change with the effective date, so the final figure is always traceable.
Q4. Is there a maximum gratuity amount?
Yes. Total gratuity is capped at 24 months (two full years) of the employee's basic salary. For someone earning AED 5,000 per month basic, the maximum is AED 120,000 regardless of how many years they have served.
Q5. Does the 2022 labour law change the gratuity formula?
Federal Decree-Law No. 33/2021 (effective February 2022) kept the same gratuity calculation formula as the previous law. The 21-day and 30-day rates, the five-year threshold, and the 24-month cap all remain unchanged. The key change was removing the distinction between limited and unlimited contracts for gratuity purposes, so all employees now receive the same entitlement regardless of contract type.
Q6. Can I estimate my gratuity online?
Yes. Zoho Payroll offers a free online gratuity calculator where you can enter your basic salary, contract type, and years of service to get an instant estimate. It covers both standard UAE calculations and DIFC-specific rules.
Calculate Your Gratuity
For a quick estimate right now, try the free Zoho Payroll gratuity calculator. For ongoing accuracy, Zoho Payroll maintains a complete, timestamped salary history for every employee, and when you initiate an employee exit, the gratuity is calculated automatically based on the contract type and tenure.
Try the free gratuity calculator, or start your free trial to keep your salary records accurate from day one.