UAE end-of-service gratuity is 21 days of basic salary for each of the first five years of service and 30 days of basic salary for each year after that, with part years counted pro rata, nothing payable below one full year, and a ceiling of two years' wage. The formula is short. The mistakes happen in applying it, so this guide works through eight real-shaped examples, step by step.
The rule, in plain terms
Gratuity for private-sector employees is set by Federal Decree-Law No. 33 of 2021, the UAE Labour Law. For a full-time employee, the parts that decide the number are these:
The method in five steps
Example 1: three years, AED 4,000 basic
Service is three years, so every year falls in the 21-day band. Gratuity days are 3 × 21 = 63. The daily rate is 4,000 ÷ 30 = AED 133.33. The gratuity is 63 × 4,000 ÷ 30 = AED 8,400.
Example 2: four years and six months, AED 3,000 basic
Part years count, so service is 4.5 years. Gratuity days are 4.5 × 21 = 94.5. The daily rate is 3,000 ÷ 30 = AED 100. The gratuity is 94.5 × 100 = AED 9,450. Rounding the service down to four years would have paid AED 8,400 and short-changed the employee by AED 1,050.
Example 3: exactly five years, AED 8,000 basic
Five years is the top of the first band. Gratuity days are 5 × 21 = 105. The daily rate is 8,000 ÷ 30 = AED 266.67. The gratuity is 105 × 8,000 ÷ 30 = AED 28,000.
Example 4: seven years and six months, AED 6,000 basic
Now both bands apply. The first five years earn 5 × 21 = 105 days. The remaining 2.5 years earn 2.5 × 30 = 75 days. That is 180 days in total. The daily rate is 6,000 ÷ 30 = AED 200, so the gratuity is 180 × 200 = AED 36,000.
Example 5: ten years, AED 8,000 basic
The first five years earn 105 days and the next five earn 5 × 30 = 150 days, 255 days in all. At a daily rate of AED 266.67, the gratuity is 255 × 8,000 ÷ 30 = AED 68,000. Compare example 3: the same salary, twice the service, and well over twice the gratuity, because every year past the fifth is worth 30 days rather than 21.
Example 6: twenty-seven years, AED 10,000 basic, where the ceiling bites
The first five years earn 105 days and the next 22 years earn 22 × 30 = 660 days, 765 days in all. At AED 333.33 a day that comes to AED 255,000. The ceiling is 24 × 10,000 = AED 240,000, so the gratuity payable is AED 240,000. With 30-day years after the fifth, the ceiling of 720 days is reached at 25.5 years of service; past that point, more service does not raise the figure, only a higher basic salary does.
Example 7: eleven months, AED 5,000 basic
Service is short of one full year, so there is no entitlement. The gratuity is AED 0, however close to twelve months the employee came.
Example 8: four years, AED 5,000 basic inside a AED 12,000 package
This is the example behind most gratuity disputes. Gratuity days are 4 × 21 = 84. On the correct basis, basic salary, the gratuity is 84 × 5,000 ÷ 30 = AED 14,000. Worked on the total package it would be 84 × 12,000 ÷ 30 = AED 33,600, a difference of AED 19,600. Employees tend to think in terms of their total package and the law does not, so the basis is worth explaining before the final settlement, not after.
Why a calculator can differ by a few dirhams
The examples above use whole and half years so the arithmetic is easy to follow. Real service runs from a joining date to a last working day, and a calculator that measures service to the day divides the days served by the average length of a year, 365.25 days, because leap years fall unevenly. Wurxa does this, so on actual dates it can land a few dirhams away from the round-number answer. For example 1, a joining date of 1 March 2023 and an end date of 1 March 2026 give AED 8,401.92 rather than AED 8,400. On a ten-year service the gap is still a matter of dirhams, not hundreds, but it is the reason two honest calculations can disagree slightly.
Five mistakes that change the number
Most wrong gratuity figures come from one of these:
Work it out in seconds
For a single figure, the free UAE gratuity calculator applies the same rules: enter the basic salary and the service dates and it shows the days, the amount and whether the ceiling applies.
For a whole workforce, the number you want is not one employee's gratuity but the total you are carrying. Wurxa works out each active employee's gratuity to date from the joining date and basic salary already held in their record, and adds them up into a gratuity liability report, sorted with the largest balances first. The figure moves as people pass their fifth anniversary or get a raise, so you see the liability building month by month instead of meeting it in a resignation letter. Before a final settlement, review the employee's record for any unpaid absence and adjust the service period, then settle.
Gratuity, payroll and WPS in one place
Gratuity is the last line of an employment, but it depends on everything before it: the joining date, every change to basic salary and every day of unpaid leave. When those live in the same workspace as attendance, leave and payroll, the final settlement is assembled from records rather than rebuilt from memory.
The gratuity calculation and liability report come with every paid Wurxa Workforce plan. If you also run salaries through the Wage Protection System, Wurxa Payroll and WPS adds validated SIF files built from the same records, at AED 2,400 a year plus VAT. You can try Wurxa for 14 days with every feature and no credit card: start your trial and see your gratuity liability on your own team before the next resignation arrives.
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