Anyone familiar with how gratuity is calculated in the UAE?

[Timothy_Hays]

Hi everyone,
I know this forum has members working or doing business in different countries, so I was hoping someone might know about this How is end-of-service gratuity calculated for employees in the UAE? I’ve been reading about it recently and noticed some confusion regarding what counts as “basic salary” and how it changes based on years of service.
If anyone has experience working in the UAE or managing staff there, I’d love to hear how you handle gratuity calculations.
I also found a helpful UAE gratuity calculator that uses the official labor law formula might be useful for anyone curious about how it works.
Thanks in advance!

[carsonmike]

Hi everyone,
I know this forum has members working or doing business in different countries, so I was hoping someone might know about this How is end-of-service gratuity calculated for employees in the UAE? I’ve been reading about it recently and noticed some confusion regarding what counts as “basic salary” and how it changes based on years of service.
If anyone has experience working in the UAE or managing staff there, I’d love to hear how you handle gratuity calculations.
I also found a helpful UAE gratuity calculator that uses the official labor law formula might be useful for anyone curious about how it works.
Thanks in advance!

In the UAE, end-of-service gratuity is calculated based on an employee’s basic salary (excluding allowances, bonuses, or commissions) and their total years of service.
According to the UAE Labour Law, the general formula is:

• For the first five years of service: 21 days of basic salary for each year worked.
  
• For each additional year after five years: 30 days of basic salary per year.
  

The total gratuity should not exceed the equivalent of two years’ salary. It’s also important to note that resignations before completing one year of service are not eligible for gratuity, and certain contract types (limited or unlimited) may have slight variations in calculation.
For anyone who wants to estimate their payout easily, you can try this simple online calculation tool.