Guide
End-of-service gratuity in the UAE, with worked examples
Who gets end-of-service gratuity in the UAE, how Article 51 works it out, four worked examples, the two-year cap, resignation and the savings scheme.
- Written by
- Quentin Dupard, Founder
- Updated
- Reading time
- 3 minutes
End-of-service gratuity is the lump sum a UAE employer pays a foreign employee when the job ends. For long-serving staff it can be the largest single payment they ever receive from an employer.
Who is entitled
A full-time foreign employee who has completed at least one year of continuous service with the employer. Below one year, nothing is due.
UAE nationals are covered by the GPSSA pension scheme instead, so the gratuity formula does not apply to them. Days of unpaid leave or absence do not count as service.
The formula
Article 51 of Federal Decree-Law 33 of 2021 sets it out:
- Take the last basic wage. Housing, transport and other allowances are left out.
- Work out the daily wage: basic divided by 30.
- Count 21 days of wage for each of the first five years of service.
- Count 30 days of wage for each year after the fifth.
- Part years count pro rata, once the first year is complete.
- Cap the total at two years’ wage.
Four worked examples
18 months on a basic of AED 8,000. Daily wage AED 266.67. One and a half years × 21 days × AED 266.67 = AED 8,400.
Four years on a basic of AED 12,000. Daily wage AED 400. Four years × 21 days × AED 400 = AED 33,600.
Seven and a half years on a basic of AED 20,000. Daily wage AED 666.67. The first five years give 5 × 21 × 666.67 = AED 70,000. The next two and a half give 2.5 × 30 × 666.67 = AED 50,000. Total AED 120,000.
Thirty years on a basic of AED 15,000. The formula gives AED 427,500, but two years’ wage is AED 360,000, so the cap applies: AED 360,000.
You can check any case with the gratuity calculator.
Resigning versus being let go
u.ae sets out one formula for gratuity, with no separate rate for resigning. We work it out the same way whether the employee resigns or the employer ends the contract, after a year of continuous service, and check any unusual case against Article 51 of the law.
When it must be paid
Within 14 days of the end of employment, together with any other money owed: salary to the last day, unused annual leave, and agreed notice pay. The employer can deduct amounts the employee owes, within the limits of the law. Late payment can be raised with MOHRE.
The savings scheme alternative
Since Cabinet Resolution 96 of 2023, private sector employers can join a voluntary savings scheme instead. The employer pays a monthly contribution into an approved fund: 5.83% of basic salary for employees with up to five years of service, 8.33% after that. The employee receives the fund balance, including any investment growth, at the end of employment. For the time covered by the scheme, the Article 51 formula does not apply.
How employers should budget
Set aside the gratuity every month instead of finding it at the end. During the first five years that is 21 days of basic a year, which is 5.83% of basic each month. A AED 15,000 basic means AED 875 a month. After five years, set aside 8.33%. This is what we do for every employee on our payroll, and the balance is visible to our clients in the platform.