How to Calculate Gratuity as per UAE Law

Are you a professional in the UAE seeking clarity on how to calculate gratuity as per the country’s laws? Understanding the process is vital for both employees and employers to ensure fair compensation and compliance. This comprehensive guide breaks down the calculation process into simple steps, empowering you to navigate gratuity calculations with ease and confidence.

Understanding the Basics:

Gratuity, also known as end-of-service benefits, is a monetary sum provided to employees upon completion of their service with an employer in the UAE. It serves as a form of financial security and appreciation for an employee’s dedication and contribution to the organization.

Step-by-Step Guide to Calculating Gratuity as Per UAE Law:

  1. Determine Your Eligibility: To qualify for gratuity benefits under UAE law, an employee must have completed at least one year of continuous service with their employer. Temporary and probationary periods typically do not count towards gratuity entitlement.
  2. Gather Essential Information: Before proceeding with the calculation, gather key details including your basic salary, length of service, and any additional allowances or benefits provided by your employer.
  3. Understand the Formula: Gratuity calculations in the UAE are based on a specific formula outlined by the country’s labor laws. The formula varies depending on the type of employment contract:
    • For unlimited contracts: (Basic Salary ÷ 30) x 21 (if less than 5 years of service) or x 30 (if more than 5 years of service).
    • For limited contracts: (Basic Salary ÷ 30) x (1/3) x years of service (if less than 5 years) or x (2/3) x years of service (if more than 5 years).
  4. Perform the Calculation: Input the necessary information into the formula based on your employment contract type and years of service. The result will provide you with the gratuity amount you are entitled to receive.
  5. Consider Additional Factors: In some cases, additional factors such as unpaid leave or disciplinary actions may impact gratuity calculations. Consult UAE labor regulations or seek legal advice for clarification if needed.

Why Understanding Gratuity Calculation Matters:

  1. Employee Rights: Knowledge of gratuity calculation empowers employees to advocate for their rights and ensure fair compensation upon termination or resignation.
  2. Employer Compliance: Employers must adhere to UAE labor laws regarding gratuity calculation to avoid legal penalties and maintain a reputation as a fair employer.
  3. Financial Planning: Understanding gratuity entitlements enables individuals to plan for their financial future effectively, whether saving for retirement or pursuing new career opportunities.


Calculating gratuity according to UAE law doesn’t have to be complicated. By following this step-by-step guide, you can navigate the process with confidence and clarity. Empower yourself with knowledge of gratuity calculation, ensuring fair compensation and compliance with UAE labor regulations.

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