What is Gratuity in Salary?

Gratuity, often referred to as End-of-Service Benefits, holds significant importance for employees in the United Arab Emirates (UAE). This guide aims to provide a comprehensive overview of gratuity in salary, including its definition, calculation method, and legal implications, tailored specifically for UAE workers.

What is Gratuity in Salary?

Gratuity, in the context of employment, is a lump sum payment provided by an employer to an employee as a token of appreciation for their service upon the termination of employment. In the UAE, gratuity is governed by federal labor laws and is considered a fundamental entitlement for employees who have completed a certain period of service with their employer.

Why is Gratuity Important?

Gratuity serves as a financial safety net for employees, offering them a cushion of funds as they transition between jobs or retire from the workforce. It acknowledges their loyalty and dedication to the organization and provides them with a tangible reward for their years of service.

Calculation of Gratuity in the UAE:

Gratuity calculation in the UAE is based on the employee’s length of service and their final basic salary. The formula for calculating gratuity varies depending on the type of employment contract:

  1. Limited Contract: For employees under a limited contract, gratuity is calculated as follows:
    • For service less than one year: No gratuity is payable.
    • For service between one and five years: The employee is entitled to 21 days’ salary for each year of service.
    • For service exceeding five years: The employee is entitled to 30 days’ salary for each year of service beyond the fifth year.
  2. Unlimited Contract: For employees under an unlimited contract, gratuity is calculated similarly to limited contracts, with the distinction that the entire length of service is considered, regardless of the duration specified in the contract.

Legal Implications and Rights:

Employees in the UAE have legal rights regarding gratuity entitlement, as outlined in federal labor laws. Employers are obligated to pay gratuity to eligible employees upon the termination of employment, failing which may result in legal repercussions for the employer.

Seeking Assistance for Gratuity Calculation:

For employees seeking assistance in calculating their gratuity entitlement accurately, various online gratuity calculators are available. These tools take into account the employee’s service duration, basic salary, and other relevant factors to provide an estimate of the gratuity amount owed.


Gratuity in salary is a vital component of employee compensation in the UAE, serving as a testament to their dedication and commitment to their employer. Understanding the calculation method and legal implications of gratuity empowers employees to assert their rights and ensure they receive fair compensation upon the conclusion of their employment. By staying informed and proactive, UAE workers can maximize their gratuity benefits and secure their financial well-being as they navigate their career paths.

Gratuity Calculator

Leave a Comment