Gratuity Calculator UAE 2026 – For Employers & HR Teams

For HR and payroll teams, manual gratuity calculations under UAE Labor Law often lead to administrative errors and costly legal disputes. Navigating the specific “21 vs. 30-day” rules and basic salary exclusions creates significant compliance risks during employee offboarding.

Use our Online Gratuity Calculator UAE 2026 to ensure 100% accuracy in end-of-service settlements. It helps payroll teams mitigate risk, save time and maintain transparent financial records according to the latest Ministry guidelines.

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What Is Gratuity in the UAE?

Gratuity in the UAE is a payment given to an employee at the end of their job. It is also called End-of-Service Benefits (EOSB). Under UAE Labour Law (Federal Decree Law No. 33 of 2021), an employee who completes at least one year of continuous service is usually entitled to gratuity. This payment is made by the employer when the employee resigns or when the employer ends the contract.

Gratuity is calculated based on the employee’s basic salary and total years of service. Allowances such as housing, transport, overtime, or bonuses are not included in the calculation. It’s purpose is to reward employees for their service and provide financial support when they leave a company. Also, It’s a legal right, not a bonus or gift from the employer.

What Is a Gratuity Calculator UAE?

A Gratuity Calculator is a digital tool that helps employees and employers to accurately estimate gratuity payment, which is also known as estimate end-of-service benefits. Instead of calculating days of salary manually, the calculator applies the correct formula based on:

• Basic salary
• Total years of service
• Contract type
• Reason for leaving

It follows the rules set under UAE Labour Law and current MOHRE guidelines to provide an estimated gratuity amount. This tool helps reduce calculation errors and saves time.

How to Use Our Gratuity Calculator UAE

Our calculator is specifically designed for the UAE. It helps you quickly estimate your end-of-service gratuity under the Labour Law. Follow these simple steps:

1. Identify Your Contract Type: Select whether your contract is limited or unlimited.
2. Enter Your Basic Salary: Add your basic monthly salary only.
3. Enter Your Service Duration: Enter your total years and months worked with the company.
4. Specify the Reason for Leaving: Choose whether you resigned or were terminated.
5. Check Minimum Eligibility Period: Make sure you have completed at least one full year of service.

By entering the above details, you can easily calculate your gratuity.

Benefits of Using a MOHRE-Aligned Gratuity Calculator

Using a MOHRE-aligned EOSB calculator has several advantages for both employees and employers. It ensures that calculations follow the latest UAE Labour Law rules. HR teams can save their time on manual calculations and can save time using our calculator.

Employees can clearly estimate the end-of-service benefits. It helps them to plan finances and avoid surprises during the final settlement. And employers also use it to standardize calculations, reduce disputes and ensure compliance with legal requirements.

It also simplifies complex cases like contract renewals, partial years of service or early resignation and gives an accurate result every time.

How Is Gratuity Calculated in the UAE?

Gratuity in the UAE is calculated based on three main factors: basic salary, total years of service, and UAE Labour Law rules. It is calculated only on the last drawn basic salary, not on allowances, bonuses, or total salary.

• First 5 years: 21 days of basic salary for each year
• After 5 years: 30 days of basic salary for each additional year

Even small errors in salary or service period can change the final amount, so accuracy is important.

Understanding Basic Salary Calculation in UAE

Basic salary is the fixed amount mentioned in your employment contract. It doesn’t include housing, transport, overtime, commissions or bonuses.
For example, if your total salary is AED 8,000 and your basic salary is AED 5,000, gratuity is calculated on AED 5,000 only. Always check your contract or payslip before calculating.

Complete Minimum Years of Service Required

An employee must complete at least one full year of continuous service to qualify for gratuity. Gratuity is usually not payable if you leave before one year. After one year, gratuity builds based on completed years. Partial years are calculated proportionally. For example, 3 years and 6 months will be counted as 3.5 years.

Gratuity Eligibility Days

Gratuity is calculated in days of basic salary per year of service:

• 21 days per year for the first 5 years
• 30 days per year after 5 years

Daily wage = Basic salary ÷ 30
Total gratuity = Daily wage × total eligible days

Maximum Limit on Gratuity

The total gratuity cannot exceed two years’ basic salary. Even if the calculation is higher, the legal cap applies. This rule keeps the payment aligned with UAE Labour Law.

Common HR Compliance Risks in Gratuity Calculation

Gratuity mistakes can lead to disputes, penalties, and compliance issues under UAE Labour Law. HR and payroll teams must ensure calculations are accurate and properly documented.

Misclassifying Basic Salary

Gratuity must be calculated only on the basic salary, not total salary. Including allowances or bonuses can result in overpayment, while excluding fixed components may cause disputes. Payroll systems should clearly separate basic salary from allowances.

Incorrect Service Duration Tracking

Gratuity depends on continuous service. Errors in joining date, last working date, unpaid leave, or contract conversion can change the final amount. Partial years must be calculated correctly and records must be updated.

Failing to Apply Legal Cap

Gratuity cannot exceed two years’ basic salary. Missing this cap may cause overpayment or settlement disputes. Always verify the legal limit before approval.

Errors During Contract Renewals

When contracts are renewed, service remains continuous unless officially terminated. Resetting service dates incorrectly can lead to wrong calculations. Keep proper documentation for each renewal.

Delays in Final Settlement Processing

Late gratuity payments can lead to complaints and legal claims. HR teams should ensure timely and accurate final settlements using standardized processes or automated tools.

Gratuity Calculation Formula as per UAE Labour Law

Gratuity in the UAE is calculated using a clear formula set under UAE Labour Law (Federal Decree Law No. 33 of 2021). The formula is based on basic salary and years of service. The standard calculation rule is:

• 21 days of basic salary for each year of service for the first five years
• 30 days of basic salary for each year after five years

The daily wage is calculated by dividing the monthly basic salary by 30. The total gratuity days are then multiplied by the daily wage.

Although the UAE now follows fixed-term contracts, many employees still refer to limited and unlimited contracts, especially in older employment cases. Understanding both helps avoid confusion.

For Limited Contracts

Under a limited contract, gratuity is calculated using the standard formula if the employee completes at least one year of service.

If the employee completes five years or less:

• 21 days of basic salary for each year

If the employee completes more than five years:

• 21 days per year for the first five years
• 30 days per year for each additional year

If the employer terminates the contract without misconduct, full gratuity is payable as per the formula.

If the employee resigns after completing one year, gratuity is still calculated according to the standard rule under the current law.

For Unlimited Contracts

Under older unlimited contracts, gratuity calculation could differ in resignation cases depending on length of service. However, under the current law structure, the general calculation method remains the same:

• 21 days per year for the first five years
• 30 days per year after five years

Eligibility starts after completing one year of continuous service.

The main difference historically applied when an employee resigned early, but current regulations have simplified the system.

In Case of Resignation: If an employee resigns after completing at least one year of service, gratuity is calculated based on total years worked. However, if resignation happens before completing one year, gratuity is not payable.
In Case of Termination: If the employer terminates the employee for reasons other than misconduct, full gratuity is payable according to the legal formula. If termination is due to serious misconduct as defined by law, gratuity may be denied.

Resignation vs Termination Gratuity Comparison

In most normal cases under the current UAE Labour Law, both resignation and termination result in gratuity payment if the employee has completed one year of service. The key difference usually depends on whether:

• The employee completed the minimum service period
• The termination was lawful
• There was serious misconduct

If service requirements are met and there is no misconduct, gratuity calculation follows the same structure.

Example Scenario

Let’s take a simple example.

An employee has:

• Basic salary: AED 5,000
• Service period: 6 years

Step 1: Calculate daily wage
5,000 ÷ 30 = AED 166.67 per day

Step 2: Calculate gratuity days
First 5 years → 21 days × 5 = 105 days

1 additional year → 30 days × 1 = 30 days
Total = 135 days

Step 3: Calculate total gratuity
135 × 166.67 = AED 22,500.45

This amount is payable if the employee completed service properly and meets eligibility conditions. The above example shows how basic salary and years of service directly affect the final gratuity amount.

Types of Employment Contracts in the UAE

Understanding your contract type is important because it affects notice period, termination rules and final settlement, including gratuity. Let me quickly explain the types of employment contracts in the UAE.

Limited Contract

A limited contract is a contract with a fixed start date and end date. For example, a contract may be valid for two years or three years. Once the contract period ends, it can either be renewed or allowed to expire.

Under a limited contract:

• The employment ends automatically on the contract end date unless renewed.
• Early termination may require notice as per contract terms.
• Gratuity is calculated based on basic salary and total service period.

Today, most employment contracts in the UAE follow this fixed-term structure.

Unlimited Contract

An unlimited contract does not have a fixed end date. It continues until either the employer or employee decides to end it with proper notice.
Before the new labour law, unlimited contracts were common in the UAE. These contracts allowed more flexibility but also had different resignation rules under the older system.

Although new employment agreements are now fixed-term, many employees still use the term “unlimited contract” when discussing older contracts or converted agreements. Gratuity calculation under unlimited contracts follows the standard rule based on years of service and basic salary.

Contract Renewals

When a fixed-term contract ends, it can be renewed by mutual agreement between employer and employee.
If the contract is renewed:

• The employment is considered continuous.
• Previous years of service are included when calculating gratuity.
• There is no reset of service period unless employment is officially terminated.

For gratuity purposes, total continuous service is what matters, not how many times the contract was renewed.
Employees should always keep a copy of each renewed contract for record and verification.

Limited vs Unlimited Contract Gratuity Comparison

While contract types differ in structure, gratuity calculation today largely follows the same legal formula.
Below is a clear comparison:

FeatureLimited ContractUnlimited ContractContract DurationFixed periodNo fixed end date

Feature	Limited Contract	Unlimited Contract
Contract Duration	Fixed period	No fixed end date
Renewal Option	Yes, by agreement	Not applicable
Minimum Service for Gratuity	1 year	1 year
Gratuity Formula	21 days (first 5 years), 30 days (after 5 years)	21 days (first 5 years), 30 days (after 5 years)
Maximum Gratuity Cap	2 years basic salary	2 years basic salary
Current Legal Status	Standard system in UAE	Mostly phased out but still referenced

 

Under the current labour framework, the main difference between limited and unlimited contracts relates to contract structure and termination terms, not the basic gratuity formula.
For gratuity calculation, what matters most is:

• Basic salary
• Total continuous years of service
• Reason for leaving
• Compliance with labour law

Understanding this difference helps employees avoid confusion and calculate end-of-service benefits correctly.

Gratuity vs Tip – Understanding the Difference

Gratuity and tips are not the same. See the below table to understand:

Feature	Gratuity	Tip
Legal Status	Mandatory under UAE Labour Law	Voluntary payment
Who Pays It	Employer	Customer or employer
When It Is Paid	At the end of employment	During service (usually immediately)
Purpose	End-of-service benefit	Appreciation for service
Legal Protection	Protected by labour law	Not regulated by labour law
Employee Right	Legal entitlement	Optional / not guaranteed

 

Gratuity is a legal right given to employees after completing eligible service. While, tips are optional payments and should not be confused with end-of-service benefits. Understanding this difference helps avoid confusion during final settlement.

9 Expert Tips to Maximize Your Gratuity

Follow these simple steps to ensure you receive your full legal entitlement and avoid unnecessary deductions.

1. Be Aware of UAE Labour Law: Know the eligibility rules, formula, and maximum cap.
2. Review Your Employment Contract: Confirm your basic salary, contract type, and service period.
3. Keep Detailed Work Records: Maintain salary slips, joining date, and leave records.
4. Complete the Notice Period: Serve full notice as per contract terms.
5. Calculate Before Resigning: Use a MOHRE-aligned calculator to estimate your gratuity.
6. Get Employer Clearance: Return company assets and complete exit formalities.
7. Discuss Issues Early: Raise concerns with HR before final settlement.
8. Follow Up Politely: Track the status of your gratuity payment.
9. Seek Legal Assistance if Needed: Consult a labour law expert in case of disputes.

Being informed and prepared helps avoid delays and ensures smooth final settlement.

4 Common Gratuity Calculation Mistakes to Avoid

Avoiding these common mistakes helps ensure accurate gratuity calculation.

• Misinterpreting Basic Salary: Gratuity is based only on basic salary, not allowances.
• Incorrect Service Duration: Verify correct joining and leaving dates.
• Not Knowing Contract Type: Understand whether your contract affects calculation rules.
• Misunderstanding Gratuity Rights: Gratuity is a legal entitlement after one year of service.

Checking these points carefully reduces disputes and calculation errors.

Conclusions

Calculating gratuity correctly in the UAE is not just a payroll task, it is a legal duty under Federal Decree Law No. 33 of 2021. Even small mistakes can cause problems or legal issues. That is why using a MOHRE-aligned Online Gratuity Calculator UAE is important for both HR teams and employees. It makes difficult calculations simple for you and automatically applies the 21-day and 30-day rules.

Many companies also integrate this calculator with payroll automation software to manage salaries, gratuity, and other HR processes in one place, reducing errors and saving time

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Frequently Asked Questions

Who Is Eligible for Gratuity in the UAE?

Every private sector employee who completes at least one year of continuous service is entitled to gratuity. It includes full-time employees working on limited or unlimited contracts. Part-time or temporary employees have rules according to their agreement. Employees who resign or whose service is terminated before completing one year usually do not get their gratuity.

Is There a Cap on Gratuity Payable?

Yes, maximum gratuity payment cannot exceed two years’ basic salary. Even if an employee has worked for many years, the total amount cannot exceed this legal limit.

Can an Employer Withhold Gratuity Payment?

An employer can withhold the end-of-service benefit only in serious misconduct cases, which is also stated in the UAE labour law. For example, if an employee causes serious damage to the company or violates major company policies, the gratuity may be reduced or denied.

Is There a Penalty for Not Paying End-of-Service Benefits?

Yes. Employers who fail to pay gratuity on time may face legal consequences under UAE Labour Law.