UAE end-of-service gratuity: the 21-day and 30-day rates

Gratuity in the UAE private sector runs on two rates. Twenty-one days of pay for each of the first five years of service, then thirty days for each year beyond that. Both are worked out on basic salary rather than on the figure that reaches the bank account. Article 51 of Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships sets the scale, and it also sets a ceiling on the total.

The arithmetic is simple. The disputes are about inputs. Which salary figure goes into the calculation, whether a stretch of unpaid leave counts towards service, and whether the old split between limited and unlimited contracts still changes the answer. It does not. Federal Law No. 8 of 1980 was replaced on 2 February 2022, and the entitlement the UAE Government publishes under Article 51 is a single scale that does not turn on contract type.

The twenty-one day and thirty day rates

A worker who has completed at least one year of continuous service is entitled to gratuity on termination. Below one year, nothing is due. From one year to five, the accrual is twenty-one days' basic salary for each year of work. Past five years the rate rises to thirty days' basic salary for each year following the first five. The first five years never convert to the higher rate. They stay at twenty-one days.

Part years count once the first full year is behind the worker. The government's guidance states that workers are entitled to gratuity for fractions of a year, proportionate to the time served, provided they have completed one year of continuous service. Three years and six months therefore accrues 73.5 days, not 63.

Basic salary, not the package

Gratuity is calculated on the last wage the worker was entitled to, namely the basic salary. Allowances are excluded. The official guidance names housing, transport, utilities and furniture among them. Where a contract splits the wage into a basic component and a set of allowances, only the basic component enters the calculation, so two people on an identical total package can walk away with very different sums.

One caveat on that table. Article 51 expresses the entitlement in days, and the guidance published on the government portal does not state the divisor used to turn a monthly basic salary into a daily rate. Dividing the monthly basic by thirty is the common working assumption and it is what the table above uses. A contract or an internal policy that specifies something else will produce a different answer, so the contract is worth reading before any employer's figure is accepted.

The cap, and when it binds

Article 51 closes with a ceiling on the whole payment.

The published wording says wage without saying whether that means the basic wage or the total wage, and at long service the difference is large. Read against basic salary on a thirty-day month, two years is 720 days. On the twenty-one and thirty day scale, 720 days is reached at twenty-five and a half years of service. Read against the total wage of someone whose allowances make up a good part of their package, the ceiling sits much further out and will rarely be reached at all. Anyone approaching that length of service should get the point settled in writing rather than assume a reading.

Unpaid leave shortens the service clock

Days of absence from work without pay are not included in the calculation of the period of service. A month of unpaid leave does not sit quietly inside the service period. It pushes the whole accrual back by a month.

Take someone who has been on the payroll for five calendar years to the day and has taken forty days of unpaid leave across that period. Countable service is four years and 325 days. The accrual is 84 days for the four completed years, plus 325 divided by 365 of a further twenty-one days, which is 18.7 days. That gives 102.7 days against the 105 days five clean years would have produced. On a basic salary of AED 10,000 a month the gap is AED 767.

It matters far more at the five-year boundary. Someone who reaches five years and two months on the calendar, but has taken three months of unpaid leave, has not completed five years of countable service. Nothing has started accruing at the higher rate. Unpaid leave taken in years four and five is therefore the most expensive unpaid leave a worker can take.

Limited and unlimited contracts after February 2022

Federal Decree-Law No. 33 of 2021 came into effect on 2 February 2022 and replaced the 1980 law. It required unlimited employment contracts to be converted into fixed-term contracts within one year of the effective date, with power for the Cabinet to extend that period where the public interest called for it. Private-sector contracts registered with the Ministry of Human Resources and Emiratisation now run for a fixed term.

For gratuity, the practical effect is that contract type no longer changes the answer. The guidance the UAE Government publishes on end-of-service benefits sets out one scale. It states no reduced rate for a worker who resigns, and it does not condition the payment on which party brought the contract to an end. Renewals do not reset the clock either. Any extension or renewal of the contract is added when calculating end-of-service benefits, so a worker on a third consecutive two-year term stands at six years of service, not two.

Part-time and temporary contracts

Cabinet Resolution No. 1 of 2022 covers the other work models. For a part-time worker the method is a ratio. Divide the hours in the part-time contract by the hours in a comparable full-time contract across the year, express that as a percentage, then apply the percentage to the gratuity a full-time worker would have earned over the same service. Temporary work that runs for under a year carries no end-of-service benefit, which is the same one-year floor everyone else faces.

Deductions and the fourteen-day deadline

An employer may deduct amounts the worker owes it from the gratuity. Outstanding wages, other entitlements and gratuity must all be paid within fourteen days of the termination of the contract. Notice sits inside the service period rather than after it. Under Article 43 the notice period must not be less than thirty days and must not exceed ninety days, and the contract continues to be performed throughout, so the notice days form part of the service that is being counted.

The savings scheme alternative

Accruing gratuity on the employer's books is no longer the only route. Under an opt-in alternative system the employer subscribes on the worker's behalf and pays a monthly percentage of basic salary into an approved investment fund. The basic contribution is 5.83 per cent of basic salary for workers with under five years of service and 8.33 per cent for those at five years or more. Those two figures are simply the monthly equivalents of the twenty-one and thirty day accruals. On leaving, the worker receives the contributions plus whatever the fund has returned, payable within fourteen days of the end of the employment.

Before signing off a final settlement, check three inputs against the contract and the payroll record: the basic salary figure the employer has used, the start date it has counted from, and the number of unpaid-leave days it has stripped out. A wrong basic salary is the costliest of the three, because it scales every single day of the accrual.