Gratuity calculation UAE

Gratuity calculation UAE

It is essential to calculate the end-of-service (remuneration) salary. Knowing how to calculate the total amount will help you determine any mistakes which may be made by the company.

Contract type

A limited or fixed-term contract refers to a situation where an employee agrees to stay with the company for a specified period on the date of termination of employment. Resigning before the end of this period may mean one or all of them; a labor ban, loss of labor rights, or even paying compensation to the employer.

Infinite contracts have no such terms or years, so there is no end date. However, the notice period for both parties to terminate the agreement is one to three months.

Remuneration is calculated based on your basic salary/salary (no additional allowances or bonuses).

Is there no remuneration?

If you are fired, if you do not violate the provisions of Section 139 of the Labor Law, the employee will still be entitled to compensation. The rules in this article provide: In the following two cases, the employee’s end of service payment shall be deprived:

  1. If he or she resigns without notice under the circumstances specified in Article 121 (if the employer breaches the contract or is beaten) and involves an indefinite contract, or in a limited deal before completing five consecutive years of service.
  2. If he or she is dismissed for any reason specified in section 120 or resigns to avoid being dismissed under this section (this section refers to dismissal during a probationary period or probationary period, or the purpose of dismissal due to failure to perform basic duties even by warning, interrogation, crime, etc. due to claims of material damage).

Calculation of limited contract remuneration:

Less than one year of service, leaving work until the completion of one year of service, means that you are not eligible and will not receive any payment.

1 to 5 years of service

Employees have the right to receive full remuneration based on the 21 days of wages worked each year. Five years or more of service Employees are entitled to receive total remuneration based on a salary of 30 days of work per year.


Basic salary: AED 8,000

  1. 8,000 ÷ 30 = 266.66. Your daily salary is Dh266.66.
  2. 266.66 x 21 = 5599.86. Therefore, based on the length of service, the remuneration for 21 working days is AED 5599.86. Multiply this number by up to 5 years of annual service time. For service over five years, calculate 30 days
  3. 266.66 x 30 = AED 7999.8. Therefore, based on the length of service, the 30-day salary should be tipped at Dh 7999.8 per year-as long as the total amount does not exceed the total salary for two years. So, no matter how long you have worked in a company, the total remuneration in the above example cannot exceed Dh 192000.

Calculation of unlimited contract remuneration

Less than one year of service

Leaving work before completing one year of service means that you are not eligible to receive any remuneration.

One year to 3 years of service

Employees are eligible to one-third of the 21-day remuneration.

Three to five years of service

Employees are entitled to two thirds of the 21-day remuneration.

Five years or more of service

Employees are entitled to tips for 21 days of service per year.


Basic salary: AED 8,000

  1. 8,000 ÷ 30 = 266.66. Your daily salary is AED 266.66.
  2. 266.66 x 21 = 5599.86. So the salary for 21 days is AED 5599.86. In this figure AED 5599.86, if you have worked for 1 to 3 years, you should only pay 1/3, so the total remuneration will be AED 1866.62. If you have worked for 3 to 5 years, you only need to pay 2/3 of the salary, so the total remuneration is AED 3733.24. If you have completed five years, you need to pay the full amount of AED 5599.86. These calculations are not considered as laws and are for reference only.

For any disputes or further clarification, please contact the UAE Human Resources and Emirate Department.

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