Who is entitled
Under the standard federal rules, full-time foreign private-sector workers qualify for gratuity after at least one year of continuous service. This calculation is not a universal formula for every UAE worker: check the applicable employment jurisdiction, pension or alternative savings arrangement and work model first.
How it is calculated
- 21 days of basic salary for each of the first five years
- 30 days of basic salary for each year after five
- Part-years count proportionally
- Based on the last basic salary — allowances are excluded
- Total gratuity cannot exceed two years of pay
- Days of unpaid absence are not counted as service
How the numbers work
An employee with a basic salary of AED 10,000 a month leaves after 7 years. Daily basic pay is AED 10,000 ÷ 30 = AED 333.33 (rounded for display). The first five years give 5 × 21 = 105 days; the next two give 2 × 30 = 60 days. Total using the unrounded daily rate: 165 × (AED 10,000 ÷ 30) = AED 55,000.
Paying it
Outstanding wages, other entitlements and gratuity are payable within 14 days of contract termination under the federal rules. An accounting accrual records a liability; it does not set aside cash. Review the cash forecast as well as the ledger balance.
Gratuity is one part of the settlement
Build a reconciliation rather than sending one unexplained total. Keep the gratuity calculation separate from unpaid salary, leave, notice-related amounts and any proposed deductions. Each line needs its own basis; a deduction appearing in a spreadsheet does not by itself make it lawful.
| Input | What to check before calculating |
|---|---|
| Employment record | Confirm the employer, applicable rules and relevant start and end dates. |
| Salary history | Separate the last basic salary from allowances and other payroll components. |
| Service record | Reconcile unpaid absence and any disputed service dates with HR records. |
| Prior arrangements | Identify pension or alternative savings participation and any preserved prior entitlement. |
| Settlement evidence | Keep the approved working, employee explanation and payment confirmation together. |
Avoid a false sense of precision
A calculator can reproduce the arithmetic but cannot resolve disputed dates, determine a deduction's legal basis or decide which employment regime applies. Keep the unrounded daily rate until the final result and document every assumption. If payroll, the contract and the calculation disagree, investigate the difference before treating the figure as final.
For planning, maintain a monthly liability schedule and separately identify departures that may create a near-term cash requirement. Explain movements caused by salary changes or corrected service records so management can understand the change.
Use the gratuity calculator Final-settlement calculation support Current WPS salary rules
