Legal Disclaimer: This guide provides general information about UAE gratuity calculation formulas as of November 2025. It is not legal advice. For disputes, consult MOHRE or a qualified employment lawyer.

Daily Rate and Formula in UAE Gratuity Calculation (2025 Guide)

The core of UAE gratuity calculation is the daily wage formula: Basic Salary ÷ 30 days. This standardized divisor of 30 applies regardless of actual month length (28, 29, 30, or 31 days). Once you know your daily wage, gratuity equals 21 days per year for first 5 years, then 30 days per year thereafter. This guide breaks down every component of the official MOHRE formula, explains why 30 days is the legal standard, and shows you step-by-step calculations with real examples.

The Complete Gratuity Formula

Official formula per Article 51 of Federal Decree-Law No. 33 of 2021:

Gratuity = Daily Wage × Days per Year × Service Years

Where:

• Daily Wage = Basic Salary ÷ 30
• Days per Year = 21 (years 1-5) or 30 (years 5+)
• Service Years = Post-probation service time

Tiered Structure

For service > 5 years: Calculate first 5 years at 21 days, then remaining years at 30 days, then add both.

Why 30 Days? The Legal Standard

Historical Context

UAE labour law standardizes the divisor at 30 days to:

1. Simplify calculations across all month lengths
2. Provide consistency (no variation by month)
3. Avoid confusion between 28-31 day months
4. Align with regional GCC standards

This is a legal fiction: Not all months have 30 days, but the law requires using 30 for gratuity calculation purposes.

What About 31-Day Months?

Question: "If my salary is for a 31-day month, shouldn't I divide by 31?"

Answer: No. Always divide by 30, regardless of:

• Actual days in the month
• When you started/ended employment
• Calendar month length

Example:

• Basic salary: AED 9,000 (for month of February, 28 days)
• Daily wage: 9,000 ÷ 30 = AED 300 (not 9,000 ÷ 28)

This is the law. MOHRE and courts enforce the 30-day divisor universally.

Comparison: Daily Wage vs. Actual Daily Earnings

Basic salary: AED 10,000 in all examples

For gratuity: Always use AED 333.33 (÷30), regardless of month.

Step-by-Step: How to Calculate Your Daily Wage

Step 1: Identify Your Basic Salary

Basic salary = Fixed monthly wage in contract, excluding:

• Housing allowance
• Transportation allowance
• Overtime pay
• Annual bonuses
• Meal allowance
• Any other variable/supplementary payments

Example contract:

Basic Monthly Salary: AED 12,000
Housing Allowance: AED 3,000
Transportation: AED 500
Total Package: AED 15,500

Your basic salary for gratuity: AED 12,000 (not AED 15,500)

Step 2: Divide by 30

Formula:

Daily Wage = Basic Salary ÷ 30

Example:

Daily Wage = 12,000 ÷ 30 = AED 400

This is your standardized daily wage for gratuity calculation.

Step 3: Apply to Service Years

Years 1-5 (21 days per year):

Gratuity (Years 1-5) = Daily Wage × 21 × Years (up to 5)

Example (3 years service):

Gratuity = 400 × 21 × 3 = AED 25,200

Years 5+ (30 days per year):

Gratuity (Beyond 5) = Daily Wage × 30 × Years Beyond 5

Example (7 years total):

Years 1-5: 400 × 21 × 5 = AED 42,000
Years 6-7: 400 × 30 × 2 = AED 24,000
Total: AED 66,000

Why 21 and 30 Days?

The Tiered Logic

21 days (first 5 years):

• Equivalent to approximately 0.7 months salary per year
• Balances employer obligation with business sustainability
• Incentivizes employee retention beyond 5 years

30 days (5+ years):

• Equivalent to 1 full month salary per year
• Rewards long-term service and loyalty
• Aligns with international best practices for long-service gratuity

Comparison to Other Regions

UAE offers relatively generous gratuity terms compared to regional peers, especially for early-service employees (21 vs. 15 days).

Worked Examples: Full Calculations

Example 1: Simple 3-Year Service

Employee profile:

• Basic salary: AED 8,000
• Service: 3 years (post-probation)
• Employer terminates

Calculation:

1. Daily wage: 8,000 ÷ 30 = AED 266.67
2. Service is under 5 years, use 21 days
3. Gratuity: 266.67 × 21 × 3 = AED 16,800

Resignation penalty (if applicable):

• 3 years = 33.33% entitlement (one-third)
• 16,800 × 33.33% = AED 5,600 if employee resigned

Example 2: 5-Year Milestone

Employee profile:

• Basic salary: AED 15,000
• Service: Exactly 5 years
• Employee resigns

Calculation:

1. Daily wage: 15,000 ÷ 30 = AED 500
2. All 5 years at 21 days (threshold not crossed yet)
3. Gross gratuity: 500 × 21 × 5 = AED 52,500
4. Resignation penalty: 3-5 years = 66.67% (two-thirds)
5. Final gratuity: 52,500 × 66.67% = AED 35,000

Example 3: Long Service (12 Years)

Employee profile:

• Basic salary: AED 10,000
• Service: 12 years
• Employee resigns

Calculation (tiered):

1. Daily wage: 10,000 ÷ 30 = AED 333.33

2. Years 1-5:

   • 333.33 × 21 × 5 = AED 35,000

3. Years 6-12:

   • 333.33 × 30 × 7 = AED 70,000

4. Total: AED 105,000

5. Resignation penalty: None (service > 5 years)

Example 4: Partial Year Service

Employee profile:

• Basic salary: AED 9,000
• Service: 4 years 8 months = 4.67 years
• Employer terminates

Calculation:

1. Daily wage: 9,000 ÷ 30 = AED 300
2. All service under 5 years, use 21 days
3. Gratuity: 300 × 21 × 4.67 = AED 29,400

Partial years must be included - Do not round down to 4 years.

Example 5: High Salary, Mixed Service

Employee profile:

• Basic salary: AED 25,000
• Service: 8.5 years (8 years 6 months)
• Employee resigns

Calculation (tiered):

1. Daily wage: 25,000 ÷ 30 = AED 833.33

2. Years 1-5:

   • 833.33 × 21 × 5 = AED 87,500

3. Years 6-8.5:

   • 833.33 × 30 × 3.5 = AED 87,500

4. Total: AED 175,000

5. Resignation penalty: None (service > 5 years)

Common Formula Errors

Error 1: Wrong Divisor

Mistake: Dividing by actual month days (28, 29, 31) instead of 30

Example:

• Basic: AED 12,000
• ❌ Wrong: 12,000 ÷ 31 = AED 387.10/day
• ✅ Correct: 12,000 ÷ 30 = AED 400/day

Impact: 3-10% variation depending on month

Error 2: Using Gross Salary

Mistake: Dividing gross salary (with allowances) instead of basic only

Example:

• Basic: AED 10,000
• Allowances: AED 3,000
• ❌ Wrong: 13,000 ÷ 30 = AED 433.33/day
• ✅ Correct: 10,000 ÷ 30 = AED 333.33/day

Impact: 30% overstatement in this example

Error 3: Single Formula for All Years

Mistake: Using 30 days per year for ALL service years

Example (7 years):

• Basic: AED 8,000
• Daily wage: 266.67

❌ Wrong (30 days for all years):

• 266.67 × 30 × 7 = AED 56,000

✅ Correct (tiered):

• Years 1-5: 266.67 × 21 × 5 = AED 28,000
• Years 6-7: 266.67 × 30 × 2 = AED 16,000
• Total: AED 44,000

Impact: AED 12,000 overstatement (27%)

Error 4: Rounding Daily Wage Too Early

Mistake: Rounding daily wage to nearest whole number before applying formula

Example:

• Basic: AED 7,500
• Daily wage: 7,500 ÷ 30 = 250.00 (no issue here)

But if Basic: AED 7,777:

• Exact daily wage: 7,777 ÷ 30 = 259.2333...
• ❌ Wrong: Round to 259, then calculate
• ✅ Correct: Keep 259.2333, calculate, then round final result

Impact: Small (usually < 1%), but compounds over many years

Formula Variations for Special Cases

Case 1: Resignation Penalty

If employee resigns before 5 years:

1-3 years service:

Final Gratuity = (Salary ÷ 30) × 21 × Years × 33.33%

3-5 years service:

Final Gratuity = (Salary ÷ 30) × 21 × Years × 66.67%

5+ years service:

No penalty (100% gratuity)

Case 2: Mixed Service (Over 5 Years)

Formula:

Part 1 (Years 1-5):
  Gratuity_A = (Salary ÷ 30) × 21 × 5

Part 2 (Years 5+):
  Gratuity_B = (Salary ÷ 30) × 30 × (Total Years - 5)

Total Gratuity = Gratuity_A + Gratuity_B

Case 3: Partial Year Prorata

Convert months to decimal:

Partial Year = Months ÷ 12

Then apply standard formula:

Gratuity = (Salary ÷ 30) × Days Rate × (Years + Partial)

Example: 3 years 9 months:

• Partial year: 9 ÷ 12 = 0.75
• Total service: 3.75 years
• Gratuity: (Salary ÷ 30) × 21 × 3.75

Quick Reference: Formula Summary

Calculator: Verify Your Formula

Use our interactive calculator to verify your manual calculations:

Calculator features:

• Handles tiered formulas automatically
• Applies resignation penalties correctly
• Includes partial year prorating
• Shows step-by-step breakdown

Frequently Asked Questions

1. Why is the divisor 30 and not the actual days in the month?

It's a legal standard for simplicity and consistency. UAE law mandates dividing by 30 regardless of actual month length.

2. Can my employer use a different formula?

No. The Article 51 formula is mandatory minimum. Employers can offer MORE than the formula (enhanced gratuity), but not less.

3. What if my contract says "gratuity as per UAE law"?

This means the Article 51 formula applies: (Salary ÷ 30) × 21/30 days × years.

4. If I work part-time, do I use a different formula?

No. Same formula applies. Your "basic salary" will be lower (part-time rate), but the divisor is still 30 and days are still 21/30.

5. Does the formula change if I'm paid hourly?

Rare in UAE, but if hourly: Convert to monthly equivalent salary, then apply standard formula.

6. Can I use 365 days instead of 30 for more accuracy?

No. The law requires 30. MOHRE and courts won't accept calculations using 365.

Official Legal References

Primary sources:

• Federal Decree-Law No. 33 of 2021 - Article 51 (Formula Specification)
• Cabinet Resolution No. 1 of 2022 - Implementation Regulations
• MOHRE Circular 2025/01 - Calculation Standards

For questions:

• MOHRE Hotline: 600590000
• MOHRE Website: mohre.gov.ae

Related Resources

• How to Calculate Gratuity in UAE: Complete 2025 Guide
• UAE Gratuity Table 2025: Quick Reference
• Common Errors in UAE Gratuity Calculations
• Service Years Calculation: How It Affects Gratuity
• Does Overtime Affect Gratuity Calculation?

For an instant end-of-service estimate, use our online gratuity calculator UAE.

Final Disclaimer: This guide reflects UAE labour law as of November 2025 and is for informational purposes. It is not legal advice. For calculation disputes, consult MOHRE or a qualified employment lawyer.