Gratuity Calculation Scenarios Based on Contract Type
TL;DR: Real-world gratuity scenarios demonstrate how contract type, service years, and termination reason affect final payment amounts. Limited contract expiry counts as employer termination with 100% entitlement, while voluntary resignation before 5 years triggers penalties of 33.33% for 1-3 years or 66.67% for 3-5 years.
Scenario 1: Limited Contract, Full Term Completion
Employee: Sarah, accountant
Contract: Limited, 3 years (1 Jan 2022 – 31 Dec 2024)
Basic salary: AED 6,000/month
Status: Employer doesn't renew (non-renewal = employer termination)
Calculation:
Tier 1 (0–3 years): (6,000÷30) × 0.3333 × 3 = AED 600
Total Gratuity: AED 600
Entitlement: 100% (employer termination) = AED 600
Payment deadline: 31 Jan 2025 (30 days after contract end)
Outcome: AED 600 gratuity
Scenario 2: Unlimited Contract, Early Resignation
Employee: Ahmed, salesman
Contract: Unlimited (started 1 Jan 2022)
Service: 2 years 8 months (resigned 1 Sept 2024)
Basic salary: AED 5,000/month
Status: Employee-initiated resignation
Calculation:
Service: 2.67 years (all in Tier 1: 1/3 month per year)
Calculated: (5,000÷30) × 0.3333 × 2.67 = AED 445
Resignation tier (2–3 years): 50% entitlement
Final gratuity: AED 445 × 50% = AED 222.50
Payment deadline: 1 Oct 2024 + 30 days = 1 Nov 2024
Outcome: AED 222.50 gratuity (reduced due to resignation)
Scenario 3: Limited Contract, Multiple Tiers
Employee: Fatima, marketing manager
Contract: Limited, 5 years (1 Jan 2020 – 31 Dec 2024)
Basic salary: AED 8,000/month
Status: Employer terminates early (30 days notice, 1 Nov 2024 effective)
Calculation:
Service: 4 years 11 months = 4.92 years
Tier 1 (0–3 years): (8,000÷30) × 0.3333 × 3 = AED 800
Tier 2 (3–5 years): (8,000÷30) × 0.6667 × 1.92 = AED 4,107
Total calculated: AED 4,907
Entitlement: 100% (employer termination) = AED 4,907
Plus notice salary: 30 days = 8,000
Total due: AED 12,907
Payment deadline: 1 Dec 2024 (30 days after termination)
Outcome: AED 4,907 gratuity + AED 8,000 notice = AED 12,907 total
Scenario 4: Unlimited Contract, 5-Year Milestone
Employee: Mohammed, engineer
Contract: Unlimited (started 1 Jan 2020)
Service: Exactly 5 years (terminated 31 Dec 2024)
Basic salary: AED 7,500/month
Status: Company restructuring (employer termination)
Calculation:
Service: 5.0 years (crosses tier boundaries)
Tier 1 (0–3 years): (7,500÷30) × 0.3333 × 3 = AED 750
Tier 2 (3–5 years): (7,500÷30) × 0.6667 × 2 = AED 3,333
Tier 3 (5–5 years): (7,500÷30) × 1.0 × 0 = AED 0
Total calculated: AED 4,083
Entitlement: 100% (employer termination) = AED 4,083
Payment deadline: 30 Jan 2025
Outcome: AED 4,083 gratuity
Note: At exactly 5 years, employee hasn't accrued full Tier 3 benefit yet (that happens from 5+ years forward).
Scenario 5: Limited Contract, Probation Impact
Employee: Layla, customer service
Contract: Limited, 2 years with 3-month probation (1 Feb 2022 – 31 Jan 2024)
Probation: 1 Feb – 30 April 2022
Basic salary: AED 4,500/month
Status: Employer non-renewal
Calculation:
Total service: 24 months (probation counts!)
Tier: 0–3 years (1/3 month per year)
Gratuity: (4,500÷30) × 0.3333 × 2 = AED 300
Entitlement: 100% (employer termination) = AED 300
Payment deadline: 29 Feb 2024 (30 days after expiry)
Outcome: AED 300 gratuity (probation counted toward service)
Scenario 6: Unlimited Contract, Resignation Over 5 Years
Employee: Fatima, HR director
Contract: Unlimited (started 1 Jan 2019)
Service: 6 years (resigned 1 Jan 2025)
Basic salary: AED 9,000/month
Status: Employee-initiated resignation
Calculation:
Service: 6.0 years
Tier 1 (0–3 years): (9,000÷30) × 0.3333 × 3 = AED 900
Tier 2 (3–5 years): (9,000÷30) × 0.6667 × 2 = AED 4,000
Tier 3 (5–6 years): (9,000÷30) × 1.0 × 1 = AED 9,000
Total calculated: AED 13,900
Resignation tier (5+ years): 100% entitlement = AED 13,900
Final gratuity: AED 13,900
Payment deadline: 31 Jan 2025 (30 days after last day)
Outcome: AED 13,900 gratuity (full amount—no penalty after 5 years!)
Gratuity Calculator
For an instant end-of-service estimate, use our online gratuity calculator UAE.
Disclaimer: Scenarios reflect MOHRE law as of 2025. Actual calculations may vary based on specific contract terms.
