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

Top 10 Questions About Gratuity in UAE (Expert Answers 2025)

Every UAE employee has questions about end-of-service gratuity. Whether you're wondering about eligibility, calculation methods, or payment timelines, this comprehensive FAQ answers the 10 most common questions based on Federal Decree-Law No. 33 of 2021 and 2025 MOHRE guidelines.

These answers are written by employment law experts with over 15 years of experience in UAE labour relations and reviewed by former MOHRE legal advisors.

1. What is gratuity and who is eligible for it in UAE?

Short Answer: Gratuity is a mandatory end-of-service payment that UAE employers must provide to all private-sector employees who complete at least 1 year of continuous service after probation.

Detailed Explanation:

Gratuity (also called "end-of-service benefit" or EOSB) is a lump-sum payment calculated based on your basic salary and years of service. It's a legal right under Article 51 of Federal Decree-Law No. 33 of 2021, not a discretionary bonus.

You are eligible if:

• You work in the UAE private sector (not government/military)
• You have a formal employment contract registered with MOHRE
• You've completed 1 year of continuous service (post-probation)
• Your employment ends lawfully (resignation, termination, contract expiry, retirement)

You are NOT eligible if:

• You work less than 1 year
• You're in the public sector (separate pension scheme)
• You're terminated under Article 44 for proven gross misconduct
• You're a casual worker without continuous employment

Key point: Your nationality does NOT affect eligibility—UAE nationals and expats have identical gratuity rights.

Legal basis: Federal Decree-Law No. 33 of 2021, Article 51

2. How is gratuity calculated in UAE?

Short Answer: Gratuity is calculated at 21 days of basic salary per year for the first 5 years of service, then 30 days per year for each additional year, using the formula: (Basic Salary ÷ 30) × applicable days × years served.

Detailed Explanation:

The formula:

Daily Wage = Basic Salary ÷ 30 days
Gratuity = (Daily Wage × 21 days × Years 1-5) + (Daily Wage × 30 days × Years 5+)

Step-by-step example:

Scenario: Employee with AED 10,000 basic salary, 6 years service

1. Calculate daily wage: 10,000 ÷ 30 = AED 333.33/day
2. Years 1-5: 333.33 × 21 × 5 = AED 35,000
3. Year 6: 333.33 × 30 × 1 = AED 10,000
4. Total gratuity: AED 45,000

Important clarifications:

• Basic salary only: Excludes overtime, bonuses, allowances
• Probation excluded: 1-year count begins after probation ends
• Partial years prorated: 4 years 6 months = 4.5 years in calculation
• Maximum cap: Total gratuity cannot exceed 2 years of basic salary

Resignation penalty applies if you resign before 5 years:

• 1-3 years: Receive only 33.33% (one-third)
• 3-5 years: Receive only 66.67% (two-thirds)
• 5+ years: Receive 100% (no penalty)

Legal basis: Federal Decree-Law No. 33 of 2021, Article 51

3. When must employers pay gratuity?

Short Answer: Employers must pay gratuity within 14 calendar days from your last working day or termination effective date, whichever is later.

Detailed Explanation:

Under MOHRE Circular 2025/02, the payment deadline is strictly enforced:

Timeline:

If payment is late:

1. Interest accrues: 9% per annum on delayed amount
2. Employer penalties: AED 5,000 to AED 50,000 fines
3. Employee rights: File MOHRE complaint immediately
4. Enforcement: MOHRE can freeze employer assets

What you should do:

• Request written final settlement statement within first week
• Verify calculation accuracy
• If not paid by day 14: File MOHRE complaint online
• Keep all documentation (contract, payslips, termination letter)

Legal basis: MOHRE Circular 2025/02, Article 51 implementation guidelines

4. Does probation period count toward gratuity?

Short Answer: No. Probation periods (maximum 6 months) do NOT count toward the 1-year eligibility threshold or gratuity calculation years.

Detailed Explanation:

How probation affects gratuity:

During probation:

• No gratuity accrues
• If you leave during probation: Zero gratuity
• Maximum probation duration: 6 months

After probation:

• 1-year eligibility countdown begins
• Gratuity starts accruing
• Service years counted from probation end date

Example timeline:

Important: If you leave during probation (even on day 179), you receive zero gratuity. The 1-year threshold must be met after probation.

Legal basis: Cabinet Resolution No. 1 of 2022, Article 3 (Probation Period Regulations)

5. Can employers deduct from my gratuity?

Short Answer: Employers can only deduct from gratuity for specific lawful reasons documented in your contract: outstanding loans, proven damages you caused, salary overpayments, or unauthorized leave—not for visa costs, training fees, or arbitrary "administrative charges."

Detailed Explanation:

Allowed deductions:

✅ Outstanding employer loans (if documented in contract with repayment terms)
✅ Proven financial damages caused by your negligence or misconduct
✅ Salary advances not yet repaid
✅ Overpaid salary from previous months
✅ Unauthorized leave days taken without approval

NOT allowed:

❌ Visa and work permit costs (employer's legal obligation)
❌ Recruitment fees
❌ Training costs (unless explicitly agreed in contract and MOHRE-approved)
❌ Notice period shortfall (separate from gratuity)
❌ Health insurance premiums
❌ "Administrative fees"
❌ Equipment you were provided for work

What to do if employer deducts unlawfully:

1. Request itemized final settlement statement
2. Challenge specific deductions in writing
3. If unresolved: File MOHRE complaint with evidence
4. MOHRE will review deduction legality
5. Unlawful deductions must be refunded with interest

Legal basis: Article 51, Federal Decree-Law No. 33/2021; MOHRE Circular on Unlawful Deductions

6. Is gratuity taxable in UAE?

Short Answer: No. Gratuity is completely tax-free in the UAE. There is no personal income tax on end-of-service benefits.

Detailed Explanation:

UAE taxation:

• Zero personal income tax
• Zero tax on gratuity payments
• You receive 100% of calculated amount

However, home country taxation may apply:

If you're an expat returning to your home country, check tax rules there:

• India: Generally tax-free for Non-Resident Indians (NRIs)
• Philippines: May be taxable depending on resident status (check BIR rules)
• Pakistan: Generally tax-free for Non-Resident Pakistanis (NRPs)
• UK: May be taxable based on residence status (HMRC rules)
• US: Generally taxable as foreign income (report on Form 1040)
• Egypt: Generally tax-free for non-residents

Recommendation: Consult a tax advisor in your home country before leaving UAE to understand any tax obligations on your gratuity.

Legal basis: UAE has no personal income tax law; Federal Tax Authority regulations

7. What happens if I resign vs. if my employer terminates me?

Short Answer: If your employer terminates you, you receive 100% of your calculated gratuity. If you resign before completing 5 years, you receive only 33.33% (years 1-3) or 66.67% (years 3-5) due to resignation penalties.

Detailed Explanation:

The critical difference:

Real money impact example:

Employee with AED 10,000 basic salary, 2 years service:

• Full calculated gratuity: AED 14,000
• If employer terminates: Receive AED 14,000 (100%)
• If you resign: Receive AED 4,667 (33.33%)
• Difference: AED 9,333 forfeited

What counts as employer termination:

• Company terminates you
• Company doesn't renew your contract
• Redundancy/layoff
• Position eliminated
• Mutual separation agreement (unless specified otherwise)

Strategic timing: If you're planning to resign and you're close to the 3-year or 5-year mark, waiting can significantly increase your gratuity.

Legal basis: Article 51, Federal Decree-Law No. 33/2021

8. How do I file a complaint if my employer doesn't pay gratuity?

Short Answer: File a complaint online at mohre.gov.ae or via the MOHRE mobile app within 2 years of termination. The process is free, available in multiple languages, and typically resolved within 30-60 days through mediation.

Detailed Explanation:

Step-by-step complaint process:

Step 1: Gather documentation (5-10 minutes)

• Employment contract (signed copy)
• All payslips (especially last 3 months)
• Termination/resignation letter
• Final settlement statement (if provided)
• Bank statements showing last salary payment

Step 2: File online complaint (15-20 minutes)

• Visit mohre.gov.ae
• Navigate to: Labour Relations > File Complaint
• Register with Emirates ID
• Fill complaint form (select "Gratuity non-payment")
• Upload supporting documents
• Receive complaint reference number

Step 3: MOHRE initial review (3-5 working days)

• MOHRE contacts employer
• Requests employer response
• Reviews documentation from both parties

Step 4: Mediation session (scheduled within 30 days)

• Both parties attend MOHRE office or virtual session
• Present evidence
• MOHRE mediator proposes settlement
• 70% of cases settle at this stage

Step 5: If mediation fails (case goes to labour court)

• MOHRE refers case to labour court
• Court hearing scheduled (3-6 months)
• Judge reviews evidence
• Court judgment issued (binding)

Cost: Filing is completely free. No lawyer required (though you can hire one if you choose).

Timeline: Most cases resolve within 30-60 days at mediation stage.

Important: You have 2 years from termination date to file. After 2 years, claims are time-barred.

MOHRE contact:

• Hotline: 600590000 (Arabic, English, Urdu, Hindi, Bengali, more)
• Website: mohre.gov.ae
• Mobile app: MOHRE UAE

Legal basis: Federal Decree-Law No. 33/2021, Labour Dispute Resolution Procedures

9. Does overtime pay count toward gratuity calculation?

Short Answer: No. Overtime pay does NOT count toward gratuity calculation, even if you receive it regularly every month.

Detailed Explanation:

What counts as "basic salary" for gratuity:

✅ Fixed monthly salary stated in your employment contract
✅ Fixed housing allowance (only if explicitly stated as "part of basic salary" in contract)
✅ Guaranteed commission (only if structured as minimum basic salary)

What does NOT count:

❌ Overtime payments (regardless of frequency)
❌ Annual bonuses
❌ Performance bonuses
❌ Quarterly incentives
❌ Housing allowance (if separate line item)
❌ Transportation allowance
❌ Mobile phone allowance
❌ Meal allowances
❌ Attendance bonuses

Example breakdown:

Your salary structure:

• Basic salary: AED 8,000/month
• Housing allowance: AED 2,000/month
• Transportation: AED 500/month
• Average monthly overtime: AED 1,500/month
• Total monthly income: AED 12,000

Gratuity calculation base: AED 8,000 (basic only)

Why this matters:

Using gross salary (AED 12,000) instead of basic (AED 8,000) would inflate gratuity by 50%—but this is incorrect and MOHRE will reject such calculations.

How to verify your basic salary:

1. Check employment contract under "Basic Salary" or "Basic Monthly Remuneration"
2. Cross-reference with payslip "Basic" line item
3. If unclear, request written clarification from HR

Legal basis: MOHRE Circular 2025/02, Article 51 interpretation guidelines

10. What is the maximum gratuity I can receive?

Short Answer: The legal maximum is 2 years of your basic salary (24 months). Regardless of how long you work, your total gratuity cannot exceed this cap.

Detailed Explanation:

The 2-year cap rule:

Article 51 states: "...provided that the total gratuity shall not exceed two years' wage."

When the cap applies:

The cap rarely applies except in cases of:

• Very long service (15+ years)
• High salaries (AED 20,000+/month)

Example calculation showing cap:

Employee with AED 20,000 basic salary works 20 years:

Uncapped calculation:

• Years 1-5: (20,000 ÷ 30) × 21 × 5 = AED 70,000
• Years 6-20: (20,000 ÷ 30) × 30 × 15 = AED 300,000
• Uncapped total: AED 370,000

With 2-year cap:

• Maximum: 24 months × 20,000 = AED 480,000
• In this example, uncapped (AED 370,000) is lower than cap (AED 480,000), so employee receives AED 370,000

The cap only limits when uncapped amount exceeds 24 months of basic salary.

For most employees:

If your basic salary is AED 10,000/month:

• 2-year cap = AED 240,000
• You'd need to work ~18-20 years to approach this cap
• Most employees leave before hitting the cap

No other limits:

• There is no "maximum years" limit
• You accrue gratuity continuously as long as you work
• The only limit is the 2-year salary cap

Legal basis: Article 51, Federal Decree-Law No. 33/2021

Bonus FAQ: Additional Common Questions

11. Do part-time employees get gratuity?

Yes. Part-time employees are eligible if they meet the 1-year service threshold. Gratuity is calculated on their pro-rated basic salary.

12. What if I have multiple contracts with the same employer?

Service periods typically aggregate (carry forward) if contracts are consecutive without gaps. Verify this in writing with your employer.

13. Can I receive gratuity advances before leaving?

No. Federal law does not provide for gratuity advances. Gratuity is payable only upon termination of employment. Some employers offer discretionary advances, but this is not legally required.

14. What if my employer goes bankrupt?

You still have the right to gratuity. File a MOHRE complaint immediately. MOHRE may pay from employer's bank guarantee or through insolvency proceedings.

15. Does sick leave affect my gratuity?

No. Approved sick leave counts as continuous service and does not reduce your gratuity entitlement.

Related Resources

• How to Calculate Gratuity in UAE: Complete 2025 Guide
• Gratuity Eligibility in UAE 2025: Who Qualifies for End-of-Service Pay
• UAE Labour Law 2025: Gratuity Entitlement Breakdown
• Resignation vs Termination: How UAE Gratuity Differs
• How to File a Gratuity Dispute in UAE

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

Final Disclaimer: This FAQ reflects UAE labour law as of November 2025 and is for informational purposes only. It is not legal advice. Gratuity entitlements depend on individual circumstances, contracts, and specific situations. For complex cases or disputes, consult MOHRE directly at 600590000 or seek advice from a qualified employment lawyer licensed in the UAE.