UAE Gratuity Glossary (2025 Edition)
TL;DR: Comprehensive reference guide defining essential UAE gratuity and labour law terminology based on Federal Decree-Law No. 33 of 2021 and MOHRE 2025 regulations. Covers key concepts including basic salary, contract types, eligibility requirements, calculation formulas, dispute resolution processes, and employee rights for accurate understanding of end-of-service benefits.
This glossary defines key terms used throughout the Gratuity Calculator UAE platform, based on MOHRE law and 2025 updates. Whether you're an employee, employer, or HR professional, these definitions clarify the language of UAE end-of-service benefits and labour regulations.
All terms reference current Federal Decree-Law No. 33 of 2021 and subsequent amendments issued by the Ministry of Human Resources and Emiratisation.
A
Allowances — Additional payments beyond basic salary, such as housing, transportation, or education allowances. These are typically excluded from gratuity calculations, which are based solely on basic salary. See How to Calculate Gratuity in UAE.
Arbitration — A formal dispute resolution process conducted by MOHRE to settle gratuity and employment conflicts between employers and employees. Less formal than court proceedings, arbitration aims for mediated settlement. See MOHRE Arbitration for Gratuity Claims.
Article 44 — The section of UAE Labour Law that defines serious misconduct justifying immediate dismissal without notice or gratuity. Offenses include theft, assault, disclosure of confidential information, and significant financial damage to the employer.
Article 51 — The provision outlining employee entitlement to end-of-service gratuity based on years of continuous service and the calculation formula applicable to different service durations.
B
Basic Salary — The fixed monthly wage excluding allowances, bonuses, and commissions. This figure forms the foundation for all gratuity calculations in the UAE. Understanding your basic salary is essential for accurate end-of-service estimates. See Daily Rate and Formula in Gratuity.
Bereavement Leave — Paid leave granted to employees following the death of an immediate family member. The MOHRE 2025 updates include clarifications on how this leave affects service year calculations for gratuity purposes.
Bonus — Performance-based or annual rewards provided to employees. Bonuses are not included in gratuity calculations as they are considered variable compensation rather than fixed salary.
C
Cabinet Resolution No. 1 of 2022 — Official clarification issued by the UAE Cabinet addressing the calculation method for partial service years in gratuity computation. This resolution resolved ambiguities around pro-rata calculations for incomplete years.
Calculator — The interactive Gratuity Calculator Tool provided on this platform. It allows employees to estimate their end-of-service benefits instantly using MOHRE-compliant formulas.
Contract Type — The classification of employment agreements as either limited (fixed-term) or unlimited (indefinite). Your contract type significantly affects gratuity calculation, notice period requirements, and termination procedures. See Limited vs Unlimited Contracts: Gratuity Impact.
CTC (Cost to Company) — The total cost an employer incurs for an employee, including salary, benefits, insurance, and other allowances. Gratuity is typically not part of CTC calculations. See Is Gratuity Part of CTC?.
D
Daily Rate — Your basic monthly salary divided by 30 days, used as the base unit in gratuity calculations. For example, if your basic salary is AED 9,000, your daily rate is AED 300. See Daily Rate and Formula in Gratuity.
Deduction — An amount subtracted from wages or final settlement. While salary deductions are permitted under specific circumstances, gratuity deductions are strictly limited by law to cases of proven financial damage or gross misconduct. See Can Employers Deduct Gratuity in UAE?.
Dispute — A formal disagreement between employer and employee regarding gratuity payment, calculation, or entitlement. MOHRE provides structured processes for filing and resolving labour disputes. See How to File a Gratuity Dispute in UAE.
Domestic Workers — Employees working in private households, including housemaids, nannies, and drivers. They are governed by separate MOHRE regulations with distinct gratuity calculation methods. See Domestic Workers Gratuity Calculation Rules.
E
Eligibility — The legal qualification to receive gratuity. Employees must complete at least one continuous year of service to qualify. Resignation timing affects the percentage received. See Gratuity Eligibility in UAE.
Emirates ID — The official identification card issued to all UAE residents. Required documentation when filing labour complaints or accessing MOHRE services for gratuity disputes.
Employer Record-Keeping — The legal obligation for employers to maintain accurate employment records, including contracts, salary history, and service duration. Proper documentation is essential for gratuity calculation and dispute resolution. See Employer Record-Keeping Requirements.
End-of-Service Benefit — The official term for gratuity in UAE Labour Law. It refers to the lump-sum payment employees receive when their employment contract ends, calculated based on service duration and basic salary. See End of Service Definition.
Expats — Foreign nationals working in the UAE under sponsored employment visas. Expats constitute the majority of the UAE workforce and are entitled to gratuity under the same regulations as UAE nationals. See Gratuity for Expats in UAE.
F
Federal Decree-Law No. 33 of 2021 — The primary legislation governing employment relationships and end-of-service benefits in the UAE. This law replaced the previous Labour Law No. 8 of 1980 and introduced significant reforms to gratuity calculations and contract types. See UAE Labour Law 2025.
Final Settlement — The complete payment package an employee receives upon contract termination, including outstanding salary, accrued leave pay, notice period compensation, and gratuity.
Fixed-Term Contract — Also known as a limited contract, this is an employment agreement with a specified end date, typically ranging from one to three years. Employees on fixed-term contracts receive full gratuity regardless of who terminates the contract.
Flexible Work — Employment arrangements including part-time, remote, and temporary work. The 2025 MOHRE updates provide clearer guidance on gratuity calculations for non-traditional work arrangements.
G
Grace Period — The timeframe after contract termination during which employers must settle final payments, including gratuity. MOHRE requires settlement within 14 days of the last working day. See Grace Period After Termination.
Gratuity — The end-of-service payment employees earn based on their length of service and basic salary. It serves as a form of retirement savings and employment security in the UAE. See How to Calculate Gratuity in UAE.
Gratuity Advance — A partial payment of gratuity before contract termination. Generally not permitted under UAE law, though some exceptions exist for specific circumstances like medical emergencies. See Can Employees Take Gratuity Advance?.
Gross Misconduct — Serious behavioral violations outlined in Article 44 that can result in immediate dismissal without notice or gratuity. Examples include theft, violence, fraud, and significant breach of trust.
H
Housing Allowance — A common component of UAE salary packages covering accommodation costs. This allowance is excluded from gratuity calculations, which consider only basic salary.
HR Department — The Human Resources team responsible for administering employment policies, maintaining records, and processing end-of-service settlements including gratuity calculations.
I
Immediate Termination — Dismissal without notice period, typically resulting from gross misconduct under Article 44. This form of termination may result in complete forfeiture of gratuity entitlement.
Indemnity — An alternative term sometimes used for end-of-service gratuity, referring to compensation provided to employees at the end of their employment tenure.
J
JAFZA (Jebel Ali Free Zone Authority) — A free zone in Dubai with specific employment regulations. While JAFZA follows federal UAE labour law for gratuity, some administrative procedures differ. See JAFZA Gratuity Calculator.
L
Labour Card — The official work permit issued by MOHRE authorizing legal employment in the UAE. This document verifies the employment relationship and contract type. See UAE Labour Card Guide.
Labour Court — The judicial body handling employment disputes that cannot be resolved through MOHRE mediation or arbitration. Court proceedings follow formal legal procedures. See What to Expect in Gratuity Court Case.
Labour Dispute — Any conflict between employer and employee regarding employment terms, including gratuity payments, working conditions, or contract violations. See How to File a Gratuity Dispute in UAE.
Limited Contract — An employment agreement with a specific duration, typically one to three years. Upon natural expiry or termination, employees receive full gratuity regardless of who ended the contract. See Limited vs Unlimited Contracts.
M
Maternity Leave — Paid leave granted to female employees during and after pregnancy. The 2025 MOHRE regulations clarify how maternity leave affects service year calculations for gratuity. See Maternity Leave and Gratuity Entitlement.
Misconduct — Behavior violating employment terms or company policy. Depending on severity, misconduct can lead to warnings, termination with gratuity, or immediate dismissal without gratuity under Article 44.
MOHRE (Ministry of Human Resources and Emiratisation) — The UAE government authority regulating employment, issuing labour policies, mediating disputes, and enforcing compliance with Federal Decree-Law No. 33 of 2021. See MOHRE Updates 2025.
N
Notice Period — The advance notification required when either party wishes to terminate an employment contract. Notice periods vary by contract type but do not affect gratuity calculation, though failure to serve notice may result in salary deductions. See Notice Period Rules and Gratuity.
O
Overtime — Hours worked beyond the standard contractual hours, compensated separately from basic salary. Overtime payments are excluded from gratuity calculations. See Does Overtime Affect Gratuity Calculation?.
P
Part-Time Employee — Workers employed for fewer hours than standard full-time positions. Part-time employees receive gratuity calculated proportionally based on their working hours and service duration. See Gratuity for Part-Time Employees.
Partial Payment — A portion of the total gratuity amount. UAE law generally requires full gratuity payment at contract termination, though partial calculations apply to employees resigning with less than five years of service.
Probation Period — An initial employment phase, typically three to six months, during which either party can terminate with minimal notice. Employees terminated during probation are not entitled to gratuity. See Do Employees Get Gratuity During Probation?.
Pro-Rata Calculation — The method of calculating gratuity for incomplete service years, ensuring employees receive proportional benefits for months worked beyond complete years.
R
Record-Keeping — The legal requirement for employers to maintain comprehensive employment documentation including contracts, payroll records, and attendance logs. Essential for accurate gratuity calculation and dispute resolution. See Employer Record-Keeping Requirements.
Remote Work — Employment arrangement where employees work outside traditional office settings. The 2025 MOHRE updates recognize remote work as a legitimate arrangement subject to standard gratuity regulations.
Repatriation — The process of returning to one's home country after employment ends. For expats, repatriation benefits may include flight tickets and are separate from gratuity entitlement. See Repatriation Benefits and Gratuity Rules.
Resignation — Voluntary termination of employment by the employee. Resignation affects gratuity entitlement based on service duration: one-third after 1-3 years, two-thirds after 3-5 years, and full gratuity after 5+ years. See Resignation vs Termination.
S
Service Years — The total duration of continuous employment with a single employer, calculated from contract start date to termination date. Service years are the primary factor determining gratuity amount. See Service Years Calculation in UAE.
Settlement — The final payment package provided to employees upon contract termination, encompassing all outstanding financial obligations including gratuity, unused leave, and final salary.
Sponsorship — The legal relationship where an employer sponsors an employee's work visa and residence permit in the UAE. This relationship governs employment rights and obligations including gratuity.
T
Taxation — The levy of financial charges by government. Gratuity payments in the UAE are not subject to income tax, meaning employees receive the full calculated amount. See Is Gratuity Taxable in UAE?.
Temporary Contract — Short-term employment agreements for specific projects or seasonal work. These contracts follow standard gratuity regulations based on actual service duration.
Termination — The ending of an employment contract, either by employer decision or mutual agreement. Unlike resignation, employer-initiated termination of limited contracts entitles employees to full gratuity regardless of service duration. See Resignation vs Termination.
Timeline — The expected duration for resolving gratuity disputes through MOHRE processes. Cases typically take 2-6 months depending on complexity and whether arbitration or court proceedings are required. See How Long Does a Gratuity Case Take?.
Transportation Allowance — A salary component covering commuting costs. Like housing allowances, transportation allowances are excluded from gratuity calculations.
U
Unlimited Contract — An employment agreement without a fixed end date, continuing indefinitely until terminated by either party. Resignation from an unlimited contract follows the same gratuity reduction rules as limited contracts based on service duration. See Difference Between Limited and Unlimited Contract.
V
Variable Pay — Compensation components that fluctuate based on performance, including commissions, bonuses, and incentives. Variable pay is excluded from gratuity calculations, which consider only fixed basic salary.
Visa Status — The legal immigration status of an employee in the UAE, typically tied to employer sponsorship. Visa cancellation usually occurs after contract termination and gratuity settlement.
W
Work Permit — Official authorization to work legally in the UAE, documented through the labour card issued by MOHRE. The work permit validates employment relationships and entitlement to legal protections including gratuity.
Written Contract — The legally required employment agreement between employer and employee, specifying terms including salary, job role, contract duration, and basic rights. A written contract is mandatory for all employment relationships in the UAE.
Y
Year of Service — A complete 12-month period of continuous employment. Gratuity calculations use both complete years and pro-rata months to determine the final payment amount. See Service Years Calculation in UAE.
Related Resources
For practical application of these terms, use the UAE Gratuity Calculator to estimate your end-of-service benefits.
If you need to understand your specific situation, review our Top 10 Questions About Gratuity for scenario-based guidance.
For comprehensive legal context, read the complete UAE Labour Law 2025 Breakdown.
For an instant end-of-service estimate, use our online gratuity calculator UAE.
This glossary is maintained under MOHRE 2025 regulations and regularly updated to reflect UAE Labour Law changes.
