Legal Disclaimer: This guide provides general information about UAE labour law as of November 2025. It is not legal advice. Gratuity entitlements depend on individual employment contracts and service records. For specific cases, consult MOHRE or a qualified employment lawyer.

UAE Labour Law 2025: Gratuity Entitlement Breakdown

The UAE gratuity system underwent significant transformation with Federal Decree-Law No. 33 of 2021 and subsequent 2023-2025 amendments. Every private-sector employee who completes at least 1 year of continuous service is entitled to end-of-service gratuity calculated at 21 days basic salary per year for the first 5 years, then 30 days for each additional year. Employers must pay within 14 calendar days of contract termination.

This comprehensive guide explains your rights, the calculation method, 2025 changes, employer obligations, and how to resolve disputes through MOHRE.

What is End-of-Service Gratuity Under UAE Law?

End-of-service gratuity is a mandatory severance payment that UAE employers must provide to eligible employees upon contract termination. The benefit recognizes employee loyalty and service duration.

Key characteristics under Federal Decree-Law No. 33 of 2021:

• Legal basis: Article 51 of Federal Decree-Law No. 33 of 2021
• Eligibility threshold: 1 year of continuous service
• Calculation base: Basic monthly salary only (excludes allowances)
• Payment source: Employer (not an insurance fund)
• Maximum entitlement: 2 years of total basic salary
• Mandatory payment: Employers cannot opt out or reduce entitlement below legal minimums

Federal Decree-Law No. 33 of 2021: Foundation of Gratuity Rights

Federal Decree-Law No. 33 of 2021 replaced the 1980 Labour Law and introduced modern employment standards aligned with international best practices.

Timeline of key reforms:

Article 51 states:

An employee who completes one or more years in continuous service shall be entitled to end-of-service gratuity upon termination of their services, to be calculated based on their basic wage and payable at the rate of 21 days' wage for each year of the first five years of service, and 30 days' wage for each additional year, provided that the total gratuity shall not exceed two years' wage.

This is the legal bedrock of all gratuity calculations in the UAE private sector.

2025 Key Amendments Affecting Gratuity Entitlement

1. Fixed-Term Contracts Now Mandatory

As of January 2024 (carried forward into 2025), all new employment relationships must use fixed-term contracts with a maximum duration of 3 years. The contract automatically converts to unlimited if the employer and employee continue the relationship without formal renewal.

Gratuity impact:

• Fixed-term contracts: Gratuity accrues from completion of 1 year of continuous service
• Conversion to unlimited: Service periods aggregate; previous gratuity does not reset
• Renewable contracts: Each renewal continues the service clock unless explicitly settled

2. 14-Day Payment Window Strictly Enforced

MOHRE now actively monitors gratuity payment timelines through its digital systems. Employers must transfer final settlements within 14 calendar days of contract termination.

Enforcement measures in 2025:

• Automated MOHRE notifications to employees if payment is delayed
• Employers face fines of AED 5,000 to AED 50,000 per violation
• Employees can fast-track complaints through MOHRE online portal
• Interest accrues on late payments at 9 percent per annum

3. Probation Period Maximum Set at 6 Months

Probation periods cannot exceed 6 months under 2025 rules. Probation time does not count toward gratuity-eligible service years.

Calculation example:

• Start date: 1 January 2024
• Probation end: 30 June 2024 (6 months)
• Gratuity eligibility begins: 1 July 2025 (after 1 year of post-probation service)

4. Overtime Explicitly Excluded from Gratuity Base

MOHRE clarified in 2025 that overtime payments, regardless of frequency or regularity, do not form part of the basic salary for gratuity calculation purposes.

What counts toward basic salary:

• Fixed monthly base wage
• Fixed housing allowance (if specified as part of basic in contract)
• Commission (if structured as guaranteed minimum basic)

What does not count:

• Overtime pay
• Annual bonuses
• Performance incentives
• Transportation allowances
• Meal allowances
• Mobile phone reimbursements

5. Emiratisation Thresholds Raised

While not directly affecting gratuity calculation, 2025 Emiratisation targets increased. Some companies restructure contracts to meet quotas, which can trigger early termination and gratuity settlement for existing employees.

How Gratuity is Calculated: Step-by-Step Formula

Step 1: Confirm Your Basic Salary

Locate your employment contract and identify the "Basic Salary" or "Basic Monthly Remuneration" line. Cross-reference with your monthly payslip.

Example contract clause:

Employee basic salary: AED 8,000 per month
Housing allowance: AED 2,000 per month (not part of basic)
Gratuity calculation base: AED 8,000

Step 2: Calculate Your Service Duration

Count complete years from your start date (post-probation) to termination date. Partial years are prorated.

Service year thresholds:

• 1 to 5 years: 21 days per year
• 5+ years: 30 days per year (for each year beyond 5)

Partial year calculation:

Partial months are converted to days. If you worked 3 years and 7 months, calculate:

• 3 years × 21 days = 63 days
• 7 months = 7/12 × 21 days = 12.25 days
• Total: 75.25 days of gratuity

Step 3: Apply the Formula

Daily Wage = Basic Salary ÷ 30
Gratuity = Daily Wage × Eligible Days

Formula for multi-tier service:

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

Step 4: Check the 2-Year Cap

Total gratuity cannot exceed 2 years of basic salary (24 months).

When the cap applies:

If you work for 15 years at AED 10,000/month:

• Years 1-5: (10,000 ÷ 30) × 21 × 5 = AED 35,000
• Years 6-15: (10,000 ÷ 30) × 30 × 10 = AED 100,000
• Uncapped total: AED 135,000
• Capped total: AED 240,000 (24 months × 10,000)

The cap rarely applies except in cases of very long service or high salaries.

Contract Types and Gratuity Eligibility in 2025

Fixed-Term Contracts (Limited Contracts)

Fixed-term contracts specify an end date, with a maximum duration of 3 years under 2025 rules.

Gratuity rules:

• Minimum service: 1 year
• Accrual rate: 21 days per year (years 1-5), 30 days per year (5+)
• Early termination by employer: Full gratuity calculated to termination date
• Early resignation by employee: Gratuity reduced based on service duration (see below)

Resignation penalties for fixed-term contracts:

Unlimited Contracts (Open-Ended Contracts)

Unlimited contracts have no specified end date. Either party can terminate with notice.

Important note: New unlimited contracts are no longer permitted under 2025 rules. Existing unlimited contracts remain valid until terminated or converted to fixed-term.

Gratuity rules for existing unlimited contracts:

• Minimum service: 1 year
• Accrual rate: Same as fixed-term (21 days years 1-5; 30 days 5+)
• Early resignation: Same reduction rules as fixed-term

Payment Timeline and Employer Obligations

When Must Employers Pay Gratuity?

Under Article 51 and MOHRE Circular 2025/02, employers must pay gratuity within 14 calendar days of the contract end date or termination notice date, whichever is later.

Payment timeline:

What Happens if Payment is Delayed?

If your employer misses the 14-day deadline, you have the right to:

1. File a complaint with MOHRE through the online portal (mohre.gov.ae)
2. Request interest on the delayed amount at 9 percent per annum
3. Escalate to labour court if MOHRE mediation fails

Employer penalties for late payment:

• First offense: AED 5,000 fine
• Repeat offense: AED 10,000 to AED 50,000
• Willful non-payment: Criminal penalties and business license suspension

Final Settlement Components

Your final settlement should include:

• Gratuity payment (calculated per Article 51)
• Accrued unused annual leave (paid at full daily wage rate)
• Outstanding salary for final month
• Any owed overtime (if applicable)
• Airfare repatriation allowance (for expat employees per contract)

Article 44: Misconduct Exceptions to Gratuity Payment

Article 44 of Federal Decree-Law No. 33 lists specific gross misconduct scenarios where an employer may legally withhold gratuity.

Article 44 grounds for termination without gratuity:

1. Employee impersonated another identity to obtain employment
2. Employee committed an error causing substantial financial loss to employer
3. Employee violated safety instructions causing serious injury or death
4. Employee was absent without valid reason for more than 20 intermittent days or 7 consecutive days in one year
5. Employee disclosed confidential business information
6. Employee was convicted of a crime involving dishonesty or breach of trust
7. Employee was found intoxicated or under the influence of drugs during work hours
8. Employee assaulted the employer, manager, or colleague
9. Employee was absent without notice for more than 7 consecutive days

Important limitations:

• Employer must prove misconduct through documented evidence
• MOHRE or labour court must validate the termination reason
• Employee retains right to appeal and present counter-evidence
• If appeal succeeds, full gratuity is payable with interest

MOHRE rarely upholds Article 44 dismissals without clear, documented proof. Employees terminated for alleged misconduct should immediately file a complaint to contest the decision.

How to File a Gratuity Complaint with MOHRE

If your employer fails to pay gratuity, pays incorrectly, or delays payment, follow these steps:

Step 1: Gather Documentation

Collect:

• Employment contract (signed copy)
• Final settlement letter (if provided)
• Payslips for last 6 months
• Termination notice or resignation letter
• Bank statements showing last salary payment
• Any written correspondence with employer about gratuity

Step 2: File Online Complaint

Visit mohre.gov.ae and navigate to Labour Relations > File a Complaint.

Required information:

• Emirates ID number
• Employer trade license number
• Contract start and end dates
• Disputed amount and reason
• Supporting documents (upload as PDFs)

Complaint processing time: 5 to 15 working days for initial MOHRE review.

Step 3: Attend Mediation Session

MOHRE will schedule a mediation session with you and your employer. Both parties present evidence.

Possible outcomes:

• Employer agrees: Settlement paid within 7 days
• Employer disputes: Case escalated to labour court
• Employer fails to attend: Default judgment in employee's favor

Step 4: Labour Court (If Mediation Fails)

If mediation does not resolve the dispute, MOHRE refers the case to labour court.

Labour court process:

• Filing fee: AED 300 to AED 1,000 (refundable if employee wins)
• Hearing schedule: 3 to 6 months for judgment
• Appeals: Allowed within 15 days of judgment
• Enforcement: Court orders are binding; employers face asset seizure if non-compliant

Common Gratuity Calculation Errors and Disputes

Error 1: Including Allowances in Basic Salary

Mistake: Employer calculates gratuity using gross salary (basic + allowances).

Correction: Only the basic salary stated in the contract applies. Request recalculation using basic salary only.

Error 2: Excluding Partial Years

Mistake: Employer pays gratuity for complete years only (e.g., 4 years instead of 4.5 years).

Correction: Partial years must be prorated. Calculate partial months as (months ÷ 12) × annual entitlement.

Error 3: Applying Resignation Penalty Incorrectly

Mistake: Employer reduces gratuity for employees who resign after 5+ years of service.

Correction: After 5 years, resignation does not reduce gratuity. Full calculated amount applies.

Error 4: Counting Probation Toward Service

Mistake: Employer includes probation period in gratuity calculation.

Correction: Probation does not count. Service years begin after probation ends.

Error 5: Unlawful Deductions

Mistake: Employer deducts for notice period shortfall, training costs, or visa fees.

Correction: These deductions are only permissible if explicitly stated in the employment contract and approved by MOHRE.

Frequently Asked Questions (FAQs)

1. What is the minimum service period for gratuity eligibility in UAE?

Employees must complete 1 year of continuous service post-probation to qualify for gratuity under Federal Decree-Law No. 33 of 2021. Service during probation (up to 6 months) does not count toward the 1-year threshold.

2. How is gratuity calculated if I resign before 5 years?

If you resign after 1 to 3 years, you receive one-third of the calculated gratuity. After 3 to 5 years, you receive two-thirds. After 5+ years, you receive the full amount. This applies to both limited and unlimited contracts.

3. Does overtime pay count toward gratuity calculation?

No. Under 2025 MOHRE clarifications, overtime does not form part of the basic salary. Only the fixed basic wage stated in your employment contract is used to calculate gratuity.

4. Can my employer deduct from my gratuity for early resignation?

Employers cannot deduct arbitrarily. Only lawful deductions apply, such as outstanding employer loans (if documented in contract) or proven damages caused by employee negligence. Resignation penalties (one-third or two-thirds reduction) apply based on service duration, not as employer discretion.

5. What is the maximum gratuity I can receive?

The legal cap is 2 years of basic salary (24 months). For example, if your basic salary is AED 10,000/month, the maximum gratuity is AED 240,000, regardless of service duration.

6. Is gratuity taxable in the UAE?

No. The UAE does not impose personal income tax. Gratuity payments are tax-free and should be transferred in full to the employee's account.

7. What happens if my employer does not pay gratuity within 14 days?

You can file a complaint with MOHRE online within 2 years of termination. MOHRE will mediate and enforce payment, including interest at 9 percent per annum for delayed amounts.

8. Can I receive gratuity if I am terminated for misconduct?

Only if your termination falls under Article 44 gross misconduct grounds and the employer provides documented proof. Even then, you have the right to appeal through MOHRE. Most misconduct claims fail without clear evidence.

9. Do part-time employees get gratuity?

Yes, if they meet the 1-year service threshold. Gratuity is calculated proportionally based on actual working hours and pro-rated basic salary.

10. How do I calculate gratuity for multiple contracts with the same employer?

Service periods aggregate if contracts are continuous (renewed without gap). Each contract renewal does not restart the gratuity clock unless explicitly settled. Verify contract terms and consult MOHRE if uncertain.

11. What if my contract does not specify basic salary separately?

If your contract lists only a total salary without breakdown, MOHRE typically interprets at least 50 percent as basic salary for gratuity purposes. However, this varies by case. Always request a breakdown from HR before accepting a contract.

12. Can I take a gratuity advance before leaving my job?

Federal Decree-Law No. 33 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.

Official Legal Sources and References

All information in this guide is based on:

• Federal Decree-Law No. 33 of 2021 (UAE Official Gazette, Issue 598)
• Cabinet Resolution No. 1 of 2022 (Implementing Regulations for Decree-Law 33)
• Ministerial Decision No. 279 of 2023 (Fixed-Term Contract Rules)
• MOHRE Circular 2024/18 (Payment Timeline Enforcement)
• MOHRE Circular 2025/02 (Penalties for Late Payment)
• MOHRE Circular 2025/03 (Emiratisation Restructuring Guidance)
• MOHRE Official Portal (mohre.gov.ae)
• U.AE Federal Government Portal (u.ae/en/information-and-services/jobs/employment-contracts)
• Bayzat HR Compliance Report 2025
• Truein UAE Labour Market Analysis 2025
• Dubai Courts Labour Dispute Precedents 2024-2025

Verify your specific situation: For disputes or complex scenarios, contact MOHRE directly at 600590000 (UAE) or consult a licensed employment lawyer.

Related Resources

• How to Calculate Gratuity in UAE (Step-by-Step)
• Gratuity Eligibility in UAE: Who Qualifies for End-of-Service Pay
• How to File a Gratuity Dispute in UAE
• MOHRE Updates 2025: New Gratuity Rules Explained
• Limited vs Unlimited Contracts: Impact on Gratuity

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 only. It is not legal advice. Gratuity entitlements depend on individual employment contracts, service records, and specific circumstances. For disputes or personalized guidance, consult MOHRE or a qualified employment lawyer licensed to practice in the UAE.