Why your gratuity is smaller than "one month per year"
The single biggest reason people over-estimate their end-of-service pay is the salary they plug into the sum. Under Federal Decree-Law No. 33 of 2021 and MOHRE guidance, gratuity is calculated on your basic salary only. Allowances sit outside the calculation entirely: housing, transport, mobile, education and any other top-ups are excluded, no matter how large. For many private-sector employees the basic wage is only 50-60% of the total package, so the gratuity you actually receive is well below a naive "one month of my full pay per year" estimate. If your contract splits AED 15,000 into AED 10,000 basic plus AED 5,000 allowances, every day of gratuity is priced off the AED 10,000, not the AED 15,000. This is why reading your contract line by line matters before you trust any figure. Our guide to what counts as basic pay walks through common contract structures, and the full explainer of the UAE gratuity law covers the statutory basis.
The one-year minimum, partial years and unpaid gaps
Gratuity only begins to accrue once you have completed one full year of continuous service. Leave before that anniversary and, in most cases, you receive nothing. Once you pass the one-year threshold, service beyond it is pro-rated: a fraction of a year earns a proportional fraction of the annual entitlement, so someone who works three years and four months is paid for the full months served, not rounded down to three flat years. One detail catches people out — periods of unpaid leave do not count toward your length of service. If you took two months of unpaid leave across your tenure, those months are stripped out of the total used to calculate gratuity, which slightly lowers the final figure.
The two-year-pay cap and resignation after 2021
There is an upper limit: total gratuity can never exceed two years' worth of your basic salary, regardless of how long you have served. This cap only bites in genuinely long or senior careers — you would need well over 30 years of service on a stable basic wage before the ceiling comes into play, so for most employees it is a theoretical limit rather than a practical one. Separately, one of the biggest changes under the 2021 unified law is that resigning no longer cuts your gratuity. The old limited versus unlimited contract distinction, which used to slash a resigning employee's entitlement to a third or two-thirds, has been abolished. Whether you resign or are terminated, the accrual rates now apply the same way. If you are untangling an older contract or an offer that still uses the old language, our limited vs unlimited gratuity guide explains what changed.
Gratuity by length of service: a worked scenario
To make the numbers concrete, the table below shows the end-of-service payout for an employee on an AED 10,000 basic salary — a daily wage of AED 333.33 — across five service lengths. The first five years accrue at 21 days per year; each year beyond five accrues at 30 days. At 12 years the figure is the first five years (AED 35,000) plus seven further years at 30 days (7 x 30 x 333.33 = AED 70,000). Note that the two-year cap here would be 2 x AED 120,000 = AED 240,000, which none of these scenarios reaches.
End-of-service gratuity on AED 10,000 basic salary (daily wage AED 333.33)
| Years of service | Accrual basis | Approx. gratuity (AED) |
|---|
| 1 year | 21 days | 7,000 |
| 3 years | 21 days per year | 21,000 |
| 5 years | 21 days per year | 35,000 |
| 8 years | 21 days (first 5) + 30 days (next 3) | 65,000 |
| 12 years | 21 days (first 5) + 30 days (next 7) | 105,000 |
The jump between year five and year eight shows how quickly the payout grows once the 30-day rate kicks in — three extra years add AED 30,000, almost as much as the entire first five years combined.
If your employer does not pay
Gratuity is a legal entitlement, not a discretionary bonus, and it should be settled within the notice period at the end of your contract. If it is withheld, the first step is to file a complaint with MOHRE, which will attempt to mediate a settlement between you and the employer. Where mediation fails, the matter is referred to the labour courts, and court filings for such claims are typically exempt from fees. Keep copies of your contract, salary slips and any evidence of your basic wage, since the calculation stands or falls on that figure. For a step-by-step view of the process and the deadlines involved, see our guide to options when gratuity goes unpaid in the UAE.
