How is gratuity calculated for 1-5 years of service?

Employees are entitled to 21 days' basic salary for each year of the first five years of service.

How is it calculated after 5 years?

For service exceeding five years, the entitlement increases to 30 days' basic salary for each additional year.

Is basic salary the same as total salary?

No. Basic salary is the fixed amount stated in the contract before any allowances (housing, transport, etc.) are added.

What if I resign before 1 year?

Usually, no gratuity is payable if service is less than 365 continuous days.

Does the type of resignation affect gratuity?

Under the 2022 Unified Labor Law, the distinction between 'Limited' and 'Unlimited' contracts has been largely replaced, simplifying the calculation.

Can a company withhold gratuity?

Only in very specific cases of gross misconduct as defined under Article 44 of the Labor Law.

Is gratuity taxable in the UAE?

Currently, there is no personal income tax in the UAE, so gratuity is paid in full.

How soon must gratuity be paid after termination?

Ideally, all end-of-service benefits should be settled within 14 days of the last working day.

Is insurance premium part of gratuity?

No, gratuity is strictly based on the basic cash salary.

Can I use an automated tool for this?

Yes, Kiework's UAE Payroll module handles these calculations with 100% accuracy.

Payroll Compliance

Gratuity (UAE)

Gratuity is a statutory end-of-service benefit paid to employees in the UAE who have completed one or more years of continuous service. It is governed by the UAE Labor Law and is calculated based on the employee's last basic salary.

Key Takeaways

Applicable after 1 year of continuous service.
Calculated on Basic Salary only, excluding allowances.
Limited to a maximum of two years' basic salary.
Entitlement varies based on whether the contract is fixed-term or flexible (pre-2022 distinctions).

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Ameena Abdurahiman

Subject Matter Expert (HR & Compliance)

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Ameena Abdurahiman

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