01
Twenty-one days, then thirty
Twenty-one days’ basic wage for each of the first five years of service, and thirty days’ basic wage for each year beyond five. The bands are cumulative, not a rate that switches retrospectively.
UAE compliance · Federal Decree-Law 33/2021
End-of-service is a liability you already carry.
Gratuity accrues from the first qualifying year, falls due within fourteen days of exit, and is capped at two years’ basic wage. Since 2023 employers may swap that accrual for a monthly contribution into a regulated fund — a different obligation, and a different shape on the balance sheet.
Reference, not a calculator. This page sets out the basis: what the statute requires, what counts as service, and what the Savings Scheme changes. For a number with the working shown, use the calculator.
Last reviewed
The statutory position
Article 51, Federal Decree-Law No. 33 of 2021.
The 2021 decree replaced the 1980 law in full. Two of its changes matter more than the rest, because guidance written before 2022 still circulates and still gets applied.
02
One year of continuous service to qualify
Below one year of continuous service there is no entitlement. Above it, partial years are pro-rated rather than rounded down to a whole year.
03
Capped at two years’ basic wage
Total gratuity may not exceed twenty-four months of basic wage however long the service. Long-tenure employees reach the ceiling and stop accruing, which is the point most provision models miss.
04
Resignation no longer reduces it
Under the repealed 1980 law, resigning before five years cut entitlement to a third or two thirds. That reduction is gone. An employee who resigns and one who is dismissed accrue identically — the reason most published UAE gratuity calculators are still wrong.
05
Limited and unlimited contracts no longer differ
The distinction was abolished with the 1980 law. All contracts are now fixed-term, and the contract type no longer changes the gratuity calculation at all.
06
Payable within fourteen days
Article 53 requires end-of-service entitlements to be settled within fourteen days of the end of the contract. Gratuity is a dated payable, not an open item to be reconciled at leisure.
What counts as service
This is where employers get it wrong.
The instinct is that unpaid days do not count. That instinct is wrong in the two cases where it costs the most, and it is wrong in the employee’s favour — which is why it survives unchallenged until someone audits it.
Counts toward service
- Paid annual leave, in full.
- Maternity leave — including its unpaid portions.
- Sick leave — including unpaid sick leave.
- Any period the employment relationship subsists and the absence is authorised.
Deducted from service
- Genuine unpaid leave taken at the employee’s request.
- Unauthorised absence.
Part-time, temporary and flexible arrangements accrue on the same bands, reduced in proportion to contracted hours against comparable full-time hours, under Cabinet Resolution No. 1 of 2022.
Basic wage
Narrower than what lands in the bank.
Article 1 defines basic wage as the wage stated in the employment contract, excluding allowances and benefits in kind. Gratuity is calculated on that figure alone, which is why a package quoted as a single gross number cannot be used to compute it.
Commissions and bonuses are the genuine open question. The decree does not expressly settle them, so their treatment turns on how the contract is written. We state that rather than asserting an answer in either direction.
A contractual waiver of gratuity is void. It is a statutory right, and a clause purporting to sign it away has no effect — including one the employee willingly signed.
Excluded from basic wage
- Housing allowance
- Transport allowance
- Utilities allowance
- Any other allowance or benefit in kind
The Savings Scheme
A voluntary alternative that changes the liability, not just the paperwork.
Cabinet Resolution No. 96 of 2023, effective 10 October 2023, with subscription mechanics under Ministerial Resolution No. 668 of 2023. An employer may stop accruing gratuity and instead pay a monthly contribution into a fund regulated by MoHRE and the Securities and Commodities Authority. It is voluntary, and it does not reach the DIFC or ADGM, which sit outside MoHRE’s remit.
5.83%
of monthly basic wage
For employees with less than five years of service
Mirrors the twenty-one-day statutory band
8.33%
of monthly basic wage
For employees at five years of service and beyond
Mirrors the thirty-day statutory band
The two rates are not arbitrary — they reproduce the twenty-one and thirty day statutory bands as a percentage of monthly basic wage, so a subscribing employer pays approximately what it would otherwise have accrued.
Three fund options
Capital guarantee
Required for unskilled workers
Protects the contributed capital and carries no investment risk to the employee. This is the option for unskilled workers, and it remains available to skilled employees who want it.
Risk-based
Skilled, professional levels 1–5, AED 4,000+/month
Portfolios at varying risk levels. Open only to skilled employees at professional levels 1–5 earning at least AED 4,000 per month. The employee carries investment losses, though not losses on the basic contributions themselves.
Sharia-compliant
Available on request
Investment options structured to Islamic principles, offered alongside the conventional portfolios by approved fund providers.
The mechanics that catch employers out
01
Accrual stops at the implementation date
Once an employer joins, Article 51 accrual ceases for enrolled employees and the monthly contribution replaces it. The two do not run in parallel, and employees recruited after enrolment do not accrue statutory gratuity at all.
02
Prior accrual freezes on the salary at that date
Gratuity already earned must still be honoured, but it is calculated on the basic salary as at the implementation date rather than on final salary at exit. For a long-serving employee whose pay later rises, that is a materially different number from the one an unmodelled provision assumes.
Article 5(3) — confirm against the decree text before relying on it
03
Accrued gratuity cannot be moved into the fund
The historic liability stays with the employer. Joining the scheme does not discharge it, transfer it, or convert it into fund units — so the balance sheet carries a frozen legacy provision alongside a new monthly expense.
Article 5(3) — confirm against the decree text before relying on it
04
Contributions are due monthly, on a clock
Basic subscriptions must reach the chosen fund within fifteen days of the start of each calendar month. On exit, the employee receives the subscriptions and their returns within fourteen days, matching the Article 53 deadline.
Under consultation. MoHRE ran a public consultation on the scheme which closed on 28 February 2026. The framework described here may change, which is why this page carries a ninety-day review interval rather than the usual one. Treat the mechanics as current rather than settled.
Inside the ERP
What this costs you if the system does not model it.
Gratuity is an accruing liability. Whether it sits on the balance sheet as a provision or converts to a fixed monthly contribution changes how payroll and the general ledger have to be configured — and the transition means carrying both at once.
01
It is an accruing liability, not an exit calculation
The balance sheet should already carry what the company owes.
- Gratuity accrues from day one of qualifying service and belongs in the general ledger monthly, not at termination.
- HCM-UAE accrues end-of-service month by month into the GL, so the provision tracks the workforce rather than surprising it.
- Calculating only on the way out is how a provision becomes an unbudgeted cash event with a fourteen-day deadline attached.
02
Joining the scheme changes the accounting shape
A provision becomes an expense, and the two coexist during transition.
- Subscribing converts a growing balance-sheet liability into a fixed monthly contribution — a different GL treatment, not a smaller one.
- The frozen legacy provision stays on the balance sheet and has to be tracked separately from the new contribution stream.
- Payroll needs the 5.83%/8.33% band to switch on the employee’s own five-year mark, which means service length has to drive the calculation rather than a static rate on the employee record.
03
Basic wage has to be a real field
Most of the errors we see are data, not arithmetic.
- Basic wage must be held distinctly from housing, transport and utilities rather than derived from gross pay at run time.
- Where commissions or bonuses are contractually part of basic wage, that treatment has to be represented per contract — not assumed globally in either direction.
- Service-date history has to survive transfers, rehires and entity moves, because the five-year band and the twenty-four-month cap both read from it.
04
Leave types have to carry the right flag
The rule that unpaid maternity and sick leave still count is a configuration question.
- Leave categories need an explicit "counts toward end-of-service" attribute rather than an inference from whether the day was paid.
- Unpaid maternity and unpaid sick leave must not reduce service, while genuine unpaid leave and unauthorised absence must.
- Part-time, temporary and flexible arrangements need contracted-hours data to pro-rate under Cabinet Resolution No. 1 of 2022.
Sources
- Federal Decree-Law No. 33 of 2021 — Articles 1, 51 and 53 — UAE Legislation, 2021
- Cabinet Resolution No. 1 of 2022 — Article 30, part-time and flexible work pro-rata — UAE Legislation, 2022
- Cabinet Resolution No. 96 of 2023 — voluntary alternative end-of-service benefits scheme — UAE Legislation, 2023
- Ministerial Resolution No. 668 of 2023 — subscription under the alternative scheme — UAE Ministry of Human Resources and Emiratisation, 2023
- Alternative End-of-Service Benefits System — guidance portal — UAE Ministry of Human Resources and Emiratisation
- End of service benefits for workers in the private sector — fund options and the 25% voluntary cap — The Official Platform of the UAE Government
- Public consultation on the voluntary alternative end-of-service system (closed 28 February 2026) — Sharik.ae — UAE Digital Participation Platform
Know the number, then know the liability.
The calculator gives you a figure with the working shown. Making the ledger carry that figure month by month — across leave types, service history and a possible move to the Savings Scheme — is the NetSuite work behind it.