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Key takeaways

1. Gratuity is an essential end-of-service payment for workers in the UAE.
2. Knowing how gratuity is calculated aids in managing finances during job changes.
3. Workers qualify for gratuity after finishing one full year of uninterrupted service.
4. Elements like termination cause and employer’s financial status impact the gratuity payment schedule.
5. Domestic employees have particular gratuity rights regulated by Federal Law No. 10 of 2017.

When I first moved to the United Arab Emirates (UAE) for work, the idea of gratuity felt distant—until my contract neared its termination. That’s when the question naturally arises for every employee: how long will it take to receive your end-of-service benefit? From personal experience and countless conversations with coworkers, I’ve found that understanding the processes is absolutely essential.

Many employees—especially newcomers—don’t realize that this financial acknowledgment of your hard work and dedication is not only your right, but it also carries a serious impact on your planning after leaving a job.

Both employers and employees have responsibilities here. If everything is handled properly, you can typically expect your gratuity to be processed within 14 to 30 days. This blog post aims to clarify your rights, explore key aspects of the process, and answer the most common questions that come up. Whether you’re reading this out of curiosity or because you’re preparing for a career transition, knowing the details of your gratuity in the UAE is truly vital.

Understanding Gratuity in the UAE: A Complete Guide

Gratuity remains a key element of the work structure in the UAE. Let’s examine its different sides to help you clearly grasp your entitlements.

What is Gratuity in the UAE?

Definition and Purpose

Gratuity is a one-time amount given to workers when they exit employment. It serves as a type of monetary reward for their time spent and faithfulness to the firm.

Legal Framework

This end-of-service payment is specifically outlined in UAE Labour Law (Federal Law No. 8 of 1980). Workers need to finish at least one year of ongoing service to qualify for gratuity. As per the law, every job contract must mention details about gratuity rights, making sure companies follow through in offering this reward.

Importance in Employment Contracts

When I first reviewed my employment contract in the UAE, I realized how essential it was to have a clear understanding of how gratuity works. It should always be explicitly mentioned, because it not only protects the interests of employees but also helps employers by providing clear guidelines on gratuity entitlement. If this clause is missing or vague, you may face unnecessary confusion or delays during your end-of-service process.

In my experience, people often overlook that gratuity does in fact depend on the basic salary. The calculations are directly based on this core financial figure, not the full salary package. This small detail can make a big difference in what you’re actually entitled to receive. Understanding this essence is key when planning your financial exit from any job in the UAE.

Sources: MOHRE Official labour contract

How Long Does It Take to Receive Gratuity in UAE?

Standard Timeline for Payment

Typically, gratuity settlements must be completed within 14 days from the job ending date. This brief period guarantees that workers avoid major waits after exiting their role.

Read More: How to Calculate Gratuity UAE

Factors Influencing the Time Frame

Multiple elements may affect the duration for obtaining gratuity:

Reason for Termination

When an employee quits or is dismissed, it can affect the payment schedule. Observing the notice period is crucial; neglecting it might postpone gratuity settlement.

Employer’s Financial Situation

Companies experiencing financial difficulties might require more time to handle gratuity payments. Circumstances like insolvency can legally delay the settlement of gratuity.

Disputes or Outstanding Issues

If disagreements remain, like outstanding debts to the employer, payment may be postponed. Pending legal matters between the employer and employee can also cause delays in receiving gratuity.

Legal Obligations of Employers

Employers must adhere to the schedule set by UAE labor law. Delays in gratuity payment can result in penalties, such as fines or legal proceedings.

Employee Rights and Recourse

Workers have the right to file a complaint if their gratuity payment is late. They may reach out to the Ministry of Human Resources and Emiratisation (MOHRE) for support. Consulting legal experts is also recommended if gratuity is unfairly withheld.

Does Gratuity Depend on Basic Salary in UAE?

Gratuity Calculation Basis

Certainly, gratuity is calculated using the employee’s basic salary only, without including allowances or additional perks.

Calculation Method

For the First Five Years of Service:

• Employees are entitled to 21 days’ basic salary for every year they serve.

For Service Beyond Five Years:

• For each extra year of service, employees receive 30 days’ basic salary.

Maximum Limit:

• The full gratuity sum should not go beyond two years’ value of basic salary.

Calculation Examples

When helping friends understand their gratuity payout, I often refer to actual examples like this. Consider an employee who has completed 3 years of service with a basic salary of AED 8,000.

The gratuity is calculated as 21 days per year, which totals to 63 days. The monetary value becomes clear with a simple calculation: (AED 8,000 / 30) × 63 = AED 16,800. That’s how one can easily estimate what they are entitled to upon completing their contract.

In another example, an employee with 7 years of service and a basic salary of AED 10,000 gets a slightly different breakdown. For the first 5 years, the gratuity is 21 days per year, making it 105 days. Then, for the additional 2 years, the rate increases to 30 days annually, adding 60 days. The total gratuity days now stand at 165 days, and the monetary value is calculated as: (AED 10,000 / 30) × 165 = AED 55,000. These clear numbers make it easier for any employee to understand what they can expect financially when planning ahead.

Impact of Employment Types

From my time working in the UAE, I learned quickly that understanding the differences between limited and unlimited contracts can greatly influence your gratuity entitlement and its calculation.

Many people don’t realize that the contract type affects the amount you receive or even whether you’re eligible in some cases. Knowing which category your contract falls under gives you more control and clarity when planning your exit from a company.

Can Employers Hold My Gratuity in UAE?

Legal Stance on Withholding Gratuity

Many people I’ve worked with are surprised to learn that while employers are required by law to pay gratuity, there are certain conditions where they can withhold the amount legally. But it’s important to note—gratuity cannot be denied unjustly.

According to UAE labor law, it is illegal to deny payment without a just cause. So unless there’s a serious breach of contract or misconduct, you have every right to claim your full gratuity after employment ends.

Circumstances Allowing Gratuity Withholding

Gratuity rights are defined under Article 120 of the UAE Labour Law, and from my HR experience, I’ve seen how certain examples of misconduct can void this benefit. Acts like assault or physical violence toward an employer or coworkers, theft, fraud, or any form of criminal acts can result in losing gratuity entitlements.

Other situations include disclosure of confidential information or violating confidentiality agreements—these are serious breaches that employers rightfully act upon. If there are outstanding debts to the company, employers can legally hold back what’s owed by employees.

Finally, contractual agreements also play a part. Specific terms within your employment contract may apply, as long as they comply with existing labor laws. This emphasizes the importance of reading and understanding your contract before signing.

Employee Protections

Workers may contest unjust non-payment of gratuity using official channels. Legal guidance is likewise accessible through MOHRE offices.

Source:UAE Labour Law

Gratuity for Domestic Workers in UAE

Eligibility Criteria

Household staff are entitled to gratuity much like workers in other job fields once they finish one full year of ongoing service.

Calculation Method

Household employees receive 14 days’ basic pay for every completed year of service.

Example

For a household helper with 4 years on the job and a basic salary of AED 2,000:

Gratuity = 14 days x 4 years = 56 days.

Cash Value = (AED 2,000 / 30) x 56 = AED 3,733.33.

Legal Framework Specific to Domestic Workers

Household workers fall under Federal Law No. 10 of 2017 on Household Workers. This regulation outlines their rights, including prompt wages and safety from mistreatment.

Importance of Transparent Contracts

Contracts for household workers must clearly mention gratuity terms. Employers are required to give a copy to workers so they know their rights.

Comparison with Other Employment Sectors

Although gratuity rights are alike across industries, certain specifics apply uniquely to household workers due to their particular work environments.

Read More: How to File a Complaint for Delay in Gratuity

Conclusion

In summary, having a solid understanding of gratuity in the UAE is absolutely crucial for employees in all sectors. This significant financial benefit marks the end of your employment and should never be overlooked. This guide has covered how gratuity is calculated, the legal obligations of employers, and the rights of employees. It’s important to regularly review your employment contracts, as these documents help clarify your entitlements and protect your interests.

For more insights on gratuity and other labor-related topics, you can always refer to the MOHRE official website. If you find yourself in complex situations regarding gratuity, seeking professional legal advice is highly recommended.

In conclusion, grasping the details of your gratuity entitlements truly empowers you and gives you peace of mind when navigating job transitions in the UAE.

Frequently Asked Questions

1. How long does it take to receive gratuity in the UAE?

Typically, gratuity must be settled within 14 days after job termination. Yet, elements such as the employer’s financial state, conflicts, or cause of termination may affect this schedule.

2. Does gratuity calculation depend on basic salary in the UAE?

Indeed, gratuity is computed from an employee’s basic salary, leaving out allowances and extra perks. Usually, it’s 21 days of basic pay for each of the initial five service years, then 30 days for every year beyond that.

3. Can my employer legally withhold my gratuity payment?

Employers may withhold gratuity only in particular cases, like when the employee owes debts to the employer, commits serious misconduct (outlined in Article 120 of UAE Labour Law), or under specific contract terms that follow labor regulations.

4. Are domestic workers entitled to gratuity in the UAE?

Domestic workers have the right to gratuity once they finish one full year of continuous service. The amount is usually calculated as 14 days of basic salary for every year worked. This is regulated by Federal Law No. 10 of 2017 concerning Domestic Workers.

5. What should I do if my employer refuses to pay my gratuity?

If your employer denies gratuity without valid reason, you may submit a complaint to the Ministry of Human Resources and Emiratisation (MOHRE). Seeking legal help is recommended if the problem continues.

6. Does resignation affect my gratuity entitlement?

Indeed, resignation impacts gratuity rights. For unlimited contracts, leaving before 5 years might reduce your payout based on service length. In limited contracts, quitting before term ends can cause forfeiture unless your contract states otherwise.

I remember when Mr. Ahmed came to me after he had resigned from a company in Dubai, where he had worked for five years. He was expecting his end-of-service benefits, but his employer withheld his gratuity without any justification.

This situation, sadly, is not new. It’s unfortunately not uncommon in the UAE. In many scenarios, a company not giving gratuity sparks confusion. That’s why understanding your rights, knowing the legal avenues available, and learning what to do in such cases is absolutely crucial.

As someone who has worked in HR compliance, I’ve come across dozens of articles and handled many cases involving end-of-service benefit payment issues. In the private sector, especially for workers under a private sponsor or even domestic workers, gratuity is a legal entitlement.

It typically begins to accrue after the first full year of employment with a company, and is often relied upon as a lump sum pension payout at the end of a job term. But following the COVID developments of 2020, getting what you’re owed has become more important than ever.

To help people like Mr. Ahmed, I often recommend using tools like DubaiHires.com’s custom report generator. It’s a comprehensive calculator that’s freely available and considers factors like your specific circumstances, how you leave or plan to leave your job, your type of employment contract, and even the jurisdiction or freezone laws that may affect your final number.

There can be significant differences in what you’re owed based on your employer’s location, your profession, or whether you were terminated or dismissed for cause. In some areas, this might mean you lose your right to the entire gratuity—yet in two particular freezones, the entitlement to the full payout is protected, regardless of the reason.

I’ve seen workers who work hard for several years get told they are not due a payout, and it’s truly gut-wrenching. However, there are legally valid reasons why an employer may try to block the payout. There are also important scenarios where you may be required to pay compensation upon leaving. So, knowing your rights, as well as those of your employer, helps avoid unpleasant surprises and lets you plan any voluntary departure wisely.

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

In the UAE, gratuity is a financial right clearly legislated by law, and one that every employer is legally bound to fulfill. The employer owes this amount to the employee if certain specific conditions are met. I’ve handled cases where companies ignored this duty, but the rules are clear.

The employer is obligated to pay the amount not just to the employee, but also to their children, spouse, or parents—those who may depend on the employee—when a contract ends through termination. It’s surprising how many workers don’t know about this protection under UAE law.

The value of the gratuity isn’t random—it is determined by a formula that considers the number of years the employee has served, the reason for termination, and the monthly salary received during that period of employment.

As an advisor, I often stress that a solid record of employment and accurate salary records are key. These numbers help ensure your payout reflects what you truly deserve, especially when things don’t end on good terms.

Common Reasons Employers Withhold Gratuity

Even though gratuity is a legal obligation, I’ve personally witnessed employers trying to withhold it using various justifications. One of the most common is the incomplete service period—if employees haven’t completed at least one year of service, they’re not eligible to receive gratuity at all.

Many people are unaware of this and only discover it during disputes. Another reason arises from termination for misconduct; if an employee is terminated due to dishonesty or a violation of company policies, the employer can withhold gratuity completely.

Another mistake I’ve seen people make is resigning without notice. Skipping the contractual notice period often leads to forfeiture of gratuity, which can be a painful realization for workers who leave in haste.

Additionally, some contracts contain specific clauses that affect gratuity eligibility, especially in fixed-term contracts. It’s not just about how long you’ve worked—it’s also about what’s written in your agreement.

That’s why it’s critical to review your employment contract carefully and fully understand the terms related to gratuity. I always advise clients to consult someone before resigning or signing anything new, because one wrong move can cost you what you’re legally entitled to.

Steps to Take If Gratuity Is Not Paid

If you’re ever in a situation where gratuity is not paid by the employer, and the company is not giving gratuity, don’t panic. I’ve helped many professionals take the right steps when caught in this very problem. The first move is to review your contract—make sure you meet every criteria tied to gratuity eligibility. Sometimes, a missed clause is all it takes for an employer to dodge the payment legally.

Next, try to communicate with your employer. A formal discussion or even a well-worded written request can sometimes resolve the issue before it escalates. But if that fails, you have every right to file a complaint with MOHRE—the Ministry of Human Resources and Emiratisation. Their mediation services are designed to handle such disputes, and many of my clients have successfully resolved their cases through this route.

If mediation doesn’t work, it’s time to seek legal assistance. Engaging a legal expert gives you access to proper counsel and can help you take necessary legal action. In the UAE, the system is there to protect employees, but it often requires you to assert your rights clearly and confidently.

Read More: file you’re complaint for delay in gratuity

Calculating Your End-of-Service Gratuity in the UAE

In many legal texts, end of service benefits, retirement gratuity, and savings gratuity often appear together. While they each suggest a form of financial compensation for a specific reason, our attention here is solely on end of service benefits. These terms overlap in principle, but it’s important to make clear distinctions when applying UAE laws.

For those working in the private sector in the UAE, the value of end of service benefits depends on several things—mainly the duration of employment, wages, and the nature of work. By law, employees are entitled to 21 days’ wages for each year of service, and after five years, they are awarded a full month’s salary for every subsequent year. This system rewards long-term contributions and consistency.

As per UAE law, an employee becomes entitled to end of service benefits upon the termination of their service. This holds especially true for full-time expatriate workers who have completed at least one year or more in service. Understanding this is crucial for any worker planning a departure, especially if they intend to claim their full dues.

What if you’re a part-time worker, job sharer, or someone under a different employment structure? The gratuity calculation differs. It’s based on a ratio: the number of hours stated in the contract, divided by a standard full-time schedule, multiplied by 100 to get a percentage, and then applied to the value of a full-time worker’s gratuity. This method ensures fairness across varying employment models.

In temporary work situations that last less than a year, the end-of-service gratuity doesn’t apply. However, legal articles do cover exceptions—such as in the unfortunate event of an employee’s death, death due to work, or entitlement in situations like unfair dismissal. These details highlight how multifaceted the law can be, especially when different human realities are involved.

In one case I dealt with, a father was claiming the rights of his son who had died due to work. These kinds of scenarios are heartbreaking but legally important. With years of experience navigating UAE law, we are prepared to support you through any challenge that may arise when it comes to claiming your rightful gratuity.

Eligibility for End-of-Service Gratuity in the UAE

Although the UAE Labour Law clearly upholds the right to end-of-service gratuity, there are specific criteria that define an employee’s eligibility. Not everyone qualifies, and it’s equally important to understand the exclusions. An employee must have completed at least one year of continuous work at the workplace to be entitled.

Whether employment has ended due to expiration of contract or the worker has resigned in a way that’s compliant with applicable regulations, they may qualify. Even those who have served for a total period of not less than one year under temporary employment systems can be eligible, provided all conditions are met.

“Does the UAE Labour Law’s provision on end of service gratuity apply to all private workers?”

For those working in the private sector, your applicable law for end of service calculations and payout rules will depend entirely on where your employer is based. From my experience working across multiple zones, I’ve seen how differently cases are handled. If you’re employed in the mainland or in most freezones, the UAE Labor Law No.8 1980, particularly Chapter 2 – End of Service Gratuity, is what governs your rights. But this changes depending on jurisdiction.

For example, if your company operates in DIFC, then the DIFC Employment Law No. 2 of 2019 applies. If it’s in ADGM, then the ADGM Employment Regulations 2015 take effect.

Those working in JAFZA should refer to the Jebel Ali Freezone Rules 2017 Seventh Edition, specifically Section 11.8. Meanwhile, if you are a domestic worker—like a maid or driver—your entitlements are protected under Federal Law no. (10) of 2017 on Domestic Workers, which has its own end of service gratuity formula under Article 26. Keep in mind, even government workers, or those in government institutions like the police or armed forces, follow alternative arrangements that don’t fall under standard labor laws. Each framework requires different handling, so identifying your employment category is critical before pursuing any legal action.

“So if I’m employed in the private sector and work for more than a year, I definitely get some sort of end of service gratuity?”

It’s not necessarily straightforward when it comes to gratuity eligibility—it really depends on where you are employed and the circumstances surrounding your departure. For example, if you work under a limited or renewed-limited (determined) term contract and you resign within your first five years of employment, even after giving notice, you may be not due any end of service gratuity.

This is stated clearly in Articles 138 and 139(b) of the UAE Labour Law. Interestingly, MOHRE legal advisors have pointed out a coding issue in their online gratuity calculator that produces output conflicting with the law. This problem has been flagged for correction.

If you are on an unlimited (open-ended, undetermined term) contract and resign without giving adequate notice, no matter how many years you have worked, you are not due a gratuity payment either under Article 139(b). The law is different in zones like DIFC or ADGM, which have their own courts and labor laws. To help workers navigate these complexities, the DubaiHires.com end of service calculator was created. It handles all these complications and provides detailed explanations to clarify your exact gratuity entitlement.

“So what if I quit my fixed term contract early, do I really owe my employer money?”

When it comes to compensation for contract termination, the situation isn’t always clear-cut. According to Article 116 of the UAE Labour law, the amount a worker may need to compensate the employer for loss due to rescission of the contract generally should not exceed one and a half month’s basic wages. More specifically, the amount of compensation is capped at the wage of half a month for a period of three months or the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.

However, the more recent Ministry of Labour Decree 765 of 2015 under Article 1 I 4 allows for a higher limit—up to more than double the previous amount, specifically 3 month’s gross wages. This indemnity must be agreed by both parties and cannot exceed the equivalent of three months’ wages.

If a renewal took place before this decree came into effect and the parties hadn’t agreed on indemnification, the three-month gross wages rule applies. When consulting MOHRE legal advisors about this difference, they mentioned they haven’t been updated, and it will be up to the labour courts to rule on the matter.

“So what if I am due an end of service gratuity payment and I don’t resign, how else can the employer not pay me then?”

How you behave at work matters because the longer you stay with a company, the more you risk losing your end of service benefit payment. From personal experience, being careless—like celebrating a client deal a bit too much—can give your employer reason to reduce or refuse payments.

The UAE Labor Law lists nine reasons why your employer can legally withhold gratuity: if the worker assumes a false identity or nationality, submits false certificates or documents, commits an error causing colossal material losses (with the Labor Department notified within 48 hours), or violates safety instructions at workplace—provided these instructions are written, posted, and the worker is notified, even if illiterate.

If the worker fails to perform duties as per the employment contract and ignores a written investigation and warning, they risk dismissal. Revealing company secrets, being convicted by a competent court of crimes against honor, honesty, or public ethics, being drunk or under a narcotic during work hours, committing assault on the employer, manager, or co-worker, or being absent without valid cause for more than twenty non-consecutive days or seven consecutive days are also grounds for dismissal.

Such dismissals happen without notice under Article 120, except during probation. If dismissed justifiably for these reasons, you lose the right to your end of service gratuity payout under Article 139a.

There are exceptions. For instance, being sacked ‘for cause’ in the DIFC freezone, governed by DIFC Law No2 2019, still entitles you to gratuity up to your date of termination under Article 63.(3)(b). The JAFZA rules differ; earlier, they offered less protection to employees compared to the UAE Labour Law regarding gratuity. However, the Court of Cassation ruled that JAFZA rules take precedence over the Labour Law, which benefits the employer. This ruling is discussed in an article by Hadef Partners.

This ruling contrasts with the opinion of Al Tamimi’s senior labour law partners who argue that when there is inconsistency between free zone regulations and the Labour Law, the terms most favorable to the employee prevail. The example cited refers specifically to JAFZA rules and highlights how different interpretations of these laws may influence court rulings.

“What about if I am caught working for another company during my annual leave, will I lose my gratuity if sacked for that?”

According to Article 88 of the UAE labour law, during annual or sick leave, a worker is prohibited from working for another employer. If the employer discovers this, they are entitled to terminate employment without notice and to deprive the worker of wages for the duration of the leave. This is considered termination for cause, but it is not included under the reasons listed in Article 120. Furthermore, Article 139a specifies that losing entitlement to end of service gratuity applies only if sacked for causes mentioned in Article 120.

We consulted MOHRE legal advisors who clarified that despite many law firms’ opinions suggesting otherwise, being sacked under Article 88 does not mean you lose your right to end of service gratuity. The ministry’s legal advisors explained that Article 88 is not covered by Article 139a, so gratuity remains due, although the employer can withhold wages from the leave period.

In contrast, JAFZA employment rules clearly list this behavior as grounds to forfeit gratuity under sections 11.8.4(j) and 11.8.13. This highlights the different interpretations and rules across various jurisdictions within the UAE, adding to the complexity of understanding end of service gratuity rights.

We have pointed out some of these complexities because simple calculation examples found on local newspapers often lack detailed explanations about what you might or might not be owed. For those with questions, mygratuitycalculatoruae.com and using their End-of-Service-Calculator provides a free custom generated report tailored to your particular circumstances, helping you better understand what you are truly owed.

Conclusion

If the company is not giving gratuity, it’s important to remember that the UAE labour law strongly supports employees. Employers are legally obligated to pay end-of-service benefits to eligible employees. If there is any failure to pay, whether your gratuity has been delayed, denied without justification, or completely ignored, you have the right to take action and claim what is lawfully yours through official legal channels.

FAQs

Is gratuity mandatory in the UAE?

Certainly, gratuity is a compulsory end-of-service payment for workers who have served continuously for a minimum of one year.

Can an employer hold my gratuity?

Employers must pay gratuity unless valid legal grounds exist, like dismissal due to misconduct.

What if the company is not giving gratuity?

In this situation, you may lodge a complaint with MOHRE and, if needed, take legal steps through the courts.

How is gratuity calculated?

Gratuity is determined by the final basic wage and length of service, usually 21 days’ pay per year of employment.

During my first year of employment in the UAE, I didn’t think much about what happens at the end of a job. But as I moved forward, I realized how important end of service benefits are for all employees, especially in the private-sector. These financial payments are not optional — they are mandatory and are clearly outlined by law.

Based on basic salary and years of service, the benefits are calculated to support workers after they leave a company. Eligibility begins after one full year of continuous work, and the process demands proper compliance from employers, ensuring fair treatment and legal adherence for all.

What I learned over time is that these benefits are more than just numbers — they’re a cornerstone of employment structure in the United Arab Emirates. They serve as a safety net that protects employees, while also being a critical obligation for businesses. Governed by the UAE Federal Labour Law and supplemented by different resolutions, these rules reflect a national commitment to fostering a secure and equitable work environment for a diverse workforce.

For companies, understanding and implementing these rules is a strategic imperative. Failing to comply may lead to significant financial penalties, operational disruptions, and reputational harm — all of which can seriously undermine efforts in recruitment and retention. In today’s highly competitive UAE job market, proper management of end-of-service rights doesn’t just meet the legal requirement — it enhances the employer’s attractiveness.

When I first moved to the UAE for a full-time job, I was surprised by how clearly the country defines the rights of employees at the end of service. All UAE nationals, foreign workers, and expatriate employees are entitled to receive benefits once their employment ends, but this is subject to conditions mentioned in Article 51 of the UAE Federal Labour Law.

This law is key to protecting workers and applies across both public and private sector roles. Whether you’re working in mainland UAE or one of the UAE free zones, as long as you complete a minimum of one year of continuous service, you’re automatically eligible for a lump sum End of Service Gratuity (EOSG) payment.

The rules do differ depending on whether you are a UAE national, a GCC national, or a foreign employee. The Federal Decree Law No.33 of 2021, which came into effect in February 2022, was designed to govern employment relations more clearly. It’s supplemented by Cabinet Resolution No.1 of 2022, which helps explain the system better for part-time, temporary, and flexible work contracts. These updates have given much-needed clarity to both employers and employees, especially those in newer work arrangements.

It’s important to understand that failure to pay these benefits can cause substantial issues for businesses. Not only can it result in operational fines, but it can also lead to reputational damage and negatively impact staff recruitment and retention.

I’ve personally seen companies in the UAE struggle with high turnover because they didn’t handle their EOSG settlements correctly or didn’t pay them within the required 14 days after the employees’ contract ended. In contrast, companies that ensure proper handling of these obligations gain more trust from their teams.

In 2023, the UAE government introduced a voluntary Savings Scheme as an alternative to the traditional EOSG system. Some employers in the private sector now contribute to these plans regularly instead of paying a lump sum at the end. Meanwhile, Emirati nationals are not entitled to EOSG and must instead be registered under a pension scheme like the General Pensions and Social Security Authority (GPSSA) in Dubai or the Abu Dhabi Pension Fund (ADPF) in Abu Dhabi.

GCC nationals also need to be registered, regardless of the Emirate they are employed in. For certain areas like the Dubai International Financial Centre (DIFC), the DIFC Employee Workplace Savings (DEWS) scheme operates separately and requires employers to contribute on behalf of their employees.

Read More: How To Calculate Gratuity uae

End of service benefits eligibility and types

In the UAE, your eligibility for end of service benefits mainly depends on the length of your service and the nature of your employment contract. From my experience working with both small and large firms, I’ve seen how carefully employers track these details to make sure every employee’s timeline matches the rules. Whether your role is fixed-term or open-ended, your time on the job will directly affect how much you receive when your service comes to an end.

These benefits are designed not just to offer financial relief but also to show recognition for an employee’s contribution. It’s about ensuring fair treatment once the employment concludes. I’ve worked with teams that felt reassured knowing that their years of effort were valued and compensated properly. That’s exactly what this system aims to protect: trust between workers and companies.

Below are the key aspects of eligibility and entitlements.

General eligibility criteria: Expatriates vs. UAE/GCC nationals

Employees in the UAE—whether UAE nationals or expatriates—become eligible for end of service benefits only after completing one year of continuous service. I remember advising a colleague who was just shy of 12 months and was surprised to learn how this rule affects payout rights. No matter the job title, this timeline is critical, and missing even a few days before hitting that one year mark can make a big difference.

For expatriates, these benefits usually come as a lump-sum gratuity payment, calculated according to service duration. On the other hand, UAE nationals and GCC nationals follow a different path. They are enrolled in mandatory pension schemes such as the General Pensions and Social Security Authority (GPSSA) or the Abu Dhabi Pension Fund (ADPF). This structured approach ensures that everyone, regardless of background, is covered appropriately depending on their employment category.

Types of contracts and termination scenarios

Types of contracts

Employees who are hired on fixed-term contracts are entitled to gratuity payments depending on the duration of their employment. I’ve worked on several such contracts myself, and each time, the entitlements were calculated at the completion of the contract, based on the total length of service. It’s a straightforward method that rewards loyalty and time spent with the employer.

Meanwhile, if you’re under unlimited contracts, the process for end of service benefits is quite similar to that of fixed-term contracts. However, from what I’ve observed, there are specific considerations that come into play, especially around the reasons and circumstances of termination. These factors can impact how your final payout is handled, and it’s something employees should clarify early with HR to avoid surprises.

Termination scenarios

When an employee submits a resignation after one year of continuous service, they become eligible for gratuity payments. I’ve seen many friends go through this process, and the key is that your time with the organization is not wasted—it’s compensated fairly. The longer you stay, the more value you build in this system.

If an employee is terminated arbitrarily or without cause, they are still entitled to receive the full range of end of service benefits. This serves as a powerful safeguard against unjust treatment, something I’ve found especially important in workplaces where job security can be unpredictable. These protections exist to uphold fairness regardless of how the job ends.

In special cases like redundancy or mutual termination agreements, there’s often room for additional compensation through negotiated exit terms. These packages are usually based on the unique circumstances of the departure and can offer extra financial security to the employee. From my experience helping others navigate these exits, this part can really ease the stress of transition.

Alternative work patterns and special cases

Many people assume that end of service benefits only apply to full-time jobs, but that’s not true. Employees working under part-time, temporary, or flexible contracts are also eligible. I once took on a temporary role in Dubai, and to my relief, I found that I still qualified for gratuity.

The only difference is that the amount is calculated on a pro-rata basis, based on working hours compared to a standard full-time schedule. It’s a fair system that ensures everyone gets compensated, even if they’re not working a traditional full-time job.

Additional entitlements

In my own HR consulting experience, I’ve seen many employees overlook the fact that, besides gratuity, they are also entitled to payments for unused annual leave, unpaid salary, and any contractual allowances stated in their agreement.

It’s crucial that employers settle these dues within 14 days of contract termination, and I always advise clients to review their final settlement carefully to ensure every item is included, especially when leaving on short notice or after a long project.

Checkout: Is Gratuity Part of CTC

Calculating EOSG – Alternative Work Pattern Expatriate Employees

In the UAE, employers need to know that employees working under an alternative pattern to the standard full-time schedule — such as part-time, temporary, flexible, remote working, or job sharing — are still eligible for EOSG. This is clearly stated in Article 30 of Cabinet Resolution No.1 of 2022.

However, to qualify, the employee must have completed over one year of service with their employer. From my experience, understanding this rule helps both workers and companies avoid confusion about benefits when work schedules aren’t traditional.

The EOSG calculation for these alternative work pattern employees is pro-rated based on the actual hours worked compared to a full-time employee working 8 hours a day for 5 days a week. This system ensures every employee will receive a fair EOSG amount that reflects their real contribution. It’s fair because the payout depends on the hours worked relative to a full-time position, so no one is shortchanged if they work less.

To calculate the EOSG, the total working hours specified in the employee’s contract per year are divided by the standard number of full-time working hours for the same period — usually 2,080 hours per year for full-time employees.

This result is then multiplied by 100 to get a percentage. That percentage is then applied to the full EOSG amount the full-time employee would be due for the same duration of service. This formula makes sure part-time workers are fairly rewarded.

For example, consider a part-time employee working 6 hours per day for 3 days a week. Using a case study for Full-Time Employees in mainland UAE, with a final monthly basic salary of AED10,000 and 7 years worked, the total EOSG settlement payment for a full-time employee is AED55,000.

The Part-Time hours per year are calculated as (6 × 3) × 52 = 936 hours, while Full-Time hours per year are (8 × 5) × 52 = 2,080 hours. The Prorated percentage is (936 ÷ 2,080) × 100 = 45%. Applying this to the full-time EOSG gives (AED55,000 ÷ 100) × 45 = AED24,750 for the part-time employee.

Calculating EOSG – Full-Time Expatriate Employees

In my experience working with HR teams in the UAE, I’ve learned that the benefit depends heavily on a full-time employee’s basic salary and their length of service. Employees who have not completed one year of continuous service are not entitled to any EOSG pay-out at the end of their employment contract.

This rule ensures that only those committed for a meaningful period receive this financial protection.

The EOSG is calculated using only the employees’ final monthly basic salary, which excludes allowances and increments, right before termination of employment. It accrues at different rates: 21 days’ salary for each of the first five years of service, and 30 days’ salary for every year thereafter.

The calculation is pro-rated if part of the year is worked, but the total EOSG payment cannot exceed the equivalent of two years’ salary.

For example, imagine an employee with a final monthly basic salary of AED10,000 who worked 7 years. For the first five years, the entitlement is 21 days per year. Using a daily salary of AED333.33, the calculation is 333.33 × 21 × 5 = AED35,000. For the remaining two years, the entitlement rises to 30 days per year, calculated as 333.33 × 30 × 2 = AED20,000. Adding both gives a total EOSG settlement payment of AED55,000.

It’s important to note that while the EOSG is based on the final monthly basic salary, this may not provide enough future security for staff with a low basic wage but a high chance to earn through commission or other sales incentives.

Thankfully, the Law allows employers the flexibility to be more generous than the statutory minimum. From my observations, companies that offer more generous EOSG benefits often have an advantage when attracting and retaining the best employees.

Calculating end of service benefits

Gratuity calculation for limited contracts

For employees working on limited contracts, the gratuity is calculated based on their basic salary and years of service following a clear formula with specific guidelines. During the first five years of service, employees earn 21 days’ basic salary for each year worked. After these initial years, the gratuity increases to 30 days’ basic salary for every additional year of service.

This structure ensures that long-serving employees are properly rewarded with higher gratuity payments, recognizing their extended contribution to the company. I have seen this approach motivate many workers to stay longer and feel valued for their dedication.

Gratuity calculation for unlimited contracts

When it comes to unlimited contracts, the calculation of gratuity works in a way similar to limited contracts but with a cap that limits the payout to a maximum of two years’ salary. During the first five years of service, employees are entitled to 21 days’ basic salary for each year worked. After that period, the gratuity rises to 30 days’ basic salary for every subsequent year.

This cap on the total payout ensures that gratuity payments stay within reasonable limits, even for long-tenured employees. From my experience, this rule helps employers manage costs while still fairly compensating loyal staff.

Basic salary as the basis for calculation

In my work with HR professionals, it’s clear that only the employee’s basic salary, as explicitly stated in the employment contract, is used to determine gratuity payments. Any additional income such as allowances, commissions, or bonuses is strictly excluded from this calculation.

Both employers and employees must always refer to the most recent salary details in the contract to ensure the accuracy of the gratuity computation. This practice helps avoid misunderstandings and keeps the process transparent and fair for all involved.

Enhanced end of service benefits

From my experience advising businesses, some employers choose to offer benefits that exceed the statutory minimum requirements. These enhanced schemes often provide more substantial gratuity payments along with additional financial incentives.

It’s important for employees to carefully review their contracts or any relevant collective agreements to fully understand if such provisions apply in their case.

Practical application

It is crucial that employers ensure the gratuity is calculated accurately and settled promptly when termination of employment occurs. At the same time, employees should take the time to familiarize themselves with the formulas and methods used to confirm they receive their full entitled benefits.

By maintaining transparency and strict adherence to labor laws, both parties can navigate this process effectively and minimize disputes, creating a fair and smooth transition at the end of service.

Process and documentation needed for claiming end of service benefits

Process and documentation for claiming end of service benefits

To ensure a seamless process when claiming end of service benefits in the UAE, employees must take certain steps and have all the required documentation prepared in advance. Having proper understanding and good organization can significantly help avoid disputes and unnecessary delays during the claim process.

Reviewing the employment contract

The first step in managing end of service benefits is to thoroughly review the employment contract, which clearly outlines the specific terms and conditions related to the benefits. This includes the method of calculation, notice periods, and any additional entitlements. It’s essential that employees familiarize themselves with these details to fully understand their rights.

Providing the required notice

Employees who plan to resign must adhere strictly to the notice period specified in their contract or as mandated by UAE labor law. Failure to provide the proper notice can result in reduced benefits or penalties, which will directly affect the final settlement of their end of service benefits. It’s a crucial step I always advise employees to follow carefully to avoid any financial loss.

Maintaining accurate records

Keeping comprehensive and accurate employment records is absolutely crucial when managing end of service benefits. This means maintaining copies of the employment contract, salary certificates, and any other relevant documents. Such records serve as important evidence to support claims for benefits and to ensure that all entitlements are calculated correctly.

From my experience, organized documentation makes the entire process smoother and helps prevent disputes.

Engaging with the employer

Open communication with the employer is essential for a smooth claims process regarding end of service benefits. Employees should openly discuss key aspects such as the calculation, the expected payment date, and any outstanding dues to ensure mutual understanding and to prevent misunderstandings. Based on my experience, clear dialogue helps both sides avoid conflicts and speeds up the settlement process.

Seeking legal advice if necessary

In cases where disputes arise or there are concerns about the calculation or payment of benefits, seeking legal advice is often a prudent step. Consulting a labor lawyer or contacting the relevant UAE labor authorities can provide valuable guidance and help resolve issues efficiently. From what I’ve seen, this approach ensures fair treatment and smooth conflict resolution.

FAQs regarding end-of-service benefits in the UAE

What are end-of-service benefits in the UAE?

End of service benefits, commonly referred to as gratuities, are financial payments owed to employees when they leave their jobs, provided they meet the specific eligibility requirements outlined by UAE labor law.

These benefits are designed to fairly compensate employees for their tenure with the organization and are calculated based on the employee’s basic salary and years of service. In my experience, understanding these fundamentals helps employees better navigate their rights.

Who is eligible for end-of-service benefits?

Employees working in the UAE’s private sector are eligible for end-of-service benefits under Federal Decree Law No. 33 of 2021, provided they have completed at least one year of continuous service with their employer.

However, employees in other sectors or those who do not meet the tenure requirement may unfortunately not qualify. From what I’ve observed, understanding these eligibility rules is essential for both employers and employees to avoid confusion.

How is the duration of service calculated for gratuity entitlement?

The duration of service for end of service benefits is calculated based on the total number of days worked with the employer. However, extended periods of unpaid leave, such as sabbaticals, are not included in this calculation. In practice, this means only active working days contribute towards your eligibility and final benefits.

How are gratuity payments calculated in the UAE?

Gratuity payments are determined by the employee’s basic salary and years of service. For those with 1 to 5 years of service, employees are entitled to 21 days of basic salary for each completed year. For employees with more than 5 years of service, the entitlement increases to 30 days of basic salary for every completed year after the fifth year. From my experience, understanding this structure is key to calculating your rightful gratuity.

Can you provide an example of gratuity calculation in the UAE?

Suppose an employee’s basic monthly salary is AED 10,000 (approximately US$2,722.58). For each year up to 5 years, the daily wage is AED 333.33 (about US$90.75), calculated by dividing the monthly salary by 30. The gratuity for 21 days of service would then be AED 7,000 (or US$1,905.81), which is 21 times AED 333.33. For years beyond 5, the daily wage remains the same, but the gratuity increases to 30 days’ salary, equaling AED 10,000 per year. It’s important to note that the total gratuity amount cannot exceed two years’ worth of the employee’s salary. This clear example helps make the calculation transparent and easier to understand.

Are all employees in the UAE entitled to end-of-service benefits?

The end-of-service benefits under UAE labor law specifically apply to private-sector employees. However, employers may include additional provisions for other sectors or expatriate workers, which should be confirmed with the relevant organization. From my experience, clarifying these details early helps avoid surprises regarding eligibility.

What should employees do to confirm their gratuity entitlements?

Employees should review their employment contracts carefully and consult with their employer to gain clarity on specific calculations and entitlements within their organization. If any disputes or uncertainties arise, it is wise to seek legal advice or contact labor authorities for proper guidance. From what I’ve seen, this approach helps resolve issues quickly and ensures everyone understands their rights.

When I moved to the UAE years ago, I had no idea how important it would be to fully understand gratuity, especially when nearing retirement or considering relocation. As an employee, the day you leave your job, whether due to new opportunities or personal challenges, your employers are obliged by law to pay an end-of-service payment.

This is not just a goodwill gesture — it’s a legal requirement under UAE labor law, based on your length of service, last drawn salary, and type of contract. However, I found that calculating the exact amount was more tricky than expected. There are several factors influencing the final payout, and knowing the basic definitions helped me a lot in understanding what was required from both sides.

The whole process may seem complex, but with some guidance, it can be simplified. There’s a simple, yet accurate way to calculate your gratuity using a gratuity calculator that helps you instantly determine your due amount. You just need to enter your employment details and let the tool do the math.

But before jumping in, make sure you meet the eligibility requirements outlined by the UAE labor law. Once you’re ready, walk yourself through your service record and calculate the gratuity you’ve rightfully earned. I’ve done it myself, and trust me, once you get started, it’s much easier to accurately see what you’re owed.

checkout gratuity calculator UAE

What Is Gratuity?

When I left my first organization in the UAE, I was pleasantly surprised to receive a payment called gratuity — a legally mandated benefit often referred to as end-of-service compensation. It’s a way for your employer to show appreciation for the services you’ve rendered during your term with the company. According to UAE labor law, every employee who has worked for a firm is entitled to this reward once they are leaving, provided all prerequisites are fulfilled.

The amount you receive is typically payable based on your monthly basic salary, and although commonly awarded upon retirement, some do claim it earlier depending on their organization’s terms and conditions. When I did mine, it all depended on how the company interpreted the law — which is why it’s important to understand your own entitlement fully before making assumptions.

Who Is Eligible for Gratuity in UAE?

Working under the UAE labor law, I learned early on that not every employee is automatically entitled to gratuity payments. There are strict conditions that must be met for these benefits to become applicable. First and foremost, there has to be an employment contract in place — either limited or unlimited. Also, the employee must have worked continuously for a minimum of one year with the employer.

In my case, I was on an unlimited contract and had to be careful when considering resignation. If an employee resigns without completing the notice period, or fails to prove the employer’s failure in meeting legal obligations, the end-of-service benefit may not be granted.

There’s even more complexity — one must provide solid evidence in cases involving assault by the employer or their representatives. Even UAE nationals and expatriates must follow the same rules. Furthermore, if you’re dismissed under Article 120 for non-compliance, you may not be eligible for any gratuity payment.

Factors to Consider for Gratuity Pay Calculation

Type of Contract

While working in the UAE, I encountered two main types of employment contracts — limited and unlimited. At first, I thought they were the same, but soon realized that the rules for calculating gratuity actually differ based on the type of contract. Understanding these contracts in detail helped me navigate my exit terms properly and secure what I was fairly owed.

Last Basic Salary

From my own exit experience in the UAE, I found that when calculating end-of-service benefits, only the last drawn basic salary is considered — nothing else. The employee’s total salary may include allowances or additional perks, but those aren’t factored in. It’s the amount you received just before the termination of your contract that matters, not what you were receiving in bonuses or extras.

I remember a friend who had a salary package of AED 4,000 while working in Dubai. His pay was inclusive of fuel allowance, housing, and occasional overtime, but still, only AED 4,000 was considered as his basic salary when it came to gratuity. These extras didn’t count — and that’s something many employees don’t realize.

Similarly, I noticed that any deductions from a person’s salary, like salary sacrifice schemes, are not included when calculating the basic component either. It’s essential to know what really counts in the final figure.

Duration of Employment

According to UAE Labour Law, a gratuity payment is only given to employees who have worked in the organization for at least one year. When I hit that milestone myself, it became clear that the tenure calculation wasn’t just about the calendar — it was about the actual number of days worked.

The gratuity calculator only considers continuous service between your first and last working day. So, if you’ve taken extended leave like sabbaticals, those don’t count. I checked this with the Ministry of Human Resources and Emiratisation (MoHRE), and they confirmed that any employment period must exclude unpaid breaks or holidays during service to be eligible.

Read More: End of service benefits for part-time workers UAE

What are the Types of Contracts?

Before I began calculating my gratuity, I made sure to review the types of contracts I had signed with my employer. Under UAE Labour Law, there are limited and unlimited contract types, and the difference between them really shows in how your end of service benefits are handled upon termination. The terms set in each contract can affect what you’re entitled to, so it’s essential to understand them clearly from the beginning.

Limited Contracts

In my first role under a limited-term contract, I quickly learned that these fixed contracts come with a set term or time period, often used when an employer wants to engage an employee for a specific project or a defined duration. This contract clearly mentioned the start and end dates of the employment period, and I had to align everything accordingly.

Once the contract expires, it gets canceled unless it’s renewed. I worked with a team of project workers, and when our project was completed, we exited the workplace as expected.

Joining a company on such terms means the employee agrees to stay for that fixed duration. If you decide to resign before that period ends, you might face consequences like a labor ban, losing your labor rights, or even being asked to compensate your employer — something I saw happen to a colleague who left early.

Unlimited Contracts

Unlike a limited contract, an unlimited-term contract feels more open-ended and flexible, which is why I personally preferred it. There’s no specified period the employee must stay with the company, making it the more commonly used contract type in the UAE.

These contracts can be terminated through mutual consent or a notice period that typically ranges from one to three months from either side. I remember having to give my full notice period, and during that time, all parties were expected to respect their obligations, which made the transition smooth and fair.

In a nutshell:

One thing I liked about working on an unlimited contract was that it came with no fixed end date, giving me more flexibility in my long-term career planning.

In case of termination, a notice period of one to three months is required — whether initiated by the employee or the employer. That notice structure really helped ensure smooth transitions on both ends.

Finally, your gratuity calculation under this contract depends directly on your duration of service, making it essential to track your time accurately from the very start.

Gratuity Pay Calculation for Limited Contracts

I found it quite eye-opening that in both types of contracts, the gratuity calculation isn’t just a flat number — it’s divided into tiers depending on whether you resign or get fired. That distinction made a big difference in how much I walked away with.

For employees on limited contracts, the amount is tied to the length of service and the nature of the termination. The payment breakdown is usually like this: contract completion with less than 5 years of service, or more than 5 years.

But if an employee is fired while under a limited contract, the tiers shift. You’re then categorized as having 1–5 years of service or 5 years or more, which directly influences what you’re entitled to receive.

In the event of resignation:

I always advise newcomers to be cautious — if you resign before completing one year of service, you’re not entitled to any gratuity pay. That’s one of the rules I learned the hard way early in my career.

For employees who’ve completed less than 5 years, you’re eligible to receive a gratuity of 21 days of basic salary for each year of service.

Now, if you’ve served for 5 years or more, the benefits increase. You’ll get 21 days of basic salary for the first 5 years, and an additional 30 days of salary for every year beyond that 5-year mark.

In the event of termination:

In my experience, gratuity for employees with 1–5 years of service is calculated based on their basic salary, granting 21 days for each year worked.

For those who have served more than 5 years, the calculation changes slightly: they receive 21 days of basic salary for the first 5th year and 30 days of basic pay for every year beyond that. However, it’s important to note that the total figure of gratuity should not exceed the equivalent of two years’ total salary or wage.

Steps to Calculate Gratuity for Limited Contracts

Let’s say your basic salary is AED 15,000, and you’ve worked at a company for 4 years. Here’s a simple guide to calculating your gratuity pay. First, determine your daily wage by dividing your monthly basic salary by 30 days — so, 15,000 ÷ 30 equals AED 500 per day.

Next, multiply that by 21, since your total years of service are less than 5 years: 500 × 21 = AED 10,500. For those with more than 5 years, it would be 500 × 30 = AED 15,000 per year.

Finally, multiply by the total number of years of service — in this case, 4 — resulting in a gratuity of AED 42,000 at the end of service. Since this is a limited contract, this is the amount you’d expect when you leave the company.

Gratuity Pay Calculations for Unlimited Contracts

For employees on unlimited contracts, gratuity is calculated differently depending on the nature of the termination — whether it’s a resignation or termination due to misconduct or poor performance. The tiers are based on the duration of service, typically broken into 1–3 years, 3–5 years, and 5 years or more.

However, if the employee is terminated, only two tiers are applicable. The calculation rules change as the employee moves from one tier to another, usually between 1–5 years and 5 years or more of service. This tiered system helps adjust the gratuity amount based on how long the employee has worked and the reason for leaving.

In the event of resignation

If you’re an employee on an unlimited contract and you resign, your gratuity calculation changes depending on your length of service. For those with less than one year of service, you are not entitled to any gratuity.

If you’ve served 1–3 years, you’re entitled to 1/3rd of the 21-day gratuity pay for each service year. For those between 3–5 years, the gratuity increases to 2/3rd of the 21-day gratuity pay for each service year.

Employees who have worked over 5 years in the company receive the full 21-day basic salary for each service year as their gratuity. This tiered approach reflects how the law adjusts payments based on your time served before resignation.

In the event of termination

If your employer terminates you while on an unlimited contract, the gratuity calculation follows specific rules. For employees with less than one year of service, they are not entitled to any gratuity.

If an employee has served for over 1 year but less than 5 years, they are entitled to a gratuity of 21 calendar days’ basic salary for each year served.

For those who have served over 5 years, the gratuity increases to 30 calendar days’ basic salary for every additional year worked. This clear tier system helps employees understand what to expect when termination happens.

Steps to Calculate Gratuity for Unlimited Contracts

Just like with fixed-term contracts, the rules for gratuity calculation on unlimited contracts are pretty similar. Let’s say your basic salary is AED 15,000, and you’ve worked at a company for 4 years. You can use this simple formula to calculate your gratuity payouts.

First, find your daily wage by dividing 15,000 ÷ 30, which equals AED 500 per day. Then, multiply that by 21, since the total work period is less than 5 years: 500 × 21 = AED 10,500.

Next, because your work experience falls between 3–5 years, take ⅔ of that figure: ⅔ of 10,500 = AED 7,000. Finally, multiply this by your total years of service, which is 4, giving a total gratuity payable of AED 28,000 at the end of service under an unlimited contract.

How to Calculate Gratuity When Employee Contract Resigns

The formulas for gratuity calculation between unlimited contracts and limited contracts are almost the same, but there’s a slight difference when the employee under an unlimited contract resigns. In such cases, they are only entitled to either ⅓ or ⅔ of the gratuity payouts, depending on their service period.

For example, if your basic salary is 20,000 and you’ve worked at the company for 3 years, you can use these calculations for your total gratuity payable. For 1–3 years of service, the formula is:

(1/3rd of their basic salary of 21 days × basic salary × years worked) ÷ 30, which equals (7 days × 20,000 × 3) ÷ 30 = AED 14,000.

For service between 1–5 years, the formula changes to:

(2/3rd of your 21-day gratuity pay × basic salary × years worked) ÷ 30, which equals (14 days × 20,000 × 3) ÷ 30 = AED 28,000.

This makes it clear how your length of service affects the gratuity you receive when resigning under an unlimited contract.

FAQs

How is gratuity calculated in UAE?

Employees who have served between 1–3 years in the UAE are entitled to the full gratuity pay, which equals 21 days of salary per year. Those who have served more than 3 years or fall between 3–5 years are entitled to two-thirds of their basic salary as gratuity pay.

To calculate gratuity, simply multiply your daily wage by 21 if your tenure is under 5 years, or by 30 if your service exceeds that period. This clear rule helps employees understand their gratuity rights based on how long they have worked in the UAE.

Is gratuity in UAE calculated on the basic salary?

In the UAE, end-of-service benefits or gratuity are calculated based on the employee’s last drawn salary. Importantly, only the most recent basic salary is considered, while any additional allowances or perks are excluded from the calculation.

This ensures that the gratuity amount fairly reflects the core salary without factoring in extra benefits that may vary or be temporary during employment.

What is the new gratuity law in UAE 2025?

According to the new UAE Labor Law, contracts are now limited to a duration of five years. The gratuity calculation is based on the employee’s basic salary, with a 21-day salary considered for each year of service. However, if the service period exceeds five years, the gratuity is calculated based on 30 days of the basic salary for each year beyond the five-year mark.

Additionally, there is no difference in how gratuity is calculated whether an employee resigns or is terminated, simplifying the process and ensuring fair treatment for all employees.

Is gratuity added to the monthly salary?

A gratuity is a type of employee benefit that is granted based on the length of service. However, it is not included in the regular monthly salary, making it a separate payment to recognize the employee’s tenure.

When should anyone not be paid gratuity?

According to UAE Labor Law, if an employee resigns before completing one full year of service, they aren’t entitled to gratuity pay. Additionally, if the employee owes any outstanding debts to the employer, the employer has the right to deduct the owed amount from the gratuity.

This ensures fairness by protecting both the employer’s rights and the employee’s obligations.

Discover how the payment is calculated as per the UAE Employment Law

When I first moved to Dubai and got employed on a part-time basis, I was just as unsure as many others about whether I’d ever qualify for end-of-service gratuity. Many people think this benefit is only awarded to full-time employees when their service with a company ends. But the truth is, under UAE Labour Law, that’s not the case.

Thanks to Federal Decree No. 33 of 2021, part-time employees are not excluded from receiving gratuity—even though the calculation, eligibility, and criteria may differ from those for full-time workers. The law makes it clear that there’s a fair system for everyone. These specifics were later clarified in Cabinet Resolution No. 1 of 2022, which outlines how gratuity is calculated for non-full-time workers, including those in job-sharing contracts. So, if you’re working in the UAE on a part-time basis, it’s good to know that the system is structured to protect your rights and reward your contribution—no matter the hours you put in.

Read More:How to Write Application for Gratuity

Are part-time employees eligible for gratuity?

As per Clause 2 of Article 30 in Cabinet Resolution No. 1 of 2022, a part-time worker is entitled to receive gratuity only if they have completed at least one continuous year of service with their employer. This condition ensures that only those who have maintained consistent employment are rewarded appropriately.

If your employment duration is less than one year, then you are not eligible for end-of-service benefits under the current legal provisions.

How is gratuity calculated for part-time work?

The gratuity amount for part-time workers is calculated in proportion to the number of hours they work, compared to a full-time employee in the same organisation. The law provides a specific formula for this, clearly outlined in Clause 1 of Article 30.

Here’s how it works.

1. You first determine the total number of hours the part-time employee has worked over the course of one year, as per their employment contract.
2. Then, you divide that figure by the number of hours a full-time employee works in a year under a standard full-time contract.
3. After that, you multiply the result by 100 to get the percentage equivalent.
4. Now, you apply this percentage to the gratuity amount that would be paid to a full-time employee, to calculate the part-time worker’s end-of-service entitlement.

For example, if a part-time worker completes 1,000 hours per year and a full-time employee works 2,000 hours annually, the gratuity for the part-time worker would be 50% of the full-time entitlement.

Gratuity is not applicable to employees on temporary contracts if their total employment period is less than one year. This approach helps ensure that part-time workers in the UAE are compensated fairly for their service, in proportion to the time they have worked.

If you’re employed under a part-time or flexible work arrangement, it’s advisable to check your contract and consult with your HR department to better understand your entitlements.

When I was applying for my end-of-service entitlements, I realized that a well-crafted letter made a big difference in how smoothly the process moved. The HR officer appreciated the complete format I used—something I wish I had known from the beginning. Writing an application for gratuity isn’t just about putting words on paper; it’s about following the right pattern and guide. One must gather all essential details such as the job’s start and end dates, service duration, and your employee ID card number.

It is crucial to include the necessary documents to accompany your gratuity claim. The HR Department needs a clear and respectful letter, and I’ve found that keeping the tone polite and professional sets the right tone from the outset.

Before you submit your request letter to your employer or company, try using a reliable, user-friendly online gratuity calculator. This tool not only helps you estimate your amount, but it also provides a year-wise breakdown of your expected gratuity with amazing precision.

When I used it, I felt much more confident knowing what I was entitled to. It also helped me structure my detailed letter-writing with accurate numbers. As you explore this step, remember that a clear sample can help you build a better application and give you the confidence to communicate your case well. A strong letter is not only about getting your money—it’s a reflection of your professionalism.

Read More: File a Complaint for Delay in Gratuity.

Application Format of Request Letter for Release of Gratuity Payments

Curious about drafting a gratuity release letter for your boss or recruiting firm? Here’s the full step-by-step guide with a sample letter to claim gratuity!

To,

The Human Resource Manager,

____________ (Company Name)

____________ (Address)

_/_/____ (Date)

Subject: Request for Gratuity Payment

This is to inform you that my name is ____________. I have worked at your firm as ____________ for ____________ (job duration) with employee ID ____________. I have reviewed all official regulations and employment law terms concerning workers’ rights to end-of-service benefits and found myself qualified for the gratuity entitlement. Therefore, I sincerely request you to process my gratuity claim as per due procedure.

Awaiting your kind acknowledgment!

Regards,

____________ (Name)

____________ (Signature)

Sample Letter to Claim Gratuity Fund Upon Resignation

To,

The HR Admin,

Company Name ____________

Address ____________

19/6/2025

Subject: Request for Gratuity Payment

Sir/Madam,

In accordance with the Gratuity Act 1972, I am submitting this letter to request my End-of-Service benefits earned through my service at your company from ____________ to ____________ (Job Duration). I have served a minimum of five years in this organization and have formally resigned from my position on ____________ (Service End Date). I have completed all assigned tasks and enclosed all the required documents with this application for your consideration. I sincerely request the prompt processing of my application to finalize the due process. Your kind response will be greatly appreciated to facilitate timely payment. Thank you in advance.

Regards,

____________ (Name)

____________ (Previous Designation)

____________(Contact Number)

____________ (Signature)

also checkout what is the difference between limited vs unlimited contacts.

What does gratuity mean in pay, and how is it calculated? This guide will help you grasp this concept with ease!

What is Gratuity in Salary?

Back when I first started working in a particular organization, I had no idea that something like gratuity even existed. Over time, I learned that gratuity is more than just a monetary benefit—it’s a token of appreciation from employers to employees. It’s typically paid when an employee leaves the company through retirement, resignation, or unfortunately, even death.

This reward acts as a financial cushion during significant life transitions, offering a sense of security for those who have dedicated a big part of their lives to a stable career. In my case, knowing this gave me extra motivation to stay committed and loyal to my employment.

In India, gratuity is not just a goodwill gesture—it’s governed by strict labor laws. The Payment of Gratuity Act 1972 mandates that an employee must have completed at least five years of continuous service with the same employer to be eligible for payment.

However, the requirement is waived if the employee suffers death or disablement, which is a humane consideration. Different countries have varying criteria, but typically, factors such as organization size, nature of employment, and tenure play key roles in eligibility.

As someone who’s navigated these policies firsthand, I can say that understanding the regulations in your country can save you from confusion later on.

Is Gratuity Deducted from Salary?

When I received my first employment offer, one of my immediate concerns was whether gratuity would be deducted from my salary. What I came to understand is that gratuity is actually an end-of-service benefit—a lump sum amount that the employer pays. It’s not something taken from your monthly earnings. However, things aren’t always that simple.

Some companies may structure your contract by showing gratuity as a part of your CTC (Cost to Company). This means that while you’re technically being paid it, the way it’s presented can be confusing. That’s why I always recommend thoroughly reviewing your employment terms before joining any new job. It helps you understand your compensation package in a more transparent and confident way.

How to Compute Gratuity in Salary?

While working in a reputed organization, I learned that either the employee or the company is responsible for paying gratuity—sometimes with or without deductions from the salary, depending on the company’s rules. The amount you receive is calculated using a formula that considers your last drawn salary and the total number of years of service rendered. If you’re working in India, there’s a specific way to calculate this.

Here’s the formula:

Gratuity = Number of Service Years × Last Basic Salary × 15 / 26

Now, your last drawn salary usually includes your basic salary and dearness allowance, but excludes any other allowances or bonuses. The 15/26 factor is interesting—it basically represents 15 days of wages for each completed year of service.

To make this clearer, let’s look at an example. Suppose a worker has served a company for 6 years, and his Last Basic Salary is ₹15,000. When you apply the formula:

Gratuity = 6 × 15,000 × 15 / 26 = ₹51,923

This calculation gave me a real sense of the benefits of long-term service.

Checkout online gratuity calculator UAE

How to Calculate Gratuity in Salary for Employees Not Covered Under the Gratuity Act 1972?

Some companies that are not covered under the Gratuity Act 1972 still offer gratuities to their employees. In such a case, the gratuity in salary is calculated using a slightly different formula:

Gratuity = (15 × Last Basic Salary × Service Tenure) / 30

To make this simple, let’s look at an example. Suppose an employee has worked in a company for 10 years, and his Last Drawn Salary is ₹30,000. When we apply the formula:

Gratuity in Salary = 15 × 30,000 × 10 / 30 = ₹150,000

This alternate method of calculation still honors the benefits an employee is entitled to based on their service.

Some other vital components of gratuity include:

– Dearness Allowance

– Last Drawn Basic Salary

– Other Employee’s Benefits

Understanding these key elements can help you make more informed financial decisions regarding your long-term employment.

Gratuity Computation in Salary in Case of Employee’s Death

In unfortunate cases where an employee dies during service, the gratuity in salary is computed based on the job tenure. The service tenure plays a key role in deciding how much the gratuity would be.

If the service duration is less than 1 year, the nominee is entitled to 2 times the Basic Salary.

If the service is equal to or more than 1 year but below 5 years, the gratuity will be 6 times the Basic Salary.

For those who have served 5 or more years but less than 11 years, the amount equals 12 times the Basic Salary.

If the service tenure is 11 or above but below 20 years, then 20 times the Basic Salary is paid.

In cases of more than 20 years of service, gratuity is calculated as half of the Basic Salary for each 6 months, with a maximum limit of 33 times the Basic Salary.

These structured slabs ensure financial support to the family of a deceased employee based on their dedication and length of service.

Income Tax Policy for Employee’s Gratuity

When it comes to Government employees, one big relief is that no income tax is applicable on the gratuity amount they receive.

For employees working with companies that are covered under the Gratuity Act, 15 days of salary—specifically the last basic salary—is exempted from income tax.

Moreover, these employees are also exempted from income tax on gratuity amounts up to ₹20 lakhs, providing them significant tax benefits upon retirement or end of service.

Read more: Apply for an E Signature Card in UAE 

Wrapping up

Employees must stay aware of their rights and entitlements when it comes to gratuity in salary. It’s essential to track your service tenure, maintain accurate documentation, and actively communicate with your employer regarding the payment of gratuity.

To avoid any confusion or delays, it is highly advisable to review your company’s policies and procedures related to gratuity. Doing so helps ensure a smooth and hassle-free experience when claiming what you’re rightfully owed.

When I first needed to sign an official document in the UAE, I was surprised by how digital solutions like the e-signature card had completely changed the game. Gone are the days of manually printing and signing paper forms.

Now, individuals can carry out business and legal procedures electronically with this advanced electronic card that truly streamlines government processes. The electronic signatures used in the Emirates help ensure compliance with legal requirements, making tasks more secure and quicker to complete.

To acquire your e-signature card, all you need is your Emirates ID and a small fee of around AED 200. When I applied for mine, the process took less than an hour at the electronic kiosk in a government service center. It was part of a broader digital transformation effort across the UAE to simplify how customers engage with various platforms.

This article aims to provide an in-depth overview of the UAE eCard, focusing on the key benefits associated with its possession. From faster service delivery to reduced paperwork, the comprehensive detail offered by these systems shows how much value they bring to modern administration.

Checkout: online gratuity calculator UAE

What is an e-signature Card?

The UAE has introduced the e-signature card as a modern digital tag to enable individuals and organizations to sign documents electronically, eliminating the need for traditional, paper-based signatures. This secure and legally recognized method of signing documents is becoming highly popular across multiple industries in the region due to its convenience and efficiency.

An e-card functions through an embedded electronic chip that contains the cardholder’s fingerprint and credentials. The signatures stored in these electronic cards can appear in different forms—whether symbols, images, or standard signatures—providing flexibility while maintaining authenticity and compliance.

How do you apply for an e-Signature Card in Dubai and UAE?

Residents, owners, certified signatories, and delegates in the UAE can now obtain their digital ID cards through the Ministry of Labor (MoHRE), TASHEEL Service Centers, or other participating enterprises. Here is a detailed guide outlining the complete process and requirements for acquiring this facility in the United Arab Emirates. The entire initiative simplifies identity verification and improves access to digital services for various user groups.

Documents Required

To apply for an e-signature card, applicants must possess several essential documents, including a colored photograph with a white background of the authorized signatory, a valid Identity Card, and a copy of a valid Passport. Additionally, contact details such as a phone number or Email address are required.

If the individual does not have a private phone number on the Ministry’s record, they must open a file as a foreigner to complete the application procedure. This ensures proper identification and a smooth processing experience for all applicants.

Application Procedure

To initiate the application process for eCards in the Emirates, you need to follow a few simple steps. Start by visiting TASHEEL Service Centers or participating establishments to apply for an electronic signature card.

For those opting for the online application, you can access the MoHRE platform by logging in using your username and password or the UAE Pass. Once logged in, simply fill out the application form and submit it via Service Centers or the designated service delivery channels.

The Ministry of Labor’s authorized personnel will then verify your application and all accompanying documents. After successful verification, your request for the E-Signature Card will be officially approved.

Lastly, the Ministry will assign a unique reference number, specific to each inhabitant, which will be recorded for future reference.

also read how to file a complaint for delay in gratuity.

Terms and Conditions for UAE e-Signature Card

The Ministry of Human Resources and Emiratisation typically takes 1–2 working days to issue e-cards. The digital signature card fee in the UAE ranges from 120–200 dirhams, excluding tax and collection charges. While you can access free digital card services through the MoHRE website and Mobile App, certain tax and government fees may still apply.

The authorized signatory must maintain a file with the Ministry for storing their personal identification number. Applicants can track their application status via the MoHRE Android App or the official website. You may also get updates by contacting the Call Center at 600590000, which operates from 8 am to 8 pm daily.

From Where to Renew the Digital Signature Card?

To obtain an E-signature Card for your company in the UAE, you can visit any of the Tasheel Service Centers located nationwide. The Tasheel service representatives will replace your old manual PRO card or internet card, which holds the company’s number and the signatures of the owner and other authorized signatories, with the advanced digital signature card—a more efficient and secure option for business representation.

Legal Aspects of Acquiring an e-Signature Card in the UAE

It is imperative to understand that, from a legal perspective, an electronic signature holds the same validity as a traditional ink signature. In the UAE, the full guideline governing the usage of electronic signatures is defined under Federal Decree law number 46.

Additionally, you should carry an electronic signature generation device along with its corresponding digital certificate. These certificates are issued by authorized service providers and are crucial to the application process.

The possession of these essential documents is especially important during travel, as they substantiate the authenticity of the electronic document, reinforcing their significance in the entire electronic signature process.

Key Benefits of Digital ID Card in the Emirates

Possessing this card completely eliminates the need to visit Customer Service or Customer Satisfaction Centers for fingerprint scanning, significantly enhancing convenience in document authentication processes.

The electronic card also facilitates seamless business operations and ensures the legal validity of various essential procedures. Here’s a detailed overview of its key benefits in the digital world, where time efficiency and security are crucial.

Cost Efficiency

The shift to digital signatures leads to substantial cost savings for businesses by reducing expenses related to printing, courier services, and storage. This allows organizations to optimize their resources and effectively allocate funds to other critical areas of their operation, enhancing overall efficiency.

Enhances Productivity

E-signature cards allow users to sign documents online within a few moments, significantly reducing the time and effort required for manual paperwork. This feature is particularly crucial in business transactions where timely approvals and agreements are essential.

Moreover, this digital card eliminates the need for employees, staff, or clients to visit specific locations to sign contracts physically. Instead, it enables seamless collaboration from anywhere in the world, promoting flexibility and efficiency in modern workflows.

Secures Data and Privacy

Security is a top benefit of the E-Signature Card, which incorporates advanced encryption mechanisms designed to protect the confidentiality and integrity of digitally signed documents. By adhering to robust security protocols, this digital solution ensures that individuals and companies can conduct safe business transactions with confidence.

Improves Accessibility

The facility provided by the e-signature card results in a substantial reduction in the processing time of e-commerce transactions. The signing of each document is significantly expedited, taking only a matter of minutes instead of days or weeks, which enables the swift closure of deals and contributes to increased revenue for the company.

Complies with Legal Requirements

The E-Signature Card aligns with the stringent regulations established by the UAE government. This legal framework guarantees that digitally signed documents carry the same legal weight as their paper counterparts. Furthermore, e-cards in the UAE help reduce the risk of legal disputes and enhance confidence in the legal validity of all e-signed documents.

Improves Collaboration

Electronic signatures significantly improve interaction among customers, companies, and suppliers by enabling the signing of legal agreements more quickly and effectively. Additionally, these digital tags help optimize transaction procedures by fully complying with the Emirates Law, ensuring smooth and lawful business operations.

Read: Is Gratuity Part of CTC

What is a Digital Certificate?

A digital certificate is a computerized document issued to an individual, company, or a specific team, enabling them to access e-signature generation services. Possessing this digital certificate is a legal requirement for utilizing an electronic signature generation device to produce UAE e-cards, ensuring authorized and compliant usage.

Digital Certifications Service Provider Companies (DCSP)

A Digital Validation Service Provider Company (DCSP) consists of a team of certified individuals offering digital certification services for electronic signatures. To apply for a DCSP permit license, applicants must submit their documents to the Telecommunications and Digital Government Regulatory Authority (TDRA).

The TRA mandates the submission of key documents including ownership details and information about the business structure, financial information covering the past two years (or less for a new organization), evidence of insurance coverage providing sufficient protection for their responsibilities, the company’s Memorandum and Articles of Association, comprehensive detail of the applicant’s profession and employment history, and confirmation of their ability to undertake DCSP duties while considering all legal perspectives.

Read More:How to Calculate Jafza Gratuity

Wrapping up

The e-signature card in the UAE serves as a key player in the ongoing digital shift, which simplifies tasks and ensures legal compliance. It acts as a reliable way to contribute towards a more efficient and legally sound business environment, fostering smoother and safer operations.

Back when I started working in the private sector, the biggest question I had was whether gratuity was part of my CTC. Most employees, whether in the government, public sector, or private companies, often ask the same thing.

The answer is actually simpler than it seems—gratuity and CTC are separate. Your Cost to Company (or CTC) includes all the payments and benefits offered by the company, like bonuses and monthly perks, but gratuity stands alone. It’s only paid by the company when you’ve completed at least 5 years of service.

I still remember reviewing my offer letter and noticing how CTC was calculated—no mention of gratuity funds. That’s because gratuity is a reward for completing long-term service, and it’s handled separately from what you get each month in your salary.

So, while it’s deeply tied to your employment, it’s not bundled into your CTC. If you take a detailed look into any offer letter or HR policy, you’ll find that the topic is clearly outlined once you know where to look.

Checkout: gratuity calculator UAE

What does CTC Mean?

When I first heard the term CTC, I didn’t realize it was just an acronym for Cost to Company. It simply means the total compensation a company pays its employees over one year. The structure sounded confusing at first, but once I joined a firm and got my offer explained, I understood how it works.

Your CTC is usually calculated by adding all the additional benefits to your total salary. It includes both monetary and non-monetary salary components, especially as defined under the Indian Payroll System. This is where the confusion with gratuity comes in.

The gratuity amount is often figured as a portion of your basic salary and can sometimes be shown as a part of the CTC, especially as a perk for long-term employees. However, not every company treats it the same way—some list it separately, others include it. I’ve seen both in my career, and it really depends on how transparently your employer structures the offer.

Read More: How to Calculate Jafza Gratuity

What are the Basic Components of CTC?

Typically, the full CTC value is determined using these listed components:

Direct Benefits

From my experience working in HR for a mid-sized firm, I’ve seen how direct benefits are paid to employees every month along with their salary. These benefits form the regular part of your income and are essential for managing day-to-day expenses.

The basic salary of an employee is the foundation of these benefits, which also include several allowances such as Medical, House Rent, Transportation, Leave & Travel (LTA), and Dearness allowance (DA). These components vary from company to company, but they usually make up a significant part of your CTC breakdown.

Indirect Incentives

In my early career, I was surprised to learn that many employees get certain perks from the company without making any direct investment. These are not visible like monthly pay but still carry significant monetary value, contributing silently to your overall CTC amount.

The payment for these incentives is done indirectly, which is why they’re known as indirect benefits. Some of these hidden gems include Tax Savings, Loan Schemes, Life Insurance, Leased Accommodation, and Company-sponsored food plans. These are often overlooked, but once you calculate them, you’ll see how they really enhance the total worth of your compensation package.

End-of-Service Benefits

Covers gratuity and provident fund and these perks are given to the employee upon completion of his contract.

Is Gratuity Considered Part of CTC in 2025? What is Gratuity Percentage in CTC?

During my time working with HR teams under Indian Employment rules, I came to know that gratuity is considered a legal right of an employee. It’s usually not a part of CTC and is calculated apart from the monthly pay. But around 2000, some companies began adding gratuity into the CTC package to boost employee retention rate. This made sense from a policy standpoint even if it wasn’t traditionally followed.

Now, including gratuity in CTC isn’t a violation of any law, legally or morally, especially when the employee hasn’t made a financial contribution to the working organization. I’ve reviewed cases where companies added it transparently, and it did help reduce turnover.

In fact, the total gratuity is compulsory for Private Limited Companies in India under the Company Act. Since gratuity payment is only given once employees complete 5 years of job with an organization, it’s usually not included in CTC from the beginning of the appointment.

For instance, your hiring company may deduct 4.81% of your salary as a gratuity fund, payable at the end of your service tenure of at least 5 years. While this annual deduction might seem like a part of CTC, you’re only entitled to it if you complete your term. If you’re terminated or resign earlier, you won’t get the gratuity, but the deducted amount may be returned to you as an ex-gratia payment.

Checkout:What is Limited vs Unlimited Contracts

CTC Calculation Formula with Example

Cost to Company (CTC) = Gross Basic Pay + Extra perks or allowances (health coverage and PF portion)

Salary Components	Type of Incentive in Salary Package	Payment
Basic Salary	–	100,000
Allowances	House Rent	35,000
	Medical	10,000
	Dearness	30,000
	Conveyance	10,000
Gross Pay		1,85000
Other Benefits	Medical Insurance	3500
	Provident Fund (12% of basic pay)	12,000
Total Benefits		15,500
Total CTC Amount		200,500

Gratuity Deduction from Salary: Is it deducted from Monthly Pay?

I’ve worked in payroll long enough to see how the gratuity amount is often deducted directly from an employee’s monthly salary, which includes both basic pay and additional allowances. That’s why the gratuity sum heavily depends on the monthly pay structure maintained throughout your employment.

According to the Payment of Gratuity Act 1972, the gratuity is approximately 4.81% of your basic pay. One straightforward formula often used for gratuity calculation within CTC is:

Gratuity amount = 15/26 × Last Basic Salary × Total Number of Service Years

If you’re looking to compute your end-of-service gratuity, using an online gratuity calculator is the best way. It’s a free, handy tool that can assist employees in checking their estimated gratuity amount in just a few seconds.

The calculation is based on your total years of service, your basic pay, and even your contract types, making it quick and reliable.

Is Gratuity and CTC Taxable?

From my experience discussing salary structures, a person’s gratuity is generally treated as part of their pay and is legally taxable. However, the government often provides tax exemptions on gratuities based on the total gratuity amount or specific situations.

Under the Provision of Income Tax Act 1961, some allowances may be either partially or fully exempt from tax. Meanwhile, an employee’s CTC or monthly salary is always taxable, which means taxes are deducted as per the rules on these amounts.

Does Gratuity Inclusion in CTC Mandatory in India?What the Law Say?

From my professional observations, Cost to Company represents the total expense a company bears for employing someone, but it’s not always the exact salary disbursed to the employee. On the other hand, Gratuity is computed based on the employee’s final drawn salary, which generally includes basic pay and DA.

In India, there is no legal obligation to include gratuity in CTC, though many companies opt to incorporate gratuity within the CTC to enhance the attractiveness of their compensation package.

Still, if an employer deducts an amount labeled as gratuity from the salary, it can be reclaimed, but not as gratuity, even if the employee leaves before completing five years of service.

Is Gratuity Considered Part of CTC in Accenture, TCS, and Cognizant?

Based on my experience with Indian payroll systems, if you are an Indian employee, your gratuity amount is generally not included in the Cost to Company (CTC), no matter which organization you work for. Even major top companies like Cognizant, Accenture, and TCS clearly don’t consider gratuity as part of the Cost to the Company.

Does Inclusion of Gratuity in CTC Impact Employee’s Monthly Salary?

In my experience with payroll, including gratuity in the CTC can affect an employee’s monthly salary since it forms a part of the overall compensation package. However, the impact on your monthly take-home pay really depends on how the employer chooses to structure the CTC.

Although the gratuity amount is factored into the CTC, the actual payment only happens after you meet the eligibility criteria, typically after completing a certain period of service. So while it definitely influences the overall compensation, it doesn’t necessarily increase the monthly salary directly but rather affects the total remuneration over time.

Conclusion

From what I’ve seen, the question “Is gratuity part of CTC?” goes beyond simple accounting semantics and involves understanding the complexities of the entire employment package. Although gratuity inclusion in CTC impacts your overall compensation, it doesn’t necessarily mean a direct boost to your monthly paycheck.

If you have any queries, feel free to contact us for a discussion — we’re available 24/7 to help you with solving problems related to this.

Having worked closely with multiple business partners in the Jebel Ali Free Zone Authority, I’ve come to realize how important it is for both employers and employees to understand the rules surrounding gratuity in Jafza. This hub in the Middle East is not just a strategic location for international trade and investment; it’s also a place where knowing the legal regulations around end-of-service benefits can make a huge difference.

Many employees, especially newcomers, don’t realize that the UAE Labor Law mandates gratuities based on the length of service and final salary, and that they can get a quick estimate using the End of Service Calculator available online.

What makes Jafza’s process unique is how efficiently the calculator works. From my experience, it provides real-time insights into your gratuity entitlements, which can be a game-changer when planning long-term finances or negotiating your next contract.

This article aims to simplify how these regulations apply in real situations. Whether you’re a new employee in Jafza or an employer trying to stay compliant, using the online tools and knowing your rights under the UAE Labor Law ensures you’re on the right track.
If you are working in Dubai, then you may also check the UAE End of Service Calculator online.

Jafza Gratuity Rules and Eligibility Criteria

Over the years of consulting within the Jebel Ali Free Zone Authority, I’ve worked with several Jafza companies where understanding gratuity has been vital for both employees and management. Jafza Gratuity Rules are tied directly to end-of-service benefits and are designed to protect the rights of employees under UAE Labour Law.

These regulations clearly state that once an employee completes their service, they are entitled to gratuity payments, which serve as a form of financial security whether they decide to retire or quit.

From my perspective, applying these rules fairly across different company structures within Jafza fosters trust and stability. The emphasis on fairness in payment and clarity in governing procedures ensures that every eligible employee receives what they’re due.

These structured benefits not only support the individual’s post-employment life but also align with broader business ethics practiced in this growing economic zone.

Gratuity Limit

One crucial point I always emphasize when advising employees in Jafza is the maximum cap applied to gratuity payouts. According to the rules, no matter how long your tenure or duration of service may be, your gratuity payment cannot go beyond the value of two years of your basic salary.

I’ve seen cases where long-serving employees expected more due to their extended years, but the predefined limit stands firm.

Even if the calculated amount exceeds this threshold, what’s actually paid out is still restricted. This constraint ensures that there’s a consistent, fair application of the rules. As an advisor, I always tell clients that while service matters, knowing your cap gives you a clear picture of what to expect financially at the end of employment.

Gratuity Rules on Resignation

From my experience advising new hires in Jafza, one of the most misunderstood aspects is gratuity eligibility when leaving the job early. As per established UAE regulations, employees become ineligible for gratuity payment if they resign before completing one year of service. I’ve seen many professionals caught off guard by this rule, assuming partial payouts were possible.

It’s important to clearly understand that this isn’t flexible—this regulation firmly defines the eligibility threshold. So, if you’re planning to leave your position early, especially within your first year, it’s wise to reconsider if your gratuity matters in your financial planning.

Gratuity on Job Termination

One thing I often stress when mentoring professionals in Jafza is understanding when gratuity entitlement can be legally denied. According to Article 44 of the Labor Law, employees who are terminated due to serious misconduct or grave violations of company rules lose their right to any gratuity.

I’ve seen unfortunate cases where employees weren’t aware of this and ended up with nothing post-termination—knowing the consequences of disciplinary actions is absolutely essential.

In other cases, when termination is not the result of dismissal or isn’t employee-initiated, the employer has another obligation—they must cover the airfare to the employee’s home country’s nearest international airport. This rule ensures that, despite job loss, basic post-termination rights and support are honored.

checkout this: How to File a Complaint for delay in Gratuity

Case of Employee’s Death

In the unfortunate case of an employee’s death, their family has the right to claim the gratuity amount under defined procedures

Deductions from Gratuity Amount

During my time working with both HR departments and employees in Jafza, one question that comes up often is about deductions from the gratuity sum—especially when outstanding debts, advances, or loans are involved. According to the law, gratuity is treated as a separate entitlement, and employers are not allowed to deduct such dues from the final payout.

That said, employers do have the right to take legal avenues to reclaim any pending amounts through court or other means. But these cannot be offset directly from the gratuity, making it clear that the final benefit is protected by regulation. This rule is often a relief to many exiting employees, ensuring financial security during transition.

Minimum Service Requirement

Having worked extensively within the Jebel Ali Free Zone Authority (Jafza), I’ve found that understanding gratuity entitlements based on contract types is crucial for both employees and HR professionals. In Jafza, employees become eligible for gratuity payments after completing one year of continuous service, and this rule applies consistently across the UAE. However, the criteria for qualifying can vary depending on whether an individual is on a limited or unlimited contract—especially in the event of termination.

For those on unlimited contracts, employment dismissal doesn’t affect gratuity eligibility, as long as the employee has completed a year of service. But for limited contracts, resignation before the one-year mark results in no end-of-service benefits. Interestingly, if the employer ends the contract before a year passes, they are still required to provide the gratuity under statutory requirements. This distinction is often overlooked, yet it plays a critical role in post-termination planning.

Companies based in Jafza are required to fully comply with these rules to prevent legal issues and uphold strong ties with their employees. Violations may lead to fines and harm.

Hence, companies must keep informed of any changes to the regulations and guarantee precise calculation and prompt distribution of gratuity amounts.

if you’re confued about what is limited vs unlimited contacts is then checkout our complete guide on it here.

How to Calculate Gratuity in Jafza? How Does Online Jafza Calculator Work?

In my experience working with companies registered in Jafza and other free zones, adherence to the gratuity laws set by the Ministry of Labour (MoL) in the United Arab Emirates is fundamental to ensure that end-of-service benefits are properly granted to employees. To make this process simpler, Dubai Trade, which is the service division of Jafza, has developed a user-friendly calculator that helps businesses accurately estimate the gratuity amount their employees deserve when leaving their job.

To get the most from the Dubai Trade calculator, employees need to input key information such as the type of employment contract they have (whether limited or unlimited), the reason for leaving (including resignation, termination, or retirement), their service duration based on joining and leaving dates, and their basic salary. I have advised many clients to keep these details handy, as it ensures precise and timely calculation of their dues.

Why Should I Use Online Jafza Gratuity Calculator?

From my professional perspective, the Jafza Gratuity Calculator is an innovative online resource created by Dubai Trade to make the often complex task of computing gratuity for employees at the end of their employment much simpler. This tool operates in accordance with Article 139 of the UAE Labour Law, guaranteeing that gratuity payments are calculated with strict adherence to legal standards.

By automating the calculation process, this calculator helps streamline business operations, saving both time and resources. Many businesses have reported improved efficiency and accuracy in managing their end-of-service obligations thanks to this valuable digital solution.

The outcomes produced by the online Jafza Freezone Gratuity Calculator are approximations requiring final validation from Jafza’s Labour Affairs Section.