What is Gratuity In Abu Dhabi and Why Is It Important for Employees?

Gratuity is a mandatory severance payment that employers must pay eligible employees when their employment ends (resignation, termination, or contract completion). It’s calculated based on your length of service and your basic salary. In Abu Dhabi and across the UAE, gratuity is especially important because there is no government-backed pension for most expatriate workers. The gratuity acts as a form of long-term savings or severance pay, helping employees secure funds after years of service. It rewards loyalty and provides financial cushioning for employees as they move on to new opportunities or retirement.

For example, if you work in Abu Dhabi for many years, your gratuity can amount to several months’ worth of salary,  a substantial sum to support your next steps. Understanding how it works means you can verify you’re paid correctly and even negotiate your salary structure (since gratuity is tied to basic pay) accordingly.

UAE Labour Law Updates 2021/2022

Abu Dhabi follows UAE federal labor law for private sector gratuity rules. In February 2022, a new labour law (Federal Decree Law No. 33 of 2021) came into effect, updating certain aspects of end-of-service benefits. Here’s how gratuity calculation works under the UAE Labour Law (2022 updates):

• Eligibility: You must complete at least one full year of continuous service with your employer to be eligible for any gratuity. If you leave before one year, you are not entitled to gratuity​. (Exception: in the event of an employee’s death, some benefit might be paid to heirs, but under normal circumstances, <1 year service yields no gratuity.)
  
• Calculation Base (Basic Salary): Gratuity is calculated based on your last drawn basic salary (the wage without allowances)​.  Allowances like housing, transport, utilities, bonuses, etc., are not included in the calculation​. Only the basic wage counts. For instance, if your total monthly pay is AED 15,000 but includes AED 5,000 housing allowance and AED 2,000 transport, and your basic salary is AED 8,000 – only the AED 8,000 is used for gratuity calculation.
  
• Gratuity Rate: Under the current law, the rate depends on your length of service:
  
  • For 1 to 5 years of service: You earn 21 days of basic pay per year of service​.
    
  • For more than 5 years of service: You earn 30 days of basic pay per year for each year beyond the first five years​. (The first five years are still calculated at 21 days each.)
    
• In other words, if you leave after 6 years, you get 5 years × 21 days + 1 year × 30 days of pay as gratuity. If you leave after 10 years, you get 5×21 days + 5×30 days of pay.
  
• Maximum Limit: No matter how long you work, the total gratuity amount is capped at the equivalent of two years’ salary​. This is a legal maximum.
  
• Pro-rata for Partial Years: If you’ve crossed the one-year mark, any additional months of service in the final year are counted pro-rata. For example, 3.5 years of service would earn roughly 3 years + 6 months worth of gratuity (the 6 months is half of the 21-days rate for that year).
  
• Payment Timeline: Employers are required to pay all end-of-service entitlements (including gratuity) within 14 days after your last working day​. This is to ensure employees get their dues promptly when leaving a job.
  
• Deductions: If you owe any money to your employer (such as an advance or loan), the employer can deduct that amount from your gratuity​.. However, they cannot deduct or refuse your gratuity as a penalty except for legally authorized deductions.
  

Important: Under the current law, there is no distinction between resignation or termination regarding gratuity entitlement. Unlike older rules, you get the full gratuity you earned regardless of whether you resigned or were terminated, as long as you have completed at least one year of service and weren’t terminated for cause (serious misconduct). Dismissal for gross misconduct (as per Article 44 of the law, previously Article 120) can forfeit your gratuity rights, but those cases are specific (e.g., theft, etc.) and relatively rare.

How Gratuity is Calculated in Abu Dhabi?

In summary, to calculate gratuity in Abu Dhabi (for the private sector):

1. Determine your eligible service period (in years, if >1 year).
   
2. Find your last basic monthly salary.
   
3. Apply the formula:
   
   • Years 1-5: each year = 21 days of basic pay.
     
   • Years 6 onwards: each additional year = 30 days of basic pay.
     
4. Add them up, ensuring the total does not exceed 24 months of basic salary.
   

This will give you the total days of pay to which you’re entitled. You can then multiply by your daily basic pay rate (basic monthly salary ÷ 30) to get an amount in AED.

Gratuity in Private Sector vs Free Zones vs Government

Abu Dhabi has various work environments, mainland private companies, free zone companies (like those in Abu Dhabi Global Market), and government entities, and each may follow slightly different rules or systems for end-of-service benefits. Here’s a breakdown:

Private Sector (Mainland Abu Dhabi)

If you work for a private company in Abu Dhabi (non-government, non-free zone), you are governed by the UAE Labour Law and the Ministry of Human Resources & Emiratisation (MOHRE). The gratuity rules explained above apply fully to you. This is the majority of employees; whether you work in a bank, a hospital, a construction firm, a school, etc., in Abu Dhabi and your employer is a UAE mainland company, your end-of-service gratuity is calculated as per the federal law.

All private sector employees, whether UAE nationals or expatriates, accrue gratuity under this system, but there’s a key difference:

• UAE Nationals in the private sector are typically registered in the government pension and social security scheme instead of receiving a gratuity​. Employers contribute to the pension fund for Emirati employees, and thus Emiratis usually do not collect a separate gratuity; their end-of-service benefit comes via the pension law.
  
• Expatriates in the private sector have no pension scheme by default, so they receive gratuity as per the law (the calculation we described)​.
  

Most expatriate employees in Abu Dhabi’s private sector will thus get the lump sum gratuity. Ensure your contract doesn’t specify any less favorable terms (it usually cannot override the law to reduce your rights, but it could enhance them).

Domestic Workers 

Domestic workers (maids, nannies, drivers, etc.) are a special category. They are governed by a separate law (Federal Law No. 10 of 2017 on Domestic Workers). Under that law, domestic workers in Abu Dhabi are also entitled to an end-of-service benefit after completing 1 year of service. The calculation for domestic workers may differ slightly.

For example, it has been cited that a domestic worker is entitled to 14 days of pay for each year of service (i.e., half a month’s salary per year) upon completing the contract term, although the exact terms are governed by the domestic workers’ law. Always refer to the domestic workers’ law or Tadbeer service centers for precise rules if you are a household worker or employ one. The key point is that domestic workers do get a gratuity now (unlike in the past when they had no such entitlement​).

Free Zones (e.g., ADGM and others in Abu Dhabi)

Free zones in the UAE are special economic areas that can have their own employment regulations. Abu Dhabi has several free zones, the notable one being Abu Dhabi Global Market (ADGM) on Al Maryah Island (a financial center).

In practice, many free zones follow the federal labour law for gratuity, or have very similar provisions, unless they have implemented an alternative scheme. For example:

• ADGM: The ADGM has its own Employment Regulations. However, these regulations provide end-of-service benefits broadly in line with UAE norms; meaning an ADGM-based company also pays gratuity to its employees (typically with the same requirement of ≥1 year service). ADGM has not (as of 2025) mandated a replacement of gratuity with a savings scheme, so employees in ADGM still receive a lump-sum gratuity payout when leaving service. The calculation in ADGM is similar (years of service and basic pay). ADGM employers, like mainland employers, also have the option to participate in the new federal savings scheme (discussed below) if they wish, since the scheme covers free zone companies as well​.
  
• Other Abu Dhabi Free Zones: Zones such as twofour54 (media free zone), Masdar City, Khalifa Industrial Zone (KIZAD), etc., generally adhere to standard UAE labor law rules on gratuity. They might be administered by different authorities, but employees should still expect the same 21 days/30 days per year gratuity formula, unless explicitly stated otherwise in that zone’s regulations.
  
• DIFC (Dubai): As a comparison, Dubai International Financial Centre (DIFC, not in Abu Dhabi) introduced a trust-based scheme (DIFC Employee Workplace Savings plan – DEWS) in 2020 that replaced the traditional gratuity with monthly contributions to a fund. This was a first-of-its-kind move in the UAE. Abu Dhabi’s ADGM has not introduced a mandatory scheme like DIFC’s, but the UAE’s new optional scheme (2023) was inspired by the success of DIFC’s model​. We mention this to highlight that free zones can have different approaches. Always check your free zone contract or HR manual for any variations, but if none are specified, assume the federal law gratuity applies.
  

Government Employees

Government employment (ministries, authorities, or local government departments in Abu Dhabi) is separate from the private sector. The gratuity (or end-of-service benefits) for government employees can differ because it’s governed by government human resources policies and laws:

• UAE National government employees: Emirati citizens working in government are covered by the pension and social security system (managed by the General Pension & Social Security Authority) rather than gratuity​. They contribute a portion of their salary to the pension, and the government contributes as well. When they retire, they receive a pension and other benefits instead of a one-time gratuity.
  
• Expatriate government employees: Non-UAE nationals working in government (for example, an expat working in a public hospital, a government university, or a municipal department) are usually entitled to an end-of-service gratuity, but it is calculated according to the government’s own rules. Often, the government schemes are similar or even more generous.
  • For instance, some government entities might calculate gratuity at one month’s salary per year of service (which is effectively 30 days per year, potentially more generous than the 21/30 day scheme), but this can vary. In Abu Dhabi, the local government has its own HR law (like the Abu Dhabi Human Resources Law) which outlines end-of-service benefits for expat employees. These could include gratuity and/or other benefits (such as a reward for each year of service). It’s best for government employees to refer to their HR department or the specific law governing their entity.
    
• New Savings Schemes: In recent years, UAE government entities have also explored providing a savings investment scheme for expatriate government workers. For example, the Government of Dubai launched a savings scheme for expat public sector employees in 2022. Abu Dhabi and federal authorities have also studied similar programs to enhance expat end-of-service benefits. By 2025, it’s possible some government employers in Abu Dhabi offer an optional scheme where monthly contributions are invested (similar to the private sector scheme we discuss next). Always check the current policy in your government organization.
  

How to Use an Abu Dhabi Gratuity Calculator

Calculating gratuity by hand can be a bit complex, especially if you have to account for partial years or varying salary. Luckily, there are tools to help. An Abu Dhabi gratuity calculator or end-of-service calculator is essentially a tool (online or an app) where you input your details and it computes the gratuity for you.

Here’s how to typically use a gratuity calculator:

1. Gather Your Details: You’ll need to know your start date and end date of employment (to get total years and any extra days), and your last basic salary amount. If you had an increase in basic salary during your tenure, note that gratuity is calculated on the last salary, not an average.
   
2. Use Our Calculator: Our site offers a feature to calculate end-of-service benefits. If not, you can find gratuity calculators on many reputable HR websites, law firm platforms, or UAE-based bank sites.
   
3. Input Your Data: Select the type of contract if asked (though since 2022 the distinction of limited/unlimited doesn’t change the gratuity calculation). Enter your basic monthly salary, and your years of service (sometimes you input start and end dates, and it calculates tenure). Some calculators also ask for a reason for leaving (resignation or termination), this should not affect the amount under current law except if termination was for cause (which calculators usually don’t handle; that’s a legal case).
   
4. Result: The calculator will display your gratuity amount in AED. Typically, it will show the total money you should receive as end-of-service gratuity. Some advanced ones might break down the calculation (e.g., “X days at salary = AED Y”).
   
5. Validate Special Cases: If you have a situation like part-time work or converted from full-time to part-time, or took unpaid leave, etc., the calculation might be adjusted proportionally. The official formula for part-time is based on the percentage of full-time hours​. Not all simple calculators handle that, so you may need a manual calculation or a more sophisticated tool.
   

For example, MOHRE’s online tool will reliably compute standard cases. If you want to manually double-check:

• Step 1: Compute total days of gratuity = (Years 1-5 * 21) + (Years 6+ * 30). If you have a partial year (say 2 months into your 6th year, that’s 2/12 of 30 days = 5 days extra).
  
• Step 2: Daily basic pay = Basic monthly salary / 30.
  
• Step 3: Gratuity amount = total gratuity days * daily pay.

Conclusion

In summary, if you work in a free zone company in Abu Dhabi (like ADGM or others) your end-of-service benefits in Abu Dhabi free zones will usually mirror the standard gratuity calculations, unless your employer has opted into an alternate scheme or the free zone has a special rule.

FAQs