Gratuity Calculator Dubai 2025

Introduction 

If you’re working in Dubai, understanding your gratuity entitlement is crucial when your employment ends. Whether you work in the private sector, hospitality, healthcare, or construction, knowing how to calculate gratuity in Dubai helps you ensure that you receive your rightful end-of-service benefits.

This guide explains gratuity calculation rules in Dubai, showcases various job sectors, and offers a step-by-step process using the Gratuity Calculator Dubai.

What is Gratuity in Dubai?

Gratuity is a mandatory end-of-service benefit that employees receive when they leave a company after completing at least one year of continuous service. Governed by UAE Labour Law, it serves as a financial cushion for employees transitioning between jobs or leaving the country.

The calculation of gratuity in Dubai depends on several factors:

• Type of contract (Limited or Unlimited)
  
• Length of service
  
• Last basic salary
  
• Reason for termination (resignation or termination by employer)

As per UAE Labour Law Article 51, gratuity must be paid within 14 days of an employee’s final working day.

For more about the UAE Labour Card which is essential for employment, visit our Labour Card UAE guide.

Importance of Gratuity for Employees

Gratuity serves multiple important purposes for employees in Dubai:

• Financial Cushion: It provides a safety net for employees leaving a job. After years of service, the gratuity amount can be substantial enough to help cover expenses while transitioning to a new role or returning to one’s home country.
  
• Recognition of Service: It’s a form of recognition for loyalty. The longer you serve, the higher the gratuity, which rewards commitment to the company. For instance, someone working 7 years gets more per year after the 5th year than someone who worked 4 years (30 days vs. 21 days per year).
  
• Encourages Retention: Knowing that end-of-service benefits increase with tenure encourages employees to stay longer with their employers, contributing to stability for both parties.
  

Gratuity is legally due to employees upon leaving, as long as they meet the conditions. By law, employers must pay all end-of-service entitlements within 14 days of the contract’s end date. This makes gratuity a critical component of employee rights in Dubai.

Gratuity Laws in 2025: Limited vs Unlimited Contracts

Dubai’s gratuity rules have evolved with the UAE’s updated labour laws. In 2022, Federal Decree Law No. 33 of 2021 (New UAE Labour Law) introduced significant changes. One major change is that unlimited-term contracts were abolished. All employees are transitioning to limited-term contracts (up to 3 or 5 years, renewable).

Here’s how gratuity is handled under different scenarios:

Under the old Labour Law (No. 8 of 1980), many employees were on unlimited contracts. For those still on an unlimited contract (if not yet converted to limited), the old rules might still apply until conversion:

Unlimited Contracts (Old System)

• Gratuity Calculation: The old law used a reduced gratuity if an employee resigned before certain milestones:
  
  • Resigned with 1–3 years service: entitled to only 1/3 of the gratuity.
    
  • Resigned with 3–5 years service: entitled to 2/3 of the gratuity.
    
  • Resigned after 5 years: full gratuity with no reduction​.
    
• If an employer terminated the employee (not for misconduct), the employee was typically eligible for full gratuity (no reductions for resignation since it’s employer-initiated).
  
• Misconduct Clause: If an employee was terminated for gross misconduct (specific reasons like fraud as listed in law), they could lose the right to gratuity. This remains true under both old and new laws; serious misconduct can forfeit gratuity.
  

Limited Contracts (New System)

Under the new law effective since Feb 2022, all contracts are limited-term, and gratuity calculation is simplified:

• Uniform Calculation: Gratuity is 21 days basic pay per year for 1–5 years, and 30 days basic pay for each year beyond 5 years. This is the same whether the employee resigns or is terminated, removing the old resignation penalty.
  
• No Resignation Penalty: The new law no longer distinguishes between resignation and termination without cause. Employees get full gratuity regardless of why the contract ended, as long as they have 1+ year of service. This is a huge win for employees who resign, as they no longer lose a portion of their gratuity for leaving.
  
• Contract Completion: If an employee on a limited contract completes the contract term (does not resign early), they are due full gratuity. If they resign before completing the limited contract, in some cases they might owe compensation to the employer for breaking the contract early (up to half a month’s salary for 3 months, or specified in contract), but that’s separate from gratuity.
  
• Maximum Limit: In all cases (limited or unlimited), gratuity cannot exceed 2 years’ basic salary​.
  

Example: If someone worked 7 years with a basic salary of AED 10,000:

• For the first 5 years: each year = 21 days of pay. 21 days of AED 10,000 basic = AED 7,000 per year. So first 5 years = 5 x 7,000 = AED 35,000.
  
• For years 6 and 7: each year = 30 days of pay. 30 days of AED 10,000 = AED 10,000 per year. So years 6–7 = 2 x 10,000 = AED 20,000.
  
• Total gratuity = AED 55,000 for 7 years. This does not exceed 2 years’ salary (which would be 24 months x AED 10,000 = AED 240,000), so it’s within legal limits.
  

Under the new law for limited contracts, the calculation is straightforward. There is no more confusion or reduction if an employee resigns; everyone is treated the same, which promotes fairness and transparency in end-of-service benefits.

Special Cases (Misconduct & Termination)

Regardless of contract type, if an employee is terminated for one of the 11 gross misconduct reasons listed in the law (such as theft, physical assault, etc., previously under Article 120 of old law), they forfeit their gratuity. This is to protect employers from having to pay gratuity to someone who caused serious harm or violated company rules severely.

Transition from Unlimited to Limited

By February 2023, all existing unlimited contracts should have been converted to limited contracts as per the new law. If an unlimited contract wasn’t converted by then, technically the employee might still be under old rules until renewal. But practically, in 2025, most employees are now on limited contracts, and new hires are all on limited contracts.

If you were hired before 2022 and haven’t signed a new contract yet, check with HR. Until renewal, the old law’s calculation might apply, but many companies proactively switched to limited contracts in 2022.

Note: For 2025, assume limited-contract rules (full gratuity, no resignation penalty) unless you know your contract is still unlimited under old terms.

How is Gratuity Calculated in Dubai?

The calculation of gratuity in Dubai depends on three factors: your basic salary, your years of service, and the type of contract and reason for leaving. Let’s break it down step-by-step:

1. Basic Salary: Identify your basic salary (monthly). Only the basic salary is used in calculation – allowances (housing, transport, etc.) are excluded.
   
2. Calculate Daily Wage: Divide your basic salary by 30 to get the daily wage. For example, AED 9,000 basic salary / 30 = AED 300 per day.
   
3. Determine Entitlement Days:
   
   • For 1 to 5 years of service: 21 days per year.
     
   • Beyond 5 years: 30 days per year for each additional year.
     
   • If less than 1 year: No gratuity (0 days).
     
4. Calculate Yearly Gratuity: Multiply your daily wage by the entitlement days for each year of service.
   
   • Using the example daily wage of AED 300:
     
     • Each year in first 5 years = 21 * 300 = AED 6,300.
       
     • Each year after 5 years = 30 * 300 = AED 9,000.
       
5. Total Gratuity: Add up the gratuity for all years of service.
   
6. Apply Limits: Ensure the total does not exceed 24 months (2 years) of basic salary. For most people with typical lengths of service, this cap won’t be reached (it’s more for people working decades at very high salaries).

Limited vs Unlimited:

• Unlimited (if applicable): If you resigned, apply the reduction scale of the old law:
  
  • 1–3 years: you only get 2/3 of the above total​
  • 3–5 years: you get 1/3 reduction (so you receive 2/3 of full).
  • 5+ years: no reduction (full amount).
  • If terminated by the employer without cause, you get the full amount.
    
• Limited (and new system): No reductions for resignation; full amount regardless of who ended the contract.
  

Quick Example: calculation of gratuity in Dubai (New system):

• Basic Salary: AED 10,000; Service: 6 years.
  
• Daily wage = 10000/30 = ~AED 333.33.
  
• Years 1–5: 21 days/year → 21 * 333.33 = ~AED 7,000 per year.
  
• Year 6: 30 days → 30 * 333.33 = ~AED 10,000.
  
• Total = 5 * 7,000 + 10,000 = AED 45,000.
  

This aligns with the UAE law guidelines. Always check your company’s HR calculations; they may have internal tools, but the law provides the minimum to which you’re entitled.

How to Use a Dubai Gratuity Calculator

Using a Dubai gratuity calculator (often called a gratuity calculator UAE) can help you quickly estimate your end-of-service benefits. Here’s how to use one:

1. Use our free Dubai gratuity calculator to find your accurate end-of-service benefit in seconds based on Latest UAE Labour Law and your job details.
   
2. Enter Employment Dates: Input your start date and end date of service. The calculator will compute total years of service (often in years and days). This matters because gratuity is for complete years, but partial year (beyond 1 year) is also paid pro-rata for the fraction of the year.
   
3. Enter Basic Salary: Provide your current basic salary (monthly). If your basic salary changed over time, typically the gratuity is calculated on your last drawn basic salary for all years of service.
   
4. Select Contract Type: The calculator will ask whether your contract is limited or unlimited, and the reason for leaving (resignation or termination). This helps apply any reductions based on old laws if applicable. In 2025, if you select “limited” or “unlimited resignation/termination,” the calculator will apply the correct gratuity formula accordingly.
   • Limited (or unlimited termination): full 21/30 days per year.
     
   • Unlimited resignation: apply 2/3 or 1/3 reduction as per old law (if service 1-3 or 3-5 years).
     
5. Calculate: Hit the calculate button. The tool will display your expected gratuity amount.
   

Recent Updates to Gratuity Rules (2023-2025)

The end-of-service benefit system in the UAE has seen some enhancements and optional updates recently:

• Introduction of a Savings Scheme (2023): The UAE government introduced an optional alternative end-of-service savings scheme. This is voluntary and mainly for employers to opt-in. Instead of paying a big gratuity at the end, employers contribute monthly to a fund (like a pension fund) for the employee’s benefit.
  
  • Contribution rates: 5.83% of monthly basic salary for employees with <5 years service; 8.33% for 5+ years. These percentages correspond to 21/30 days out of 365, essentially matching the accrual of 21 or 30 days per year.
    
  • If a company joins this scheme, the employee gets the invested amount (which could grow) instead of the traditional gratuity. It ensures funds are set aside and can earn returns.
    
  • As of 2024-2025, two investment funds (Lunate and National Bonds/Daman etc.) are approved to manage these schemes. Employers across mainland and free zones (except DIFC/ADGM which have separate systems) can opt in.
    
  • For employees, this could mean your end-of-service benefit is saved and invested throughout your employment. It’s optional, so if your employer doesn’t opt in, you’ll just get gratuity as usual.
    
• No More Unlimited Contracts: As discussed, by 2023 virtually all contracts should be limited term. This means the resignation penalty (reduced gratuity) is effectively gone for new contracts. All employees should get full gratuity unless terminated for cause.
  
• Free Zone Alignments: Free zones like DDA, DMCC updated their regulations to align with the new Labour Law by 2022/2023. For example, DMCC (Dubai Multi Commodities Centre) issued guidelines consistent with the new federal law, and DDA uses the federal law as a basis.
  
• Dubai Development Authority Free Zone: Specifically, the DDA (covering TECOM free zones) reaffirmed that they follow the UAE Labour Law 2021 for gratuity calculations. They provided tools and guidance for their free zone companies to comply. This is notable because prior to the new federal law, free zones sometimes had slightly different rules, but now there is more consistency across the board.
  
• Gratuity for New Work Models: The law now clarifies gratuity for part-time or other non-full-time contracts. It’s proportional to working hours. E.g., if someone works half the full-time hours, they get 50% of the normal gratuity proportion. This was outlined in Cabinet Resolution No.1 of 2022 to ensure part-time workers also get fair end-of-service benefits.
  

Staying updated on labour law changes is crucial. For instance, new amendments in 2024 or beyond could fine-tune entitlements. For now, the above are the latest updates up to 2025.

FAQs