End-of-service gratuity
is the statutory lump sum Gulf employers owe departing expatriate employees, calculated from final basic salary and years of service. In the UAE: 21 days’ basic pay per year for the first five years and 30 days per year beyond, capped at two years’ pay. It functions as the region’s substitute for pension contributions for expatriates.
How is end-of-service gratuity calculated in 2026?
The UAE formula under the 2021 labour law: for each of the first five years of service, 21 calendar days of basic salary; for each additional year, 30 days — pro-rated for part years, based on the final basic salary (allowances excluded), with the total capped at two years’ pay. Full gratuity is due after at least one year of continuous service.
Other GCC states apply the same architecture with different parameters: Saudi Arabia uses half a month per year for the first five and a full month thereafter; Qatar a minimum of three weeks per year. Free zones such as DIFC and ADGM have replaced accrual with funded workplace-savings schemes (DEWS in DIFC), where employers contribute monthly instead.
| Regime | Formula (expatriates) |
|---|---|
| UAE mainland | 21 days/year (years 1–5), 30 days/year after; cap 24 months’ pay |
| Saudi Arabia | Half month/year (years 1–5), one month/year after |
| Qatar | Minimum 3 weeks per year of service |
| DIFC / ADGM (UAE) | Funded monthly contributions (e.g. DEWS) replace gratuity accrual |
Who is entitled — and what reduces the amount?
The rules that decide real payouts:
- One-year threshold: service under one continuous year earns no gratuity in the UAE; unpaid absence days can be excluded from service counts.
- Basic salary only: housing, transport and other allowances are excluded — which is why contract salary structure matters enormously.
- Nationals differ: GCC nationals are typically enrolled in state pension schemes (e.g. GPSSA in the UAE) instead of gratuity.
Under the current UAE law, resignation no longer slashes the entitlement as the old regime did — the accrued formula applies on lawful exit. Gratuity interacts with WPS payment records: the registered basic salary is the evidence base for the calculation.
Provisioning for end-of-service liabilities
The employer failure mode is treating gratuity as a distant liability: it accrues silently, then lands in a single final-settlement payment that labour courts enforce quickly. Provision it monthly (roughly 5.8%–8.3% of basic salary depending on tenure), structure basic-vs-allowance splits deliberately and lawfully, and mind the free-zone schemes where funding is mandatory. Access Financial’s Gulf EOR employment includes gratuity accrual and settlement — request a UAE employment cost simulation.
FAQ
Quick answers to the questions that come up most often.
How is UAE gratuity calculated for 3 years of service?
Three years at 21 days per year gives 63 calendar days of final basic salary. Convert the basic monthly salary to a daily rate (commonly basic ÷ 30), multiply by 63, and pro-rate any part-year. Allowances are excluded, deductions for documented debts are possible, and payment is due within 14 days of the end of service.
Do employees get gratuity if they resign?
Under the UAE’s current labour law, yes — employees who lawfully complete at least one year receive gratuity per the standard formula on resignation; the old reduced-rate regime for resignations was abolished with the 2021 law. Dismissal for defined gross misconduct can affect entitlements, within the limits the law and courts allow.
Is end-of-service gratuity the same as a pension?
Functionally it substitutes for one: Gulf states generally exclude expatriates from national pension schemes, and the gratuity lump sum is the statutory retirement-style benefit instead. The model is shifting — DIFC’s DEWS replaced accrual with funded monthly contributions, and similar funded schemes are under discussion elsewhere in the region.