UAE Clarifies End-of-Service Gratuity Rules for Private-Sector Employees

The UAE Ministry of Human Resources and Emiratisation (MOHRE) has issued updated guidance outlining how private-sector employees can calculate their end-of-service gratuity, eligibility requirements and the deadline for employers to settle outstanding payments.

In a social media post published on Thursday, October 22, the Ministry explained the UAE Labour Law provisions governing end-of-service benefits, including how gratuity is determined according to an employee’s basic salary and years of service.

Eligible expatriate employees are entitled to 21 days of basic salary for each year worked during their first five years of service, increasing to 30 days for every additional year.

Employers are required to settle outstanding salaries and end-of-service benefits within 14 days of the employment contract’s termination.

The latest guidance from MOHRE clarifies existing legal provisions and does not introduce any changes to gratuity entitlements.

Article 51 of Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations states that foreign employees working full-time in the private sector qualify for end-of-service gratuity after completing at least one year of continuous employment.

Employees who leave their jobs before completing one year of continuous service are not eligible for gratuity under the standard system.

Those who have worked for more than one year are also entitled to a proportionate gratuity payment for any additional fraction of a year of eligible service.

The calculation is based on the employee’s most recent basic salary, excluding allowances and other components of total remuneration.

Any periods of unpaid absence are deducted when determining the employee’s qualifying length of service.

How Is UAE End-of-Service Gratuity Calculated?

MOHRE has reiterated the two basic rates used to determine end-of-service gratuity for eligible employees.

• First five years of service: 21 days of basic salary for each year worked.
• Beyond five years of service: 30 days of basic salary for each additional year.
• Partial years of service: Proportionate gratuity is payable after completing at least one year of continuous employment.
• Maximum entitlement: Total gratuity is capped at the equivalent of two years’ wages.

The calculation is based exclusively on basic salary, excluding housing, transport and other allowances included in an employee’s total remuneration.

For example, an employee earning a monthly basic salary of AED10,000 ($2,723) would have an illustrative daily basic salary of AED333.33 ($91), calculated using a 30-day divisor.

After completing five years of eligible service, the employee would qualify for gratuity equivalent to 105 days of basic salary, amounting to AED35,000 ($9,530).

Under UAE Labour Law, the maximum standard end-of-service gratuity is limited to the equivalent of two years’ wages.

This ceiling remains applicable even if an employee’s years of service would otherwise result in a higher gratuity amount under the standard calculation.

MOHRE has also drawn attention to the voluntary Savings Scheme, which offers an alternative to the traditional end-of-service gratuity arrangement.

Participating employers can contribute to approved investment funds under the scheme, allowing employees’ end-of-service benefits to be invested with the potential to earn returns.

Participation in the scheme is voluntary, and its structure differs from the conventional gratuity system.

Employees are advised to check whether their employer participates in the Savings Scheme and confirm which arrangements govern their end-of-service benefits.