The official formula for gratuity is simple on paper — 21 days of basic salary per year for the first five years, 30 days per year after that. But when your final settlement arrives, the number on it rarely looks like the number you imagined. Gratuity Calculation Examples for Employees below walk through realistic salary and service combinations step by step, so you can see exactly how each dirham is reached and compare the maths against your own case.
Every example uses the rule that applies to private-sector employees under the UAE Labour Law: gratuity is calculated on basic salary only, unpaid leave days are excluded from service, and the total can never exceed two years’ pay. If you need the full legal background first, read our complete UAE end-of-service gratuity guide.
Quick Answer
Gratuity = (basic salary ÷ 30) × 21 × each of the first 5 years of service, plus (basic salary ÷ 30) × 30 × each year beyond five. Partial years after the first are paid pro rata, service under one year earns nothing, and the final figure is capped at 24 months of basic salary. The examples below show how this works with real numbers.
The Formula in Plain Words
Before the examples, here is the method each one follows:
- Take the employee’s basic salary — not the total package. Allowances for housing, transport, and other benefits are not included in the calculation.
- Divide it by 30 to get the daily basic rate.
- Multiply the daily rate by 21 for each year of the first five years of continuous service.
- Multiply the daily rate by 30 for each year of service beyond five years.
- Add any partial year (after one full year of service) on a pro-rata basis.
- Check the result against the cap: gratuity cannot exceed two years of basic salary.
Gratuity Calculation Examples for Employees
Example 1: Three years of service, basic salary AED 6,000
Ahmed joined as a junior accountant on a basic salary of AED 6,000 per month and left after exactly three years.
| Step | Working | Result |
|---|---|---|
| Daily basic rate | 6,000 ÷ 30 | AED 200 |
| Gratuity per year | 200 × 21 days | AED 4,200 |
| Three years | 4,200 × 3 | AED 12,600 |
Because his service is under five years, the 21-day rate applies to every year. Notice that AED 12,600 is more than two months of his total take-home expectations — many employees are surprised by how substantial even short service amounts are when calculated correctly.
Example 2: Seven years of service, basic salary AED 8,000
Maria worked as a nurse on a basic salary of AED 8,000 and stayed seven years, so both rates apply.
| Step | Working | Result |
|---|---|---|
| Daily basic rate | 8,000 ÷ 30 | AED 266.67 |
| First 5 years (21 days) | 266.67 × 21 × 5 | AED 28,000 |
| Years 6–7 (30 days) | 266.67 × 30 × 2 | AED 16,000 |
| Total | 28,000 + 16,000 | AED 44,000 |
The jump from the 21-day to the 30-day rate is what makes long service valuable. If you want a quick sense of your own figure before doing the full maths, see our companion piece on how to estimate your end-of-service benefits.
Example 3: Four years and six months, basic salary AED 5,000
Dev left after four and a half years on a basic salary of AED 5,000. The half year counts pro rata because he completed more than one year of service.
| Step | Working | Result |
|---|---|---|
| Daily basic rate | 5,000 ÷ 30 | AED 166.67 |
| Gratuity per full year | 166.67 × 21 | AED 3,500 |
| Four and a half years | 3,500 × 4.5 | AED 15,750 |
Partial months are normally converted into a fraction of the year (for instance, six months = 0.5). Employers sometimes round these fractions differently, which is one of the small discrepancies worth checking — our article on common gratuity calculation errors lists the ones employees miss most often.
Example 4: Thirty years of service, basic salary AED 4,000 — the cap in action
Karim retired after thirty years as a driver on a basic salary of AED 4,000. Watch what happens to the total:
| Step | Working | Result |
|---|---|---|
| Daily basic rate | 4,000 ÷ 30 | AED 133.33 |
| First 5 years (21 days) | 133.33 × 21 × 5 | AED 14,000 |
| Years 6–30 (30 days) | 133.33 × 30 × 25 | AED 100,000 |
| Uncapped total | 14,000 + 100,000 | AED 114,000 |
| Legal cap | 2 years’ pay = 24 × 4,000 | AED 96,000 |
Although the formula produces AED 114,000, the law caps gratuity at two years’ basic salary — so Karim’s entitlement is AED 96,000. This is exactly why checking the calculation yourself matters: an employer might pay either the uncapped or capped figure, and both would look plausible if you didn’t know the cap exists. Note that the cap is assessed on basic salary only, so employees with generous allowances but a modest basic figure reach the ceiling faster than their total package might suggest.
Example 5: Eleven months of service — no gratuity
Sara resigned after eleven months on a basic salary of AED 7,000. Under the one-year minimum service rule, she receives AED 0 in gratuity, even though she worked almost a full year. The threshold is one continuous year — there is no partial payment for service under that.
What the Examples Reveal
A few patterns come through clearly across all five cases:
- Basic salary, not total salary. If your contract shows AED 10,000 total but only AED 6,000 as basic, every figure above is calculated on the AED 6,000. This single misunderstanding explains most disputes.
- The fifth-year mark matters. Service beyond five years earns the higher 30-day rate, so the difference between leaving at five years and at six years is bigger than employees expect.
- Partial years count after year one. Leaving at 3 years and 4 months earns more than leaving at exactly 3 years.
- The cap only bites on long service. For most employees with under ten years, the cap is irrelevant — it mainly affects very long-serving staff on lower salaries.
The way the employment ends — resignation, termination, or contract expiry — does not change the formula under the current law. For how resignation specifically affects your payout, see gratuity after resignation explained.
What These Examples Don’t Cover
These worked examples assume straightforward full-time employment with a fixed basic salary. They don’t account for unpaid leave (those days are excluded from service), salary changes during employment (each period is calculated on the salary that applied at the time), or part-time contracts with adjusted rates. Your employment contract type can affect how these details apply, so treat the examples as a template and adjust for your own facts.
If you’re approaching your final settlement, the end-of-service benefits checklist walks through everything to confirm before you sign off on the paperwork.
Frequently Asked Questions (FAQs)
Are allowances included in gratuity calculation examples?
No. In all of the examples above, only the basic salary is used. Housing, transport, cost-of-living and other allowances are excluded from the gratuity calculation under the UAE Labour Law. If your employer has historically paid gratuity on total salary, that would be more generous than the legal minimum — but it is not the standard the examples reflect.
How is a partial year calculated?
Once you have completed one full year, each additional month typically counts as one-twelfth of the annual gratuity entitlement for that year (21 or 30 days depending on where it falls). Some employers convert days precisely; others round months. The difference is small but worth verifying on your settlement sheet.
Does the 21-day or 30-day rate apply if I resign?
Both apply the same way regardless of how the employment ends. Under the current Labour Law, resignation, termination, and contract expiry all use the same formula — the older system that reduced gratuity for resigning employees on unlimited contracts no longer applies.
Can my gratuity really be capped at two years’ pay?
Yes. The law states that total end-of-service gratuity for a full-time foreign worker cannot exceed the equivalent of two years’ basic salary. Example 4 above shows a real case where this cap reduced the payout by AED 18,000.
Where can I verify the official rules behind these examples?
The UAE government’s official portal publishes guidance on pension and end of service benefits, including the qualifying service period and the 21/30-day rates. Use it to confirm any figure your employer gives you.
The Bottom Line
Working through gratuity calculation examples like these takes ten minutes and can save you thousands of dirhams. The maths is fixed, the rates are published, and your employer’s figure either matches them or it doesn’t. Run the numbers yourself using your basic salary and actual service length, compare the result with your settlement statement, and raise any gap before you sign.
Last Updated: 8 October 2026
About the author: Zaviyar Sultan is a UAE-focused writer at Asandada24, covering driving, visas, banking, insurance and everyday UAE life. His guides are researched from official UAE government and regulator sources and updated regularly.
Asandada24 is an independent informational website, not affiliated with the UAE government or any agency mentioned; content is general information only, not legal, immigration or financial advice; verify critical details with official sources before acting.