When your employment in the UAE comes to an end, one number matters more than any other in your final settlement: your end-of-service gratuity. This guide on How to Estimate Your End-of-Service Benefits shows you how to work that number out yourself with nothing more than your basic salary and your start and end dates — so you can check your employer’s figure before you sign anything.
Quick Answer
To estimate your end-of-service benefits: (1) find your monthly basic salary (excluding all allowances), (2) divide it by 30 to get your daily basic rate, (3) count your years of continuous service, (4) multiply the daily rate by 21 days for each of the first five years and by 30 days for each year beyond five, pro-rating any partial year, and (5) cap the total at two years’ basic pay. Add any unused annual leave pay and notice-in-lieu compensation for your complete final settlement estimate.
The Formula, Step by Step
UAE Labour Law (Federal Decree-Law No. 33 of 2021) sets the gratuity formula for private-sector employees who complete at least one year of continuous service. It runs on basic salary alone — never your total package. For a fuller walkthrough of the legal background, see our UAE end-of-service gratuity guide.
Step 1: Find your basic salary
Your basic salary is the fixed figure in your MOHRE-registered employment contract, before housing, transport, and other allowances. If you are unsure which number is the basic one, your latest salary certificate or payslip usually separates them — our salary certificate guide explains where to find it.
Step 2: Get your daily basic rate
Divide the monthly basic salary by 30. The law uses calendar days, so it is always 30 — not the number of working days in a particular month.
Daily basic rate = monthly basic salary ÷ 30
Step 3: Measure your service period
Count from your first day of employment (including probation) to your last working day, then subtract any days of unpaid leave or unauthorised absence. Convert the result into years with a fraction — for example, 4 years and 7 months is 4.58 years.
Step 4: Apply the rates
- First five years: daily basic rate × 21 × years of service (up to 5)
- Beyond five years: daily basic rate × 30 × years of service after year five
- Cap: the total can never exceed two years of basic pay
Or as one formula: Gratuity = (Basic ÷ 30 × 21 × years up to 5) + (Basic ÷ 30 × 30 × years beyond 5).
How to Estimate Your End-of-Service Benefits: Worked Examples
Three examples at different salary levels and service lengths, plus one showing the two-year cap:
| Profile | Basic salary | Service | Calculation | Estimated gratuity |
|---|---|---|---|---|
| Junior staff | AED 5,000 | 1 year 2 months (1.17 yrs) | 166.67 × 21 × 1.17 | ≈ AED 4,083 |
| Mid-level | AED 8,000 | 3.5 years | 266.67 × 21 × 3.5 | ≈ AED 19,600 |
| Senior | AED 12,000 | 7 years 4 months (7.33 yrs) | (400 × 21 × 5) + (400 × 30 × 2.33) | ≈ AED 70,000 |
| Long service | AED 20,000 | 30 years | Uncapped: ≈ 570,000 → capped at 2 yrs’ pay | AED 480,000 |
More detailed breakdowns of different scenarios are available in our gratuity calculation examples for employees.
What Counts as “Salary” — and What Doesn’t
The biggest estimation mistake is using the wrong salary figure. The law is explicit: gratuity is calculated on the last basic wage, and the wage used “shall not include” payments such as housing allowance, transport allowance, overtime, bonuses, commissions, children’s education allowance, and similar extras.
| Included | Excluded |
|---|---|
| Basic salary (last drawn) | Housing allowance |
| — | Transport / car allowance |
| — | Overtime pay |
| — | Bonuses and commissions |
| — | School / education allowance |
| — | Annual air ticket allowance |
One nuance: if your contract bundles everything into a single “salary” figure with no separate basic, the treatment can be disputed — keep the signed contract, because the label the contract uses matters. The UAE government’s end-of-service benefits page confirms benefits are calculated on the last basic salary.
Adjustments: Part-Time, Probation, and Unpaid Leave
- Probation: counts toward service. The clock starts on your first day, not your confirmation date.
- Unpaid leave and unpaid absence: excluded from the service period. Two months of unpaid leave can move your total enough to matter at the boundary of a year.
- Paid leave (annual, sick, maternity): does not reduce service — these are still employment days.
- Part-time employees: entitled to gratuity pro-rated against a full-time equivalent, based on actual hours worked. Estimate using your contractual basic pay and hours ratio.
- Less than one year of service: no statutory gratuity. Your estimate is zero unless your contract promises something better.
Reality-Checking the Number Your Employer Gives You
Employers are human, and payroll departments make errors — usually in the employer’s favour. Before accepting a settlement figure, run this five-point check, adapted from our guide on how to check an employer’s gratuity calculation:
- Confirm the basic salary matches your contract, not your total package. Using gross pay is the most common error — the common gratuity calculation errors guide lists the rest.
- Verify the service dates. Check the start date against your offer letter and the end date against your resignation or termination letter. A wrong start date by a few months can cost you a pro-rated slice.
- Check unpaid-leave deductions. Make sure only genuine unpaid days were subtracted — not sick leave or annual leave.
- Confirm the rate split at year five. The 21-day rate applies to years one through five; the 30-day rate only kicks in after five full years.
- Do your own math. Plug the same inputs into the formula yourself. If your number and theirs differ, ask for their written breakdown line by line.
Also remember the final settlement is more than gratuity: add accrued but unused annual leave (paid at your full daily wage including allowances) and any agreed notice-in-lieu compensation. Our end-of-service benefits checklist walks through every line item.
Frequently Asked Questions (FAQs)
Can I estimate gratuity on my total salary including allowances?
No — and doing so is the fastest way to overestimate. The law calculates gratuity on basic salary only. If your basic is AED 6,000 inside a AED 12,000 package, your gratuity is based on the 6,000.
What if my basic salary changed over the years?
Only the last basic salary matters. Earlier raises or cuts do not enter the calculation — the formula always uses the basic wage you were entitled to at the end of service.
Does it matter whether I resigned or was terminated?
For the amount, no. Under the current law, both get the same formula after one year of service. The old rules that reduced gratuity for resigning employees no longer apply.
Are gratuity payments taxed in the UAE?
The UAE has no personal income tax, so your gratuity is paid to you in full. (Tax treatment in your home country is a separate matter — check local rules if you remit the money.)
What about government-sector expatriate employees?
A different scheme applies: roughly one month’s basic salary per year for the first five years, one and a half months for the next five, and two months per year after that. Our UAE retirement and pension benefits guide for expats covers the alternatives.
How long should I wait for payment?
The law expects prompt settlement once employment ends. If payment is delayed without explanation, follow up in writing, keep records of every message, and consider raising it with MOHRE.
How is unused annual leave pay estimated?
Unlike gratuity, unused annual leave is paid at your full daily wage — basic salary plus allowances. Divide your total monthly remuneration by 30 and multiply by your unused leave days. Many people forget this line item entirely, which is why a settlement can look short even when the gratuity figure is correct: check both parts separately.
I work in a free zone — is the formula the same?
Most UAE free zones follow the federal Labour Law, so the estimate above applies. Two notable exceptions are DIFC and ADGM, which run their own employment regimes with different end-of-service structures (including mandatory savings schemes). If your visa was issued by DIFC or ADGM, check your zone’s rules instead of the federal formula.
Should I use an online gratuity calculator?
Calculators are fine as a rough check, but many ask for your total salary and quietly use it as the basic figure, which inflates the result. Always verify which salary figure the tool uses before trusting its number — doing the five-minute manual calculation above is more reliable because you control the inputs.
The Bottom Line
Estimating your end-of-service benefits takes five minutes: basic salary divided by 30, times 21 days per year for the first five years and 30 days per year after, pro-rated, capped at two years’ pay. Run the numbers yourself before your exit meeting, verify the basic salary and service dates your employer uses, and add unused leave and notice compensation for the full picture. An estimate in your pocket turns a confusing settlement meeting into a simple comparison.
Last Updated: 8 October 2026
About the author: Zaviyar Sultan is a UAE-focused writer at Paxi, covering driving, visas, banking, insurance and everyday UAE life. His guides are researched from official UAE government and regulator sources and updated regularly.
Paxi 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.