What is the end of service in the UAE?
Under the UAE Labour Law, employees who resign, are terminated, or reach the end of their contract are entitled to end-of-service benefits.
These include gratuity payments (based on final basic salary), unpaid wages, and compensation for unused leave.
Who qualifies for gratuity in the UAE?
All employees—full-time, part-time, or flexible—may qualify if they’ve completed at least one year of service.
This article explains how gratuity is calculated, the updated 2025 rules, and what constitutes a final settlement. For disputes or legal advice, our licensed UAE labour lawyers are here to help.
Contact our expert lawyers & legal consultants in UAE. Click the WhatsApp icon below.
Table of Contents
Gratuity – End of Service in the UAE
How does gratuity work in the UAE?
Gratuity is calculated based on the employee’s final basic salary and total duration of continuous service. Allowances like housing or transport are excluded from the calculation.
When is gratuity paid?
It is paid when employment ends—due to resignation, termination, or contract completion—and must be settled within 14 days of the employee’s final working day.
Who governs gratuity in the UAE?
End-of-service gratuity is regulated by the UAE Labour Law and applies to employees in the private sector, including those on full-time, part-time, or flexible contracts.
Who Is Eligible for Gratuity?
Expatriate employees in the UAE private sector are eligible for gratuity under the Labour Law, while UAE nationals receive retirement benefits through the national pension system.
All employees—whether full-time, part-time, or on flexible work arrangements—may qualify for gratuity, calculated proportionately to their working hours and length of service.
Gratuity Calculation in UAE
The end-of-service gratuity is calculated based on an employee’s last basic salary, excluding allowances such as housing, transport, or utilities.
The calculation formula depends on the duration of service:
- Less than 1 year: No gratuity is due.
- 1 to 5 years of service: Entitled to 21 days’ basic yearly salary.
- Over 5 years: Entitled to 30 days’ basic salary for each year beyond five years.
The gratuity amount must not exceed the equivalent of two years’ total salary, and unpaid leave days are excluded from the calculation.
End of Service UAE Example:
Suppose an employee has a basic salary of AED 8,500 and has worked for 7 years. Their gratuity would be calculated as follows:
- First 5 years: (8,500 ÷ 30) × 21 × 5 = AED 29,750
- Years 6 and 7: (8,500 ÷ 30) × 30 × 2 = AED 17,000
- Total gratuity = AED 46,750
This example demonstrates how gratuity increases after completing five years of service, reflecting the shift from 21 days to 30 days of basic salary per additional year.
Rules of Gratuity Entitlement in the UAE
What rules govern end-of-service gratuity in the UAE? UAE Labour Law outlines the core obligations and entitlement requirements as follows:
- Employees must have at least one year of uninterrupted service to qualify for gratuity.
- Gratuity must be paid based on the final basic salary (excluding all allowances).
- Payment of gratuity and all other dues must be completed within 14 days of the contract’s end.
- Employers are allowed to deduct any outstanding financial obligations owed by the employee (e.g., loans, salary advances).
- The gratuity is calculated proportionally based on working hours for part-time and flexible work arrangements.
- Alternative End-of-Service Scheme: Employers may adopt a Savings Scheme, an investment-based approach to gratuity, as an alternative to the standard lump-sum gratuity model.
Note: Gratuity rules in UAE free zones may vary. While some follow the Federal Labour Law, others have independent end-of-service schemes or savings plans.
To understand how gratuity is calculated in specific free zones, refer to our article on Gratuity Calculation under Free Zone Laws in the UAE.
Final Settlement According to UAE Labour Law
What is included in a final settlement in the UAE? The final settlement is the total financial package owed to an employee at the end of employment, covering:
- Any unpaid salary up to the last working day.
- Gratuity payout as per service duration.
- Compensation for unused annual leave.
- Outstanding bonuses, commissions, or performance incentives.
- Reimbursable expenses.
Under UAE Labour Law, employers must settle all entitlements within 14 days of the employee’s final working day.
In cases where the employee owes money to the employer, those amounts may be deducted from the final settlement.
Read about Termination of Employment in the UAE.
Legal Support for End-of-Service Cases in UAE
Our legal consultants in Dubai offer a full suite of legal services to ensure compliance with the UAE Labour Law and to support both employers and employees through the matters of end of service in the UAE.
Our Key Legal Services Include:
- Gratuity Calculation Support
We help employees and employers precisely calculate end-of-service gratuity in line with legal requirements, avoiding costly errors. - Legal Advice on Employee Rights
Our legal experts provide guidance on entitlements, contract interpretation, and proper handling of terminations. - Dispute Resolution and Representation
We represent clients in disputes brought before the Ministry of Human Resources and Emiratisation (MoHRE) or UAE labor courts, whether for unpaid gratuity, unlawful termination, or salary disputes. - Contract Review and Drafting
We offer in-depth reviews of employment contracts to ensure end-of-service clauses are clearly defined and legally compliant. - Employer Compliance Services
For businesses, we assist with setting up internal processes and HR practices to ensure full compliance with UAE Labour Law, including the timely payment of end-of-service benefits.
FAQs about End-of-Service Matters in the UAE
Conclusion – Handling UAE End of Service
Gratuity for end of service in the UAE must be calculated based on the employee’s final basic salary—excluding allowances—and paid within 14 days of termination.
The final settlement should also include unpaid wages, compensation for unused leave, and any pending bonuses or commissions.
For part-time or flexible workers, gratuity is calculated proportionally. Employers may deduct outstanding loans or salary advances.
If you’re facing calculation errors, payment delays, or disputes, our legal team offers expert support in gratuity assessment, contract review, and full compliance with UAE Labour Law.
Contact our law firm in UAE for expert help. Click the Whatsapp icon below.
A law graduate and legal writer focusing on UAE law, he became known for his ability to clarify complex legal concepts through his writings. His work simplifies the intricacies of the legal landscape in the Emirates, helping both locals and expatriates navigate their legal concerns.
