Under UAE Labour Law, employees who resign or are terminated are legally entitled to end-of-service benefits. These include gratuity payments, unpaid salary, and compensation for unused leave or bonuses.
With varied employment types—full-time, part-time, and flexible—understanding how end of service in the UAE is calculated is crucial for employers and employees.
This article outlines key requirements for 2025, including gratuity definition, rules, final settlement components, and available legal support for disputes or compliance.
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Table of Contents
Gratuity – End of Service in the UAE
In the UAE, end-of-service benefits (gratuity) are mandatory payments provided to employees when their employment ends, whether through resignation, termination, or mutual agreement.
These benefits are governed by the UAE Labour Law and serve as financial recognition of the employee’s service duration.
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
The Labour Law sets out key obligations and entitlement rules related to payments of end of service in the UAE:
- 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
The final settlement is the complete financial package owed to an employee upon departure, 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
End-of-service benefits can be complex, especially when disputes arise over gratuity amounts, unpaid dues, or wrongful termination.
Our legal consultants in Dubai offers a full suite of legal services to ensure compliance with the UAE Labour Law and to support both employers and employees through the process.
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
Understanding the legal framework governing the end of service in the UAE is essential for employees seeking fair compensation and employers aiming to remain compliant.
Gratuity, unpaid dues, and other end-of-service components must be handled with care, accuracy, and legal precision.
If you’re facing issues related to your final settlement or need professional help navigating the complexities of UAE labor law, our legal team is here to guide you.
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.
