Overview

Wondering how to calculate gratuity in the UAE as per the latest labour law updates in 2025? Whether you’re an HR professional, employer, or employee, understanding your end-of-service benefits is essential. This step-by-step guide breaks down everything you need to know—from eligibility to formulas—using simple language, legal references, and numeric examples.

You’ll also find a free ROI calculator powered by MaxHR to estimate costs or benefits instantly.

What Is Gratuity in the UAE?

Gratuity, also known as end-of-service benefits, is a lump sum paid by an employer to an employee at the end of their service, as mandated under the UAE Labour Law. It’s a statutory right and calculated based on the employee’s basic salary and length of service.

Who Is Eligible for Gratuity?

You are eligible for gratuity if:

• You have completed at least one year of continuous service.

• You resigned or your contract was terminated for reasons other than gross misconduct.

• You’re under a limited or unlimited contract with the employer.

Types of Employment Contracts in the UAE

Step-by-Step: How to Calculate Gratuity in the UAE (2025)

Step 1: Confirm Employment Duration

Start by calculating total service years in the organization. Round off any time more than 6 months as a full year.

Step 2: Identify Basic Salary

Gratuity is calculated based on basic salary only (excluding allowances and bonuses).

Step 3: Apply the Formula Based on Contract Type

For Limited Contracts:

For Unlimited Contracts (Resignation):

Example Gratuity Calculation (2025 UAE)

Let’s say:

• Basic monthly salary = AED 10,000

• Service duration = 6 years

• Contract = Limited

Calculation:

• First 5 years: 5 × 21 days = 105 days

• 6th year: 1 × 30 days = 30 days

• Total = 135 days of basic salary

Daily Salary = 10,000 ÷ 30 = AED 333.33
Gratuity = 135 × 333.33 = AED 44,999.55

Use MaxHR’s Gratuity ROI Calculator

Manual calculation takes time—and it’s easy to make errors. Try the MaxHR Gratuity ROI Calculator to:

• Instantly calculate accurate gratuity

• Compare savings on employee offboarding

• Automate HR compliance with UAE law

MaxHR helps HR teams cut admin time and avoid payroll penalties.

Why You Should Know How to Calculate Gratuity in the UAE

• Transparency: Helps employees plan better financially.

• Compliance: Employers can avoid legal issues or disputes.

• Retention: Clear policies improve employee trust.

Understanding gratuity boosts workplace transparency and ensures compliance with UAE Labour Law 2025.

Conclusion

Learning how to calculate gratuity in the UAE isn’t just for HR professionals—it’s knowledge every working individual should have. With legal requirements changing and financial planning becoming more important, knowing your rights (and obligations) makes all the difference.

And remember, if you want to save time and calculate gratuity instantly, use the free tool at MaxHR. It’s accurate, fast, and legally aligned.

FAQs

1. How many years do you have to work to get gratuity in the UAE?

You must work at least 1 year continuously with the same employer.

2. Is gratuity based on total salary or basic salary?

Gratuity is always calculated based on the basic salary, not including allowances.

3. Do part-time workers get gratuity in the UAE?

Yes, as per the UAE Labour Law 2022 updates, part-time employees are also eligible on a pro-rata basis.

4. Can an employer deduct gratuity?

Only under certain legal conditions like gross misconduct; otherwise, gratuity is a statutory right.

5. Where can I find an easy way to calculate gratuity online?

You can use the MaxHR ROI Gratuity Calculator for instant results.