At a glance: quick gratuity reference
| Years of service | Approx. gratuity (based on basic salary) |
|---|---|
| Less than 1 year | No gratuity entitlement |
| 1–5 years | 21 days' basic salary × each completed year |
| 5–10 years | 21 days/year for first 5 years + 30 days/year for years beyond 5 |
| 10–20 years | Same formula continues — 30 days/year beyond year 5 |
| 20+ years | Same formula, subject to the 2-year total salary cap |
| Salary increased mid-service | Most employers calculate using the final basic salary across all years — check your contract |
The gratuity formula is simple in principle (21 days per year for the first five years, then 30 days per year after that, on basic salary, capped at two years' pay) but small details — which salary figure is used, how partial years and unpaid leave are treated — can meaningfully change the result. Use the worked examples and reference table below to build your own estimate, then confirm the exact figure with HR before relying on it for planning.
The formula, restated
- Daily wage = basic monthly salary ÷ 30
- Years 1–5 of service: 21 days' pay per year of service
- Years 6 onward: 30 days' pay per year of service
- Less than 1 year of service: generally no entitlement
- Partial final year: calculated pro-rata based on completed months/days
If you haven't already, read our complete UAE gratuity guide for the full context on what counts as basic salary, how resignation vs. termination can affect entitlements, and what reduces a payout — this article focuses purely on the arithmetic.
Example 1: Service of exactly 5 years
Basic salary: AED 8,000/month. Service: exactly 5 years, all years at the 21-day rate.
| Step | Calculation | Result |
|---|---|---|
| Daily wage | 8,000 ÷ 30 | AED 266.67 |
| Gratuity days owed | 5 years × 21 days | 105 days |
| Total gratuity | 105 × AED 266.67 | AED 28,000 |
Example 2: Service crossing the 5-year threshold
Basic salary: AED 8,000/month (unchanged throughout). Service: 9 years and 6 months.
| Step | Calculation | Result |
|---|---|---|
| Daily wage | 8,000 ÷ 30 | AED 266.67 |
| Years 1–5 (21 days/year) | 5 × 21 | 105 days |
| Years 6–9 (30 days/year) | 4 × 30 | 120 days |
| Final 6 months (pro-rata, 30-day rate) | 0.5 × 30 | 15 days |
| Total gratuity days | 105 + 120 + 15 | 240 days |
| Total gratuity | 240 × AED 266.67 | AED 64,000 |
Note that the final partial year is calculated using the rate applicable to the year band it falls into — in this case the post-five-year, 30-day rate, since this employee is in their tenth year of service.
Once you have your gratuity figure, see our guide on what to do with your UAE gratuity payout for how to prioritise it — emergency fund, debt, then investing.
Example 3: Salary increased during employment
Gratuity is calculated based on your final basic salary at the time your employment ends — not an average across your tenure, and not the salary you were on when you joined. This is one of the more favourable aspects of the formula for long-serving employees who have received salary increases over time.
Example: an employee joined on a basic salary of AED 6,000/month, received increases over the years, and is now on AED 12,000/month after 7 years of total service.
| Step | Calculation | Result |
|---|---|---|
| Daily wage (based on final salary) | 12,000 ÷ 30 | AED 400.00 |
| Years 1–5 (21 days/year) | 5 × 21 | 105 days |
| Years 6–7 (30 days/year) | 2 × 30 | 60 days |
| Total gratuity days | 105 + 60 | 165 days |
| Total gratuity | 165 × AED 400.00 | AED 66,000 |
The entire 165 days are valued at the final AED 400/day rate, even though the employee spent several years earning a lower salary. This is why it's worth confirming that "basic salary" on your most recent payslip is what your employer will use for the calculation, and why salary increases — even modest ones, in the years before you expect to leave — have a compounding effect on your eventual gratuity.
Example 4: Periods of unpaid leave
If you took a period of unpaid leave during your employment, that period may not count toward your qualifying years of service, depending on your contract and company policy. Example: an employee has been with their employer for 6 calendar years but took 6 months of unpaid leave during that time.
| Step | Calculation | Result |
|---|---|---|
| Calendar tenure | 6 years | 6 years |
| Less: unpaid leave period | − 6 months | 5.5 years qualifying service |
| Years 1–5 (21 days/year) | 5 × 21 | 105 days |
| Final 0.5 year (30 days/year rate) | 0.5 × 30 | 15 days |
| Total gratuity days | 105 + 15 | 120 days |
Whether unpaid leave is excluded in this way depends on your specific contract and company policy — some employers count it, others don't. If you've taken extended unpaid leave, this is worth clarifying with HR well before your departure, rather than discovering the treatment for the first time in your final settlement.
A quick reference table for common tenures
For an employee with a basic salary of AED 10,000/month and continuous service with no interruptions, here is how total gratuity scales with tenure:
| Years of service | Gratuity days | Approx. gratuity (AED) |
|---|---|---|
| 1 year | 21 days | AED 7,000 |
| 3 years | 63 days | AED 21,000 |
| 5 years | 105 days | AED 35,000 |
| 7 years | 165 days | AED 55,000 |
| 10 years | 255 days | AED 85,000 |
| 15 years | 405 days | AED 135,000 |
| 20 years | 555 days | AED 185,000 |
These figures scale linearly with basic salary — to estimate your own, divide your basic monthly salary by AED 10,000 and multiply the relevant figure above by that ratio. For example, on a basic salary of AED 15,000/month with 10 years of service: AED 85,000 × 1.5 = AED 127,500.
Build your own calculation
- Find your current basic monthly salary (not total package).
- Calculate your daily wage: basic salary ÷ 30.
- Work out your total years and months of qualifying continuous service.
- Apply 21 days per year for years 1–5, and 30 days per year for years beyond that.
- For a partial final year, apply the rate for the band that year falls into, pro-rated by months.
- Multiply your total gratuity days by your daily wage.
- Cross-check the result with HR — and confirm whether any deductions (loans, advances, company property) might apply to your specific final settlement.
Once you have your gratuity figure, putting any surplus to work sooner rather than later matters — Sarwa offers diversified, low-minimum portfolios for Gulf residents.
Once you know your gratuity figure, see our guide on what to do with your UAE gratuity payout for how to prioritise it — emergency fund, debt, then investing.
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Frequently asked questions
Basic salary only — housing, transport, and other allowances are generally excluded from the calculation. See our complete UAE gratuity guide for more on why this matters.
Check your employment contract or your most recent payslip — UAE payslips are generally required to itemise basic salary separately from allowances. If it isn't clear, ask your HR or payroll department directly; this is a routine request.
Yes — any accrued but unused annual leave is typically paid out separately as part of your final settlement, calculated at your daily wage rate, in addition to (not as part of) your gratuity entitlement.
The total is generally capped at the equivalent of two years' total salary, though this rarely applies in practice for typical expat tenures — it would generally only become relevant after a very long period of continuous service.
Ask for a written breakdown of how the figure was calculated, including the basic salary figure used, the years of service counted, and any deductions applied. Discrepancies are often due to a different basic salary figure being used, a different treatment of partial years, or deductions you weren't aware of — a written breakdown lets you compare line by line.
