End of Service Gratuity Calculation UAE: A Comprehensive Guide for Employees and Employers

In the UAE, End of Service Gratuity (EOSG) is a critical financial right designed to support employees transitioning after their employment ends. Governed by Federal Decree-Law No. 33 of 2021 (the new UAE Labor Law), this benefit ensures that workers who have contributed to a company’s growth receive a fair gratuity pay

Whether you are looking to calculate your gratuity as an employee or manage liabilities as an employer, understanding the calculation in the UAE is essential for legal compliance and financial planning.

What is End of Service Gratuity in the UAE?

End-of-service gratuity (also known as an end-of-service benefit) is a mandatory lump-sum payment given to an employee upon the completion of their service period. The gratuity amount serves as a recognition of the worker's loyalty and provides financial stability during retirement or career transitions.

Per UAE labor law dictates, this benefit is mandatory for all expatriate employees in the UAE who meet the minimum service requirements.

How is End of Service Gratuity Calculated in the UAE?

The calculation of EOSG depends on several factors, including the type of contract, the duration of employment, and the final salary. Let’s break down how gratuity is calculated under the different schemes in the UAE.

1. Old End‑of‑Service Gratuity Scheme (for Employees with Limited and Unlimited Contracts)

Who is it for?
This scheme applies to full-time employees with limited or unlimited contracts.

Gratuity Calculation Method:

• For the First 5 Years:
  Employees are entitled to 21 days of basic salary for each year of service.

• For Years Beyond 5:
  After completing 5 years of service, employees are entitled to 30 days of basic salary for each additional year of service.

• Part-Time Employees:
  Gratuity for part-time employees is calculated on a prorated basis depending on the number of hours worked in comparison to a full-time employee.

Gratuity Cap:

• The maximum amount of gratuity an employee can receive is capped at 2 years' basic salary.

Payment Deadline:

• The gratuity payment must be made within 14 days after the employment ends.

2. New Voluntary End‑of‑Service Gratuity Scheme (for Non-GCC Nationals)

Who is it for?
This new scheme is designed exclusively for non-GCC nationals working in the UAE.

Contribution Model:
Under this scheme, both the employer and employee contribute monthly to an approved investment fund rather than paying a lump sum at the end of employment.

Employer Contribution Rates:

• First 5 years: The employer contributes 5.83% of the employee's monthly basic salary.

• Beyond 5 years: The contribution increases to 8.33% of the employee's monthly basic salary.

Employee Contribution:
Employees can also contribute to the fund, with the option of contributing up to 25% of their annual salary.

Payment Timeline:
Employers are required to make contributions by the 15th of each month.

No Contribution Cap:
Unlike the old scheme, the new voluntary scheme has no cap on the contributions made to the investment fund.

Eligibility Criteria for End of Service Gratuity

For employees to be eligible for EOSG, the following conditions must be met:

1. Citizenship Status:

• UAE Nationals: Gratuity is available for all UAE nationals, including GCC citizens.

• Foreign Nationals: Non-GCC nationals are also eligible under the old scheme, but only the new voluntary scheme is available for them post-2022.

2. Duration of Service:

Employees must have worked continuously for a minimum of 1 year to be entitled to EOSG. Employees who leave before the completion of one year of service (especially for resignation) are not entitled to gratuity, except under certain circumstances (e.g., illness, family emergencies).

3. Reason for Termination:

• Resignation: If an employee resigns before the completion of one year or for reasons of misconduct, they may forfeit their gratuity entitlement.

• Termination: Employees who are terminated (except for gross misconduct) are entitled to gratuity payments.

Using a Gratuity Calculator

To calculate your uae gratuity accurately, many use an online gratuity calculator. These tools ask for your joining date, end date, and last basic salary to provide an estimate.

1. MOHRE Gratuity Calculator: The official mohre gratuity calculator is the most reliable tool for mainland employees.

2. Gratuity Calculator Dubai: Specific tools are available for different jurisdictions, though the formula remains consistent across the mainland.

3. Online Gratuity: Most online gratuity calculator platforms help you calculate gratuity in the UAE by applying the 21/30-day formula automatically.

HR and Employer Responsibilities in EOSG Management

For employers, managing benefits in the UAE requires diligent payroll management and record keeping. Failure to calculate gratuity correctly or pay it within 14 days of the contract's end date can lead to:

• Fines & Penalties: Up to AED 1,000,000 for repeated violations of per the uae labour law.

• Work Permit Blocks: MOHRE may suspend the issuance of new permits.

• Reputational Damage: Affecting the ability to attract talent in a competitive 2025-2026 market.

Employers should also perform an actuarial valuation to ensure they have enough reserve funds for future end-of-service benefits in the UAE.

Legal Risks for Employers: What Happens if Gratuity is Not Paid?

Failure to comply with gratuity obligations can have severe consequences for employers:

1. Fines & Penalties:

Employers who fail to pay gratuity on time may face fines, and their work permits could be blocked.

2. Lawsuits:

Employees may choose to file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE), potentially leading to legal action.

3. Reputational Damage:

Non-compliance can damage the company’s reputation, making it difficult to attract and retain top talent in the future.

How to Budget for End of Service Gratuity

Managing gratuity obligations is a financial responsibility for every employer. Here are a few ways to budget for EOSG liabilities:

1. Actuarial Valuation:

Employers may consider hiring actuaries to estimate their future gratuity liabilities, especially for larger organizations with many employees.

2. Reserve Funds:

Setting aside a reserve fund each year to cover gratuity payments will help employers manage future obligations effectively.

3. Regular Review of Employment Contracts:

Employers should review employee contracts, salaries, and length of service regularly to anticipate future gratuity liabilities and ensure compliance with the law

• How does UAE Gratuity Calculator works?

  A gratuity calculator uae is a specialized digital tool designed to help workers and HR departments calculate gratuity in uae with precision. By entering specific data such as your period of service and final basic salary for the first and subsequent years, the tool applies the legal formulas found in Article 51 of the UAE Labor Law. Whether you are reviewing your records from 2025 or planning for the current year, the calculation in uae ensures an accurate gratuity assessment. Every employee is entitled to gratuity provided they have completed at least least one year of service under their specific type of employment contract.

  • Eligibility: You are eligible for gratuity once you have completed at least one year of continuous service with your employer.

  • Contract Type: The uae is calculated based on a limited contract structure, which has become the standard contract type across the Emirates.

  • First Five Years: For the first five years of service, the calculation is based on 21 days’ basic salary for each year worked.

  • Long-Term Service: After you surpass five years of service, the gratuity increases to a rate of 30 days of basic pay; specifically, for these subsequent service and 30 days are used for each additional year.

  • Lump Sum Payment: Employees who have completed their first five years of service and beyond are entitled to full gratuity for the entire period of service.

  • The Cap: It is important to remember that the total gratuity payment cannot exceed two years' worth of your basic salary.

How Young & Right Can Help You with End of Service Gratuity Calculation in the UAE

At Young & Right, we provide expert assistance with End of Service Gratuity (EOSG) calculations to ensure accuracy and compliance with UAE Labor Law. Here’s how we can help:

• Accurate Gratuity Calculation: We ensure your gratuity in the UAE is calculated correctly based on your years of service, basic salary, and the applicable law (21 days for the first 5 years, 30 days after).

• Understanding the Scheme: We explain the differences between the old and new gratuity schemes, ensuring employees and employers are well-informed about their entitlements.

• Maximizing Your End of Service Benefit: We help both employees and employers understand how to calculate and maximize the end-of-service benefit accurately, including any adjustments for part-time employees.

• Legal Compliance: We ensure that employers remain compliant with gratuity laws, avoiding penalties and ensuring timely payments.

At Young & Right, we simplify the complex process of gratuity calculation, ensuring that employees receive their full gratuity and employers are legally compliant.

Conclusion

Mastering the uae gratuity calculation ensures that employees in the uae receive their rightful end-of-service benefit. Per the UAE Labor Law (33 of 2021), once you complete one year of service, you are entitled to a gratuity.

Whether you use a mohre gratuity calculator or an online gratuity calculator, always ensure your total gratuity is calculated based on your final basic salary and total service period. By tracking your year of continuous service, you can guarantee your gratuity pay is accurate and paid promptly by your end date.