UAE End of Service Gratuity Guide 2026
End of service gratuity (also called end of service benefits or ESB) is a lump-sum payment that UAE employers must provide to employees upon termination of employment. Whether you're resigning, being terminated, or completing your contract, understanding how gratuity is calculated is essential for financial planning. This comprehensive guide covers everything you need to know about UAE gratuity laws in 2026.
Unlimited vs Limited Contracts: Key Differences
Under the new UAE Labour Law (Federal Decree-Law No. 33 of 2021), all employment contracts are now considered 'limited' (fixed-term) contracts with a maximum duration of 3 years, renewable. The old distinction between unlimited and limited contracts has been phased out. However, employees on older unlimited contracts may still be governed by previous rules until their contracts are updated. For limited contracts, gratuity is calculated based on 21 days of basic salary for each of the first 5 years, and 30 days for each additional year. The total gratuity cannot exceed 2 years' worth of basic salary regardless of tenure.
Resignation Rules and Gratuity Entitlement
If you resign from your position, your gratuity entitlement depends on your length of service. Employees who complete at least one year of continuous service are entitled to gratuity. For resignations during the first 5 years, you receive one-third of the calculated gratuity (if served 1-3 years) or two-thirds (if served 3-5 years). After 5 years of service, you're entitled to the full gratuity amount. If you resign without serving the required notice period, your employer may deduct up to 30 days' salary from your final settlement. Always provide proper written notice as specified in your contract.
Legal Deductions from Gratuity
Employers can make certain legal deductions from your gratuity payment. These include: outstanding loans or advances, damage to company property caused by negligence, any amounts owed under court judgments, and unpaid housing or utility bills if company-provided. However, deductions cannot exceed the equivalent of 5 days' wages per month during employment. Upon termination, employers must settle all dues within 14 days. If you believe deductions are unfair, you can file a complaint with MOHRE (Ministry of Human Resources and Emiratisation) through their smart app or service centers.
Calculating Your Gratuity: Step by Step
To calculate your gratuity: First, determine your basic salary (excluding allowances, bonuses, and commissions). For the first 5 years, multiply your daily wage by 21, then by years served. For years beyond 5, multiply daily wage by 30, then by additional years. Add both amounts together. For resignations before 5 years, apply the appropriate fraction (1/3 or 2/3). Remember: only basic salary counts, the maximum cap is 2 years' salary, and part-year service of 6+ months counts as a full year. Our calculator above handles all these calculations automatically.