Understanding Gratuity Calculation in the UAE

Apr 8, 2026

69 min

Apr 8, 2026 08:31

Is UAE gratuity calculated on basic salary or gross salary?

## Basic vs. Gross Salary

In the UAE, gratuity for full-time employees is calculated based on the basic salary, not the gross salary. The basic salary is the fixed amount specified in the employment contract, while the gross salary includes additional allowances such as housing and transport.

## Legal Definitions

According to UAE Labour Law, the term 'basic wage' is used for calculating severance pay. This excludes any allowances or benefits in kind. However, the broader term 'wage' includes both the basic salary and allowances.

## Gratuity Calculation Rules

For service less than one year, no gratuity is paid. For service between one and five years, employees receive 21 days' basic salary per year. For service beyond five years, the calculation is 21 days' basic salary for the first five years and 30 days' basic salary for each subsequent year. The maximum gratuity cannot exceed two years' total salary.

## Example Calculation

Consider an employee with a total wage of Dh10,000 and a basic wage of Dh9,000, who has worked for 30 years. The gratuity is calculated as follows: Dh31,500 for the first five years and Dh225,000 for the remaining 25 years, totaling Dh256,500. However, due to the legal cap, the maximum payout is Dh240,000.

## Checking Your Basic Salary

Your basic salary is detailed in your employment contract, which can be accessed through the MOHRE or UAE Pass apps.

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