End of Service Gratuity in the UAE (Mainland & Free Zone)

When an employee’s service in the UAE comes to an end — whether through resignation, termination, or contract expiry — they’re entitled to receive End of Service Gratuity (EOSB). 

Gratuity is a statutory payment defined under Federal Decree-Law No. 33 of 2021 and Cabinet Decision No. 1 of 2022, designed to reward employees for their length of service and contribution. 

This guide explains how gratuity is calculated, what employers must pay, and how the rules differ between mainland and Free Zone companies. 

What Is End of Service Gratuity? 

End of Service Gratuity is a lump sum payment made by the employer to the employee at the end of their employment contract. 

It is based solely on the employee’s basic salary and the total number of years worked. Allowances such as housing, transport, or overtime are excluded. 

It acts as a severance benefit, helping employees transition after leaving their role. 

Who Is Eligible for End of Service Gratuity? 

✅ Employees under limited-term contracts who complete at least 1 year of continuous service.
✅ Expatriate employees (UAE nationals are covered separately by pension rules).
✅ Both full-time and part-time employees (gratuity is calculated proportionately). 

❌ Not eligible if: 

• The employee has worked less than 1 year. 

• Termination occurs due to gross misconduct (Article 44 of the Labour Law). 

• They are enrolled in a Free Zone alternative savings plan (e.g., DEWS in DIFC). 

How Gratuity Is Calculated 

Gratuity is calculated based on the employee’s last basic salary (excluding allowances like housing, transport, or commissions). 

Standard Calculation (Mainland UAE): 

• First 5 years of service: 21 days’ basic salary per year. 

• After 5 years: 30 days’ basic salary per year. 

Formula: 

Gratuity = (Basic Salary ÷ 30) × 21 (or 30) × Years of Service 

Important Limits: 

• Total gratuity cannot exceed 2 years’ worth of salary. 

• Any unpaid leave or absences without pay are deducted from service length. 

Example Calculation 

• Basic salary: AED 8,000/month 
• Service period: 7 years 

First 5 years:
(8,000 ÷ 30 × 21) × 5 = AED 28,000 

Next 2 years:
(8,000 ÷ 30 × 30) × 2 = AED 16,000 

Total gratuity owed: AED 44,000 

Gratuity for Part-Time Employees 

For part-time or flexible workers, gratuity is calculated pro rata based on: 

• Hours worked compared to full-time hours. 

• Service duration. 

• Final basic wage. 

This ensures fair treatment in line with their working schedule. 

Free Zones and Alternative Schemes 

While most Free Zones follow MOHRE gratuity rules, some operate independent schemes: 

• DIFC (Dubai International Financial Centre) → DEWS Plan (Defined Contribution Scheme). 

• ADGM (Abu Dhabi Global Market) → Workplace Savings Scheme. 

Instead of paying gratuity at the end, employers make monthly contributions into savings accounts managed by approved providers. 

Employers in these Free Zones must follow the specific contribution rules instead of traditional gratuity. 

Gratuity Payment Deadlines 

Employers must pay gratuity within 14 days of the employee’s last working day.
Delays can result in MOHRE fines or legal claims filed by the employee.