UAE Gratuity Guide: Is It Calculated on Basic or Gross Salary?

Wondering how companies calculate your UAE end-of-service gratuity? Does it use your basic salary or your full gross wage? Let's explore exactly what the UAE Labour Law says today.

Understanding Basic vs. Gross Salary

Your overall pay package usually includes a basic salary and various allowances.

Basic Wage: This is the fixed amount specified in your employment contract. It strictly excludes all allowances.

Wage (Gross Salary): This represents your basic salary plus any contractual cash allowances and in-kind benefits.

Your basic salary directly impacts your end-of-service gratuity. It also dictates your ILOE (job-loss insurance) payouts, public holiday compensation, and overtime rates.

Overtime converts your basic salary into an hourly rate before adding 25% or 50%. ILOE pays a percentage of your basic salary and caps payouts by category.

Is Gratuity Based on Basic or Gross?

Employers calculate your UAE gratuity using your last drawn basic salary only. They do not include your gross salary or allowances.

UAE legal experts confirm companies must exclude housing, transport, and other bonuses from this calculation.

Who Qualifies for Gratuity?

Gratuity becomes payable after you complete one year of continuous service.

Full-time employees follow standard rules. Part-time and flexible workers receive a pro-rated gratuity based on their actual working hours.

Good news: Resigning no longer reduces your accrued gratuity. You get your full pro-rated amount whether you resign or face termination. Just avoid dismissal for gross misconduct.

General Gratuity Calculation Rules

• Under 1 year: No gratuity payout.

• 1 to 5 years: You earn 21 days of basic salary for each year of service.

• Above 5 years: You get 21 days for the first five years. You then earn 30 days of basic salary for every additional year.

• The Upper Limit: By law, your total gratuity cannot exceed the equivalent of two years' wage.

An Example Calculation

Let's say your full wage is Dh15,000 and your basic salary is Dh10,000. You worked for exactly 10 years.

• First 5 years: Dh10,000 × (21 ÷ 30) × 5 = Dh35,000

• Next 5 years: Dh10,000 × (30 ÷ 30) × 5 = Dh50,000

• Total accrued gratuity = Dh85,000

A Note on the Cap: The maximum cap limits payouts for very long service. Experts sometimes debate whether the two-year cap uses basic or gross wage. Long-service employees should verify their exact cap directly with MOHRE.

How to Check Your Basic Salary

You can easily find your exact basic salary breakdown in your official contract.

1. MOHRE App

Sign in using your UAE Pass. Navigate to your dashboard and open your labor contract PDF. This document shows your exact salary breakdown.

2. UAE Pass App

Go directly to the documents section. Request your labor contract under the professional or employment tab to view your salary structure.

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