How to Calculate Gratuity in UAE for Limited and Unlimited Contracts?

Calculating your end-of-service gratuity can be a complex process, especially with the frequent changes in UAE labor laws. Many factors, like your contract type and reason for leaving, directly affect the final amount. Understanding the rules is crucial to ensure you receive your full entitlements. Dr.Job Pro provides a powerful free tool to simplify this task, giving you a clear, precise figure based on the latest regulations. Gratuity Calculator Dubai, Abu Dhabi, UAE Online

How does the end-of-service gratuity calculation work in the UAE?

End-of-service gratuity is a payment an employee receives from their employer at the end of their employment period. The calculation is based on the last basic salary and the length of service. According to Federal Decree-Law No. 33 of 2021 on the Regulation of Labor Relations, the gratuity is calculated based on working days, not calendar days. The amount varies depending on whether your contract is limited or unlimited and your tenure.

The law specifies different rates. For the first five years of service, an employee is entitled to 21 calendar days of basic salary for each year. After five years, this increases to 30 calendar days of basic salary for each year of service. The total amount is capped at two years' worth of salary.

Gratuity Calculator UAE: Your Full Guide to End-of-Service Pay | Dr.Job Blog

How do you use the Dr.Job Pro Gratuity Calculator for UAE?

Using the https://drjobs.ae/gratuity-calculator is a straightforward way to determine your entitlement. First, you need to input your basic monthly salary. This should be the salary stated in your employment contract, excluding allowances like housing or transportation. Next, enter your start date and your last working day. The tool will automatically determine your total years of service.

Finally, select your contract type (limited or unlimited) and the reason for leaving. This is a critical step, as resigning under an unlimited contract after a short period can affect the final payment. The calculator processes these inputs against the official UAE labor law formulas. Within seconds, it provides a precise gratuity figure, saving you time and preventing errors in manual calculation.

What is the gratuity formula for limited and unlimited contracts in the UAE?

The gratuity formula is different for limited and unlimited contracts, particularly if the employee resigns. For limited contracts, a worker who completes their term and leaves is entitled to full gratuity. If they resign before completing one year, they are not entitled to any gratuity. Between one and five years, a portion of the gratuity is paid out.

Under an unlimited contract, an employee who has completed at least one year of continuous service is entitled to gratuity. If they resign with less than five years of service, they get one-third of the gratuity for the period between one and three years. This increases to two-thirds for three to five years. After five years, they are entitled to the full amount.

How is basic salary defined for gratuity calculation?

Your basic salary is the core component used in the calculation. It is defined as the fixed wage received by the employee, excluding any allowances, commissions, or bonuses. The basic salary is the figure agreed upon and documented in your official employment contract. Any changes to this amount must be formally amended in the contract to be considered in the gratuity calculation.

For example, if your total salary is AED 15,000 but your basic salary is AED 10,000, only the AED 10,000 figure is used to calculate your end-of-service benefits. Employers are legally required to base the calculation on this specific number. This is why knowing your basic salary is the first step when using any gratuity calculator.

What happens to my gratuity if I am terminated or resign?

The reason for the end of employment significantly impacts your gratuity. If an employer terminates a worker after a year or more of service, the employee is entitled to their full gratuity, regardless of contract type. If the employee resigns, the rules change based on the contract and tenure.

For example, a worker on a limited contract who resigns after four years of service might still be entitled to a full gratuity. However, a worker on an unlimited contract who resigns after four years gets two-thirds of their gratuity entitlement. It's crucial to understand these distinctions to avoid misunderstandings with your employer.

What if my last working day is in the middle of a month?

The gratuity calculation is based on your exact start and end dates. The Dr.Job calculator factors in the specific number of days you worked beyond full years. This ensures the calculation is precise down to the day. The law accounts for fractions of a year to provide fair compensation for the entire service period.

For instance, if you worked for three years and six months, the calculator applies the formula for both the full years and the additional months. It will not round down your service period. The calculation will be based on 21 days' basic salary for each of the first three years, plus a pro-rated amount for the six months, which is calculated as half of a year's gratuity entitlement.

How do you calculate gratuity with an unpaid leave?

Periods of unpaid leave are not included in the calculation of an employee's total years of service for gratuity purposes. The law states that gratuity is based on continuous service. If an employee takes an extended period of unpaid leave, that time is deducted from the service period used for the gratuity calculation.

For instance, if you have worked for six years but took three months of unpaid leave during that time, your gratuity will be calculated based on a service period of five years and nine months. This ensures the calculation reflects the actual time you were actively working and receiving a salary.

What are the most common gratuity-related questions?

What are the next steps after calculating your gratuity?

Once you have used the calculator and know your gratuity amount, it is time to think about your next career move. Dr.Job Pro offers a suite of AI tools to help you land your next job. Use the AI Resume Builder to create a professional CV tailored for the UAE market. You can also explore the AI Job Interview tool to practice for your next big meeting.

Start your job search by exploring thousands of opportunities on the Drjobs.ae platform. Whether you are looking for jobs in Dubai, Abu Dhabi, or elsewhere in the UAE, you will find relevant listings. Our goal is to empower you with the right tools and information to navigate your career with confidence.

Conclusion: Use Trustworthy Tools for Your Career

Calculating your gratuity is a crucial step in ending a chapter of your career. Getting this right ensures you receive your rightful dues. Using a trusted and reliable tool like the Dr.Job Pro Gratuity Calculator removes the guesswork and provides a precise, legally compliant figure. This allows you to focus on what matters most: your future. For more career advice and job opportunities, visit Dr.Job Pro.

About the Author

Suleiman Alnsour is a seasoned career strategist focused on Gulf job markets. With over six years of experience placing professionals in the GCC region, he provides actionable, research-backed advice on salary benchmarking, visa processes, and relocation for professionals moving to Abu Dhabi.