UAE Labor Law — Gratuity Reference 2026

Every worker who completes one or more years of continuous service is entitled to an end-of-service gratuity upon termination. The gratuity is calculated on basic wage only and must be paid regardless of whether the employee resigned or was terminated — provided no misconduct dismissal applies. This right cannot be waived or reduced by contract.

• For the first five years: 21 working days of basic wage per completed year
• For each year beyond five years: 30 calendar days of basic wage per year
• Partial years beyond the first complete year: calculated on a pro-rata basis
• Days of absence without pay: excluded from the total service period

The total end-of-service gratuity shall not exceed two years of basic salary (24 monthly payments). This is a hard statutory maximum that cannot be exceeded regardless of years served. Gratuity rights are protected even in cases of employer insolvency.

The employer must pay the full gratuity within 14 days of the employee's last working day. This is a strict legal deadline.

An employer may deduct documented amounts legally owed by the employee: outstanding salary advances, employer-approved loans, and compensation for damages directly caused by the employee — within limits set by UAE labour law. Arbitrary or undocumented deductions are prohibited and can be challenged through MOHRE or the labour courts.

An employer may dismiss an employee without notice and without gratuity payment in cases of serious misconduct:

• Fraud, theft, or embezzlement of company assets
• Physical assault on the employer, managers, or coworkers
• Disclosure of confidential business information
• Repeated violation of workplace policies after formal written warning
• Gross negligence causing significant financial loss to the employer
• Being found in a state of intoxication during working hours

Under the 2022 UAE Labour Law, an employee who resigns after completing one or more years retains full gratuity entitlement — regardless of contract type. This is one of the most significant improvements introduced by Federal Decree-Law No. 33 of 2021, which eliminated the tiered resignation reductions that previously existed under unlimited contracts.

Authorised leave (annual leave, sick leave, maternity leave) is included in the service period. Days of unpaid absence are excluded and do not count toward total service for gratuity purposes. Approved career breaks: specific terms of the written agreement determine whether the period counts toward gratuity.

Cabinet Resolution No. 96 of 2023 introduced a voluntary Alternative EOSB Scheme coordinated by MOHRE and the Securities and Commodities Authority (SCA). Participating employers contribute monthly to approved investment funds, replacing traditional lump-sum gratuity with a growing investment portfolio.

As of 2026, participation remains voluntary for employers. Traditional gratuity rules under Federal Decree-Law No. 33 of 2021 continue to apply to all employees not covered by the alternative scheme.