How to Calculate Gratuity in UAE for Unlimited Contract in 2025 | Complete Guide

How to Calculate Gratuity in UAE for Unlimited Contract in 2025

How to Calculate Gratuity in UAE for Unlimited Contract
Learn how gratuity is calculated in UAE for unlimited contracts.

1. Introduction

Gratuity or end of service benefits is the most anticipated topics among the expats living and working in the United Arab Emirates. If you're working in UAE on unlimited contract, you need to understand how gratuity is calculated. This can boost your confidence for future. Whether you're switching jobs, resigning, or about to retire this guide will help you to walk through every things you need to know. Here is how to calculate gratuity in uae for unlimited contract in 2025.

2. What is Gratuity In the UAE?

Let's find what out what is actually the gratuity or end of service benefits in the emirates. Gratuity in simple words is a lump sum payment which is paid to employees when they leave the job. It will be given only after the completion of 1 year in the present job you're doing. If you leave before 1 year you're not able to get gratuity.

Gratuity acts as a reward for long time service and is mandated by the UAE labor's law. It is based on last drawn basic salary and is regulated by MOHRE (Ministry of Human Resources & Emiratization). It is not just as a benefit it is legal right of employee which help after job s finished.

3. Difference between Limited & Unlimited Contract

Understanding your contract type is very important step. In the UAE the employment contracts or either limited (fixed-term) or unlimited (open-ended). A limited contract has a specific end date and clearly include an exit clause in it. While on the other side an unlimited contract is open ended. It is more flexible and can be terminated by any party with proper notice. Gratuity calculation slightly differs in 2 types when it comes to resignation.

Feature Limited Contract Unlimited Contract
End Date Fixed Open Ended
Resignation Rules Strict Flexible
Gratuity Impact Minimal May Reduce Amount

4. Gratuity Rules For Unlimited Contract Employees

According to UAE labor's law employees on unlimited contract must meet certain conditions to qualify for the end of service benefits. The basic requirement is to complete at one year in the current job. The gratuity amount depends on the length of service means you worked for how many years and why are you leaving. And the most important thing is only basic salary is used in the calculation. Your allowances, bonuses, and prized rewards nothing is counted.

If you resign before 3 years your end of service will be reduced or may be less. However if employer terminates you before 3 years or you have completed 3 years you're entitled for full end of service benefits as per UAE's labor's law.

5. How To Calculate Gratuity With Step by Step (Using Formula)

The gratuity formula for the unlimited contact is simple and straight forward but varied based on years of services. Here is how,

  • Less than 1 year : No gratuity
  • 1 to 3 years : 21 days basic salary per year of service
  • 3 plus years: 30 days basic salary per year of service

Gratuity Formula:

Here is the simple formula you can calculate your gratuity very easily.

Gratuity = (basic salary / 30) × days entitled × years of service

Let's understand with simple examples to make it clearer.

Example 1:

  • Basic Salary: AED 6,000
  • Years of Service: 2
  • Entitlement: 21 days
  • Gratuity = (6000 / 30) × 21 × 2 = AED 8,400

Example 2:

  • Basic Salary: AED 10,000
  • Years of Service: 5
  • Entitlement: 30 days
  • Gratuity = (10000 / 30) × 30 × 5 = AED 50,000

Note: The total gratuity should not exceed two years' worth of basic salary.

6. How To Calculate Gratuity Online

You can easily calculate gratuity online with simple calculators given. But here is the most trusted one calculator you can use online. Try this online gratuity calculator to calculate your end of service benefits for unlimited or limited contract. It is very easy, it has simple interface, no login no sign up no account need. You just need to put the necessary information and click the result button boom it will give accurate results based on your service years.

7. Resignation Vs Termination Effects On Gratuity

If you stop your job or be terminated for any reason it causes bad effects on your end of service benefits. You can only get full gratuity according to the service criteria mentioned if you complete it correctly. The actual period to get full benefits is of 5 years. If you end your job before 5 years like you end it after 2 years the end of service benefits will be reduces.

Always check the MOHRE guidelines or a lawyer before doing anything if you don't know the rules. If you end your job after 2 years the end of service benefits will become on third of the actual amount.

8. Real Life Studies/Examples

Lets understand it in more effective way with real life and practical examples given below.

Example 1:

Fatima worked under an unlimited contract for 2 years with a basic salary of AED 5,000. She resigned.

Gratuity: = (5000 ÷ 30) × 21 × 2 = AED 7,000 (Only partial gratuity as she resigned before 3 years)

Example 2:

Mohammed was terminated after 5 years of service with a basic salary of AED 8,000.

Gratuity: = (8000 ÷ 30) × 30 × 5 = AED 40,000 (Full gratuity because of termination)

These examples make the law easy to understand for everyone.

9. Gratuity Rules Based on Resignation or Termination

Here is a quick chart to understand which benefit you can get according to your job years.

Years Of Service Resigned Terminated Gratuity You Will Get
0-1 years x x Not Eligible
1-3 Years 1/3 Full Partial or Full
3-5 year 2/3 Full Partial or Full
5+ years Full Full Full

10. Legal References & official Sources

To ensure accuracy always check the official website Like:

11. Conclusion

Calculating gratuity for unlimited contract maybe difficult for some persons but it is very easy with the right gratuity calculator which you can use online. Use this free Online UAE Gratuity Calculator For accurate results. Always check with the official sources or websites of UAE government. Whether youre retiring or terminated end of service benefits are very important to know for each person.

Frequently Asked Questions

How is end of service gratuity calculated in UAE for limited contract?

For limited contracts in UAE, gratuity is calculated similarly but with different rules for early termination. If you complete the contract term, you receive 21 days' basic salary for each of the first five years and 30 days' basic salary for each subsequent year. If terminated early, different rules apply based on who initiated the termination.

How do I calculate my end of service benefits in the UAE?

To calculate your end of service benefits in UAE, use the formula: (Basic Salary ÷ 30) × Number of Days Entitled × Years of Service. For unlimited contracts: 21 days per year for 1-3 years, 30 days per year after 3 years. For limited contracts: 21 days per year for first 5 years, 30 days per year thereafter.

How to calculate the end of service?

End of service is calculated based on your basic salary (not total salary), years of service, and contract type. For unlimited contracts: 21 days per year for 1-3 years, 30 days per year after 3 years. Multiply your daily basic salary (basic salary/30) by the number of entitled days and years of service.

How is end of service leave salary calculated in UAE?

End of service leave salary is calculated separately from gratuity. It's based on your unused leave days. Multiply your daily basic salary by the number of unused leave days. This is paid in addition to your gratuity amount when leaving employment in UAE.

What is the new rule for gratuity calculation in the UAE?

As of 2025, the gratuity calculation rules remain the same in UAE. For unlimited contracts: 21 days per year for 1-3 years, 30 days per year after 3 years. The maximum gratuity cannot exceed two years' basic salary. Always check MOHRE for any updates to labor laws.

Can I resign after 1 year in an UAE limited contract?

Yes, you can resign after 1 year in a UAE limited contract, but there may be penalties. Early resignation before contract completion may require you to pay 45 days' salary or more as compensation to the employer, unless mutually agreed otherwise. Your gratuity may also be affected.

What is the difference between a limited and unlimited contract in the UAE?

Limited contracts have fixed duration (usually 2-3 years) with penalties for early termination. Unlimited contracts are open-ended with flexible termination (with notice). Gratuity calculation differs slightly - unlimited contracts reduce gratuity for early resignation, while limited contracts may have different rules based on who terminates.

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