UAE Gratuity Calculation Formula — How to Calculate EOSB
The complete step-by-step guide to calculating UAE End of Service Benefit (EOSB / gratuity) under the updated 2022 Labour Law. Includes worked examples, MOHRE rules, and a free calculator.
The UAE Gratuity Formula (Step by Step)
Less than 1 year
₀
No EOSB entitlement
1 – 5 Years
21 days × daily rate × years
Daily rate = basic ÷ 30
Beyond 5 Years
21 days (first 5) + 30 days/yr (rest)
Cap: 2 years gross salary
// UAE EOSB formula
Daily Rate = Basic Salary ÷ 30
EOSB (≤5 yrs) = Daily Rate × 21 × total years
EOSB (>5 yrs) = (Daily Rate × 21 × 5) +
(Daily Rate × 30 × years beyond 5)
Final EOSB = min(EOSB, Basic × 24)
The 2-year cap (Basic × 24) is based on total gross salary per UAE Labour Law. Since we use basic salary here, the cap is conservative — if your total package is higher, the actual cap may be larger.
Worked Examples — UAE Gratuity Calculation
All examples use basic salary only. Partial years are counted proportionately.
| Service | Monthly Basic | Daily Rate | EOSB |
|---|---|---|---|
| 2 years | AED 8,000 | AED 266.67 | AED 11,200 |
| 3 years 6 months | AED 10,000 | AED 333.33 | AED 24,500 |
| 5 years | AED 12,000 | AED 400.00 | AED 42,000 |
| 7 years | AED 15,000 | AED 500.00 | AED 82,500 |
| 10 years | AED 20,000 | AED 666.67 | AED 170,000 |
| 15 years (large) | AED 30,000 | AED 1000.00 | AED 405,000 |
| 20 years (cap test) | AED 25,000 | AED 833.33 | AED 462,500 |
MOHRE Gratuity Rules — What Changed in 2022
The Ministry of Human Resources and Emiratisation (MOHRE) administers UAE Labour Law. Federal Decree-Law No. 33 of 2021 (effective 2 February 2022) made two major changes to how gratuity works:
Resignation penalty abolished
Previously, employees who resigned received a reduced percentage of gratuity (50% for 1–3 years, 66% for 3–5 years). Under the 2022 law, resignation and termination receive the same calculation.
Limited vs unlimited contracts: unified
The distinction between limited (fixed-term) and unlimited contracts was largely removed. All employees are now on limited contracts renewable in 3-year cycles, and EOSB applies the same formula.
Minimum 1 year, proportionate partial years
You need at least 1 full year to claim any EOSB. Once past 1 year, partial years count proportionately (e.g., 4 years 4 months = 4.33 years of entitlement).
What Counts as "Basic Salary" for Gratuity?
This is the most common source of disputes. UAE law uses only the basic salary component — not your total package.
| Component | Included in EOSB base? |
|---|---|
| Basic salary | ✓ Yes |
| Housing allowance | ✗ No |
| Transport allowance | ✗ No |
| Food allowance | ✗ No |
| Mobile / utility allowance | ✗ No |
| Annual bonus / incentive | ✗ No |
| Commission | ✗ No |
| Overtime | ✗ No |
⚠ If your contract lumps everything into a single "salary", MOHRE and courts use the written contract value as basic. Always check your offer letter.
How to Calculate Gratuity in UAE — Manual Steps
Example: Employee with AED 12,000 basic salary, 7 years 3 months of service.
Find your daily rate
AED 12,000 ÷ 30 = AED 400/day
EOSB for first 5 years (at 21 days/year)
AED 400 × 21 × 5 = AED 42,000
EOSB for remaining 2.25 years (at 30 days/year)
AED 400 × 30 × 2.25 = AED 27,000
Total EOSB
AED 42,000 + AED 27,000 = AED 69,000
2-year cap check
AED 12,000 × 24 = AED 288,000 (not hit)
Final EOSB
AED 69,000
Skip the manual math — get your exact EOSB instantly:
→ Free UAE EOSB Gratuity CalculatorNRI? Transfer Your EOSB to India Tax-Free
If you're returning to India, your UAE gratuity is generally exempt from Indian income tax under Section 10(10)(iii) — if received while you are still an NRI.
Gratuity Calculation UAE — FAQ
What is the gratuity formula in the UAE?
For the first 5 years: 21 working days of basic salary per year. Beyond 5 years: 30 calendar days of basic salary per additional year. Total = (21/30 × basic salary × years ≤5) + (1 × basic salary × years >5). The cap is 2 years of gross salary.
How do I calculate my UAE gratuity manually?
Step 1: Find your daily rate = basic salary ÷ 30. Step 2: For the first 5 years multiply daily rate × 21 × years. Step 3: For years beyond 5, multiply daily rate × 30 × extra years. Step 4: Add both. Step 5: Compare to the 2-year cap (basic × 24) and take the lower.
Does MOHRE use a different calculation than the formula?
No. The MOHRE (Ministry of Human Resources and Emiratisation) gratuity calculator applies the same formula as Federal Decree-Law No. 33 of 2021 — 21 days for the first 5 years and 30 days per year thereafter. The MOHRE tool is just an interface to the same rules.
Is the gratuity formula different if I resign?
Under the updated 2022 UAE Labour Law (effective February 2022), the resignation penalty was abolished. Whether you resign or are terminated, the formula is identical. Previously, resigning employees received reduced gratuity, but that rule no longer applies.
What is included in 'basic salary' for UAE gratuity?
Only the basic salary component — not housing allowance, transport allowance, food allowance, or any other benefits. If an employee's offer letter bundles everything into a single number, the courts may look at industry norms to determine the 'basic' portion.
How is a partial year counted in UAE gratuity?
Partial years are counted proportionately. For example, 3 years and 6 months of service counts as 3.5 years. The formula applies: (21 × daily rate × 3.5) for service within the first 5-year bracket.