If you live and work in the UAE then knowing how to calculate gratuity in UAE for unlimited contract can save you from unpleasant surprises. This payment gives you financial closure when you leave your job — so you deserve to get it right. I’ll walk you through each step simply and clearly so you can compute your payout confidently.
If you want quick help, you can always check your amount using a UAE gratuity calculator. But this guide explains everything so you understand the formula without depending on any tool.
You’ll learn exactly which salary counts, how years of service affect the amount, how termination or resignation changes things, and how to avoid common mistakes. By the end, you’ll feel ready to double-check your employer’s calculation or even compute it for yourself.
What Is Gratuity for Unlimited Contract Employees?
Gratuity refers to a lump-sum benefit you earn after finishing a minimum continuous service period under an unlimited contract. This payment doesn’t depend on bonuses or perks it’s strictly based on your basic salary. That clarity helps standardize the payout across jobs and employers.
Think of it as a “thank you” from your employer for your time and effort. It’s that cushion when you leave whether by choice or termination. Knowing how to calculate gratuity in UAE for unlimited contract gives you peace of mind before you sign papers or accept your final settlement.
UAE Labour Law Rules for Unlimited Contracts
UAE law treats gratuity for unlimited contracts with clear formulas based on service length. Only your last drawn basic salary matters; housing, transport, or allowances don’t count. This ensures fairness and protects employees across sectors.
If you want to verify the rules directly from the government, you can read the UAE Labour Law. This official source explains rights, calculation methods, and employment regulations in simple terms.
Also, your service must be continuous. Periods of unpaid leave or long unpaid absence can reduce eligible service time. Whether you resign or your employer terminates you that decision affects how gratuity is calculated under current rules.
How to Calculate Gratuity in UAE for Unlimited Contract (Step-by-Step)
First, identify your basic monthly salary as shown on your final pay slip. Then compute your daily wage by dividing that salary by 30. That daily figure is the base unit used in the gratuity formula under unlimited contracts.
Next, the number of gratuity-eligible days per year depends on how long you worked. For the first five years you get 21 days’ basic pay per year. If you stay longer each year after year five gets 30 days. That gradual increase rewards long-term service fairly.
Gratuity Entitlement for Termination vs Resignation
If your employer terminates you after at least one year of service, you are eligible for the full gratuity amount under the standard formula.
If you resign:
- 1–3 years = one-third of the 21-day rate per year
- 3–5 years = two-thirds of the 21-day rate per year
- After 5 years = full entitlement
These differences show why it’s so important to understand how to calculate gratuity in UAE for unlimited contract correctly depending on your situation.
Examples: Practical Gratuity Calculations (Unlimited Contract)
Basic Salary (AED) | Years of Service | Resignation Gratuity (AED) | Termination Gratuity (AED) |
9,000 | 4 | 16,800 | 25,200 |
12,000 | 6 | 54,000 | 72,000 |
In first example daily wage = 9000 ÷ 30 = 300 AED. Resignation (4 years) uses two-thirds multiplier; termination uses full rate. In 6-year case termination gives higher benefit due to 30-day rule for 6th year.
These examples illustrate exactly how to calculate gratuity in UAE for unlimited contract depending on your situation. You can plug in your own salary and service years to get the result.
What Counts as “Basic Salary” (Common Mistake to Avoid)
Always use the fixed basic salary listed on your final pay slip or contract. Do not add housing, transport, meal allowances, overtime or bonuses. Many workers inflate expectations by including those extras — and end up disappointed.
If your basic pay changed recently, the gratuity is based on the last drawn basic salary, not the old one. That update affects your payout positively if salary increased, or negatively if it decreased.
Deduction & Reduction Factors That Can Affect Your Gratuity
Your employer may deduct legitimate debts such as unpaid loans or fines from your gratuity, provided they follow UAE law. Also, periods of unpaid leave or long absence may reduce service length, thereby reducing gratuity days.
In cases of serious misconduct or dismissal under disciplinary clauses, you might lose gratuity entitlement entirely. So always behave professionally and keep records to avoid losing benefits.
What Changed: Old vs New Law for Unlimited Contracts
After the 2021 labour-law update under Ministry of Human Resources and Emiratisation (MOHRE), gratuity calculations for unlimited contracts became more consistent. The same 21-day/30-day structure now applies broadly without many of the older exceptions.
That means many previous rules like full forfeiture for short resignations are now outdated. However, always check your contract and final pay slip, because older contracts may still follow legacy terms.
Documents You Should Keep Before Claiming Gratuity
Before you claim your gratuity, gather: your signed employment contract, final pay slip showing basic salary, joining date and leaving date records, absence or leave history (especially unpaid leave), and any resignation or termination letters. Having all these ensures your calculation is accurate and prevents delays.
How to Claim Your Gratuity Amount Properly
When you resign or face termination, formally request your full end-of-service benefits from HR. UAE law generally requires your employer to pay gratuity within 14 days of the contract end date.
If there is delay or wrongful deduction, you can file a grievance with MOHRE. Keep all documents safe — they will be critical if you need to prove your case.
Avoid Common Gratuity Mistakes
Many people miscalculate because they include allowances, forget unpaid leave, or assume resignation equals termination. Others use outdated calculators or don’t re-check final salary. By using correct basic pay, accurate service years, and the proper formula, you ensure you receive the right amount under unlimited contracts in UAE.
Final Thoughts: Empower Yourself with the Right Gratuity Knowledge
When you understand how to calculate gratuity in UAE for unlimited contract, you gain the power to check your benefits with confidence. You’ve worked hard—so your final settlement should be correct. Take a moment now and use our UAE Gratuity Calculator to confirm your exact gratuity and make sure every dirham is counted.
FAQs
Q: How to compute gratuity in UAE unlimited contract?
ANS: Gratuity in an unlimited contract is calculated using your last basic salary, years of service, and the UAE Labour Law formula: 21 days’ basic wage per year for the first 5 years, and 30 days’ wage per year after that.
Q: What is the new Labour law for unlimited contract in UAE?
ANS: Under the updated UAE Labour Law (2022 onwards), all unlimited contracts had to be shifted to fixed-term contracts, but gratuity rules for service benefits remain the same.
Q: What is a contract for unlimited time?
ANS: An unlimited contract is an open-ended employment agreement with no fixed end date, allowing either party to end it with proper notice.
Q: What does “unlimited contract” mean?
ANS: It means your job has no predefined end date, and employment continues unless the employer or employee ends it with notice.
Q: What is the gratuity for unlimited contract?
ANS: Gratuity is based on your last basic salary: 21 days of basic wage per year for the first 5 years and 30 days per year afterward.