What UAE Labour Law (Updated 2026)
Not sure your gratuity is correct? See the UAE Labour Law update now. With the constant updates in employment rules, it’s completely normal to feel lost or confused. That’s exactly why understanding the UAE Labour Law Gratuity Calculation is more important than ever in 2026. Employees across the country rely on this law to protect their financial rights, especially when resigning, switching jobs, or facing unexpected termination.
The UAE’s new labor regulations continue to evolve, aiming to strengthen fairness and increase government transparency. The latest updates, part of the UAE Labour Law update in 2021, ensure that every worker, whether in the public or private sector, understands their rights and the process involved. If you’re looking for further clarification, you can explore more details on how to calculate your fair gratuity on our gratuity calculator tool.
Gratuity — also known as end-of-service benefits (EOSB) — is a legal right for every employee working in the UAE’s private sector. The rules governing this benefit come mainly from Federal Decree-Law No. 33 of 2021, which replaced the old UAE Labour Law No. 8 of 1980.
Old vs New Law (2026 Updated Quick View)
| Rule | Old Law (1980) | New Law (2021–2026) |
| Resignation penalty | Reduction applied | No reduction (removed) |
| Contract types | Limited + Unlimited | All contracts converted to fixed-term |
| Gratuity calculation | More complex | Fully unified |
| Payment deadline | Not defined | Clear timeline under MOHRE |
| Free zones | Mostly separate | Some aligned; DIFC/ADGM remain separate |
The new UAE labour law gratuity calculation makes the process fairer and simpler for both employees and employers, ensuring transparency and reducing disputes.
Eligibility for Labour Gratuity Under UAE Law
Minimum Service Rule — Article 51
To qualify for gratuity, an employee must complete at least one year of continuous service. Less than one year = no gratuity.
Continuous service includes:
- Paid annual leave
- Official holidays
- Sick leave (within legal limits)
Non-continuous service includes:
- Unpaid leave (does NOT count)
- Unauthorized absence
- Work gap not covered in the contract
Resignation, Termination, and Misconduct – Articles 43,44,45
Resignation under New Law
Under the updated legislation, resignation does not reduce gratuity.
This is a major improvement compared to the old UAE labour law No. 8 of 1980.
Termination
- Normal termination → full gratuity paid
- Arbitrary termination → additional compensation possible
- Termination due to misconduct (Article 44) → gratuity may be lost.
Examples of misconduct:
- Workplace violence
- Fraud or document fake
- Disclosure of trade secrets
- Repeated violations after warnings
Contract Types (Limited vs Unlimited)
Earlier, UAE had:
- Limited contract
- Unlimited contract
Today, most employment relationships are converted to fixed-term agreements, but many employees still search for:
To Understand the “UAE labour law gratuity calculation for unlimited contract”, it’s important to know the exact formula and rules used for gratuity calculation.
So here’s the clarity:
- Old unlimited contracts: Same gratuity formula, but resignation rules were different (now removed).
- New fixed-term contracts: Combined gratuity rules for all employees.
Regardless of contract type, gratuity is still calculated according to Article 51.
How Salary Is Calculated for Gratuity
“Basic Salary” Definition — Article 1 & 9
Gratuity is NOT calculated on the full salary — only on the basic salary.
Included in Basic Salary
- Fixed basic wage
- Any legally defined basic components
NOT Included
- Housing allowance
- Transportation
- Food allowance
- Mobile allowance
- Travel tickets
- Commissions (unless part of fixed contractual wage)
Many employees mistakenly assume gratuity is based on total salary, but the law clearly uses UAE Labour Law Basic Salary Percentage — meaning basic salary × 100%.
Working Hours, Leave & Deductions — Article 29
- Paid annual leave counts toward service duration
- Unpaid leave does NOT count — these days must be deducted
- Sick leave within the legal 90-day period counts
- Working hours changes do not affect gratuity, as long as salary is unchanged
UAE Gratuity Calculation Formula (Simple Breakdown)
The Official Formula from Article 51
For the first 5 years of service
- 21 days basic wage for each completed year
After 5 years
- 30 days basic wage for each additional year
Cap on gratuity
- Total gratuity cannot exceed 2 years’ basic salary
This is the standard calculation of gratuity UAE labour law across private-sector companies.
Step-By-Step “How Calculate Gratuity in UAE Labour Law”
- Calculate daily wage:
Daily wage = Basic salary ÷ 30 - Multiply by 21 days (if 1–5 years)
OR
Multiply by 30 days (after 5 years) - Multiply by number of completed years
- Add prorated amount for months/days
- Deduct unpaid leave days
Example formula:
Gratuity = (Daily basic wage × 21 or 30) × Service years
This is the universal gratuity calculation as per UAE labour law.
Practical Examples
Example 1 — 1 year 3 months
- Basic salary: AED 4,000
- Daily wage = 4000 ÷ 30 = 133.33
- Gratuity = (133.33 × 21) × 1.25
= AED 3,499 approx.
Example 2 — 5 years exactly
- Basic salary: AED 6,000
- Daily wage = 6000 ÷ 30 = 200
- Gratuity = (200 × 21) × 5
= AED 21,000
Example 3 — 7 years 6 months
- First 5 years → 21 days
- Extra 2.5 years → 30 days
Total is a combined calculation.
Example 4 — Unlimited Contract (Old Rule)
Now treated like fixed-term, but old cases follow same formula without resignation reduction.
New UAE Labour Law Gratuity Calculation (Post-2022 Reforms)
What Changed After Decree No. 33 of 2021?
- No penalty for resignation
- End-of-service benefits combined
- Employers must pay EOSB within 14 days of last working day
- All contracts are now fixed-term
- Greater employee protection from arbitrary termination
Ministry of Labour / MOHRE Guidelines
The Ministry of Human Resources & Emiratisation (MOHRE) plays a central role in ensuring that employees in the UAE receive their gratuity and end-of-service benefits (EOSB) as per the law. Whether you are resigning, being terminated or completing your contract, MOHRE provides clear guidelines to protect your rights and help you avoid disputes with your employer.
1. Official Gratuity Calculation Guidelines
MOHRE provides official instructions on how gratuity should be calculated according to your basic salary, service years, and contract type. Employees can use MOHRE-approved gratuity calculators to verify that the amount offered by their employer matches the legal requirements. These calculators are especially useful for:
- Unlimited and limited contracts
- Employees with varying leave periods or unpaid leave
- Cases where the employer tries to withhold or underpay gratuity
2. Payment Timeline
Under MOHRE rules, employers are legally required to pay gratuity within 14 days of the employee’s last working day. This ensures employees receive their end-of-service benefits promptly, without unnecessary delays.
3. Evidence & Documentation
If there is a dispute, MOHRE requires proper documentation to process your claim efficiently. Employees should maintain:
- Employment contract
- Salary slips
- Passport and Emirates ID copy
- Resignation or termination letters
- Records of leave or unpaid days
4. Filing a Complaint
If an employer delays payment or underpays gratuity:
- Submit a complaint via the MOHRE online portal or visit a service center.
- Attach the required documents.
- MOHRE investigates and mediates between employer and employee.
5. Benefits of Following MOHRE Guidelines
- Ensures your gratuity is calculated correctly
- Protects you from illegal reductions or miscalculations
- Provides a legal channel for disputes
- Empowers employees to claim their full rights
By following MOHRE guidelines, employees can confidently calculate and claim their gratuity, knowing it aligns with UAE Labour Law Gratuity Calculation standards.
Special Cases: Free Zones, JAFZA, DIFC & DMCC
When it comes to UAE Labour Law gratuity calculation, most employees follow the standard federal rule—but free zones like JAFZA, DIFC, and DMCC often apply their own frameworks. Understanding these differences is crucial so you can calculate your end-of-service benefits correctly and avoid underpayment.
JAFZA (Jebel Ali Free Zone)
JAFZA follows UAE Labour Law, meaning your gratuity is calculated using:
- 21 days of basic salary per year for the first 5 years
- 30 days of basic salary per year after 5 years
The only difference: disputes are handled by JAFZA authority instead of MOHRE.
DMCC (Dubai Multi Commodities Centre)
DMCC also follows the standard UAE gratuity law, but all employment matters—including EOSB—are managed under the DMCC Employment Regulations, not MOHRE.
This means your gratuity formula remains the same, but complaints, approvals, and final settlements go through DMCC.
DIFC (Dubai International Financial Centre)
DIFC is the exception. It does not use the UAE Labour Law gratuity system.
Instead, employees receive DEWS (DIFC Employee Workplace Savings Plan)—a monthly employer contribution (5–8% depending on service).
No traditional gratuity formula applies here.
Key Takeaway for Employees
If you’re working in a free zone, always confirm whether your company follows UAE Labour Law gratuity calculation or a zone-specific system like DIFC DEWS. A small difference in rules can significantly impact your total EOSB.
Your Rights When Employer Delays or Underpays Gratuity
Filing a Complaint with MOHRE
Employees may file a complaint if:
- Employer refuses to pay gratuity
- Employer delays payment
- EOSB amount is incorrect
Required documents:
- Employment contract
- Salary slips
- Passport/Emirates ID copy
- Resignation/termination letter
Settlement timeframe:
7–14 days in most cases.
Penalties on Employer
- Fines for delayed EOSB
- Legal action for withholding passports
- Wage Protection System (WPS) restrictions
UAE strongly enforces labour gratuity calculation compliance.
Free Tools, Calculators & Templates
Understanding your UAE labour law gratuity calculation becomes much easier when you use the right tools. That’s why we’ve created a dedicated online solution to help employees check their end-of-service benefits instantly and accurately.
“Final Labour Gratuity Calculator” (Go Gratuity Tool)
If you want a quick, reliable, and error-free estimate of your EOSB, the Go Gratuity Tool gives you a clear breakdown based on the latest UAE Labour Law.
It’s designed for both limited and unlimited contracts, and calculates:
- Total years of service
- Basic salary-based EOSB
- Deductions (unpaid leave)
- Exact end-of-service amount
Users simply enter their start date, end date, and basic salary, and the tool handles the full calculation using the official Article 51 formula.
This makes it far more accurate and transparent than manual math or outdated calculators.
Downloadable Templates
To make the process even easier, the website also provides essential documents every employee needs:
- UAE EOSB calculation sheet (Excel format)
- Professional resignation letter template
- Settlement agreement sample for smooth offboarding
These free resources help employees avoid errors, understand their rights, and manage their final settlement confidently.
FAQs About UAE Labour Law (Official Rules)
Q: What is the new labour law in the UAE?
ANS: The current UAE labour law is Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationship — it governs employment contracts, wages, leave, termination, and end-of-service benefits in the private sector.
Q: What are my rights as an employee in the UAE?
ANS: As an employee you are legally entitled to:
- A signed employment contract specifying your wage and conditions.
- Wages paid on time in AED and under agreed terms.
- End-of-service gratuity after completing at least one year.
- Notice before termination unless dismissed for valid reasons.
You can file complaints with MOHRE if rights are violated.
Q: How is Labour gratuity calculated?
ANS: Under Article 51 of Federal Decree-Law No. 33 of 2021, end-of-service gratuity is based on your basic salary: you get 21 days’ basic pay for each year of the first five years, and 30 days’ basic pay for each additional year of service. The total gratuity cannot exceed two years’ salary.
Q: What are the changes in gratuity rule 2025?
ANS: Under the current law (enforced from 2022 and applied in 2025), gratuity is now paid based solely on basic salary, with no reduction for resignation after certain years (unlike the old rules). It must be paid within 14 days of contract end and applies to all fixed-term contracts once you complete at least one year of service.
Q: What is Article 42 of the UAE labour law?
ANS: Article 42 of Federal Decree-Law No. 33 of 2021 lists the lawful reasons an employment contract can end, including: expiry of the contract term, mutual agreement, resignation/termination with notice, employer or employee death, company closure or bankruptcy, and failure to renew the work permit.
Q: Can my employer terminate my contract without notice?
ANS: Yes — under Article 44 of the UAE Labour Law, an employer may dismiss an employee without prior notice in specific serious cases, such as proven fraud/forgery, gross misconduct, repeated safety violations, or unjustified absence, but this must follow a written investigation.
Q: Can my employer reduce my salary in the UAE?
ANS: An employer cannot reduce your salary unilaterally if your contract is already in force. Any changes to wages must be mutually agreed in writing.
If employer forces a reduction, you can file a complaint with MOHRE
Q: What is the basic salary rule in UAE?
ANS: “Basic salary” in UAE Labour Law is the amount stated in your contract for your primary job pay — used for calculating overtime, holiday pay and end-of-service gratuity. Basic salary plus allowances together form your total wage
Q: Is bonus calculated on basic salary?
ANS: UAE law does not mandate bonuses, and there is no rule requiring bonus calculation based on basic salary.
Bonus payment is typically defined by your contract or employer policy, not the labour law.
Conclusion
The UAE Labour Law gratuity calculation system has never been clearer or more employee-friendly. With the updated rules under Decree No. 33 of 2021, resignation penalties are removed, entitlements are unified, and workers finally have transparent protection over their end-of-service benefits. Understanding how to calculate gratuity as per UAE law puts you in control—whether you’re resigning, negotiating a settlement, or simply checking if your employer calculated your EOSB fairly. And if you want to verify your exact amount with accuracy, you can use the Go Gratuity Tool for instant, reliable results—no guesswork, no confusion.