End-of-service gratuity is often the single largest lump-sum payment an employee receives when leaving a job in the UAE. Whether you are planning a career move, preparing for retirement, or restructuring your workforce, understanding how gratuity is calculated under Federal Decree-Law No. 33 of 2021-and its 2025 amendments-is essential for protecting your finances and staying compliant. If you are leaving a firm to pursue a Golden Visa investment path, your gratuity can help fund the application fees. This guide about End- of- service gratuity from Arabian Business Center, Trusted typing center UAE for visa and labour services, explains the latest rules, provides easy-to-follow calculation steps, and offers practical examples for unlimited, limited, and part-time contracts. By the end, you will know exactly what you are entitled to and What is Amer Tasheel and GDRFA and how these teams can help you process any related paperwork transparently.
Why Gratuity Still Matters in 2025
Although the UAE has no income tax and boasts one of the region’s most employee-friendly labour laws, gratuity remains a critical part of the social safety net. It finances relocation costs, children’s education, mortgage payments, and sometimes new business ventures. From an employer’s perspective, accurate provisioning prevents unexpected cash-flow shocks and reduces the risk of costly disputes at the Ministry of Human Resources and Emiratisation (MoHRE). The 2025 update to Article 51 clarifies accrual for fractional years, codifies rules for flexible work patterns, and introduces electronic settlement through the Wage Protection System. These changes aim to improve transparency while supporting Dubai’s push for a four-day work week, a trend we analysed in our recent piece on the Dubai summer work schedule.
Latest Legal Framework for 2025
Federal Decree-Law No. 33 of 2021 continues to serve as the backbone of UAE labour relations, but Cabinet Resolution No. 27 of 2025 introduces three noteworthy refinements:
- Pro-Rata Rights for Part-Time Workers. Employees on official MoHRE part-time permits now accrue gratuity in direct proportion to hours worked, rather than a 50 % cap.
- Early Settlement Option. Workers may request partial gratuity payment after completing two consecutive years, provided both parties sign a notarised agreement.
- Digital Calculation Standard. All companies with more than 20 employees must furnish annual gratuity statements via the MoHRE smart application.
Penalties for non-compliance range from AED 5,000 to AED 20,000 per worker. For startups launched through the Meydan Free Zone 60-minute licence, understanding these obligations early can prevent fines that erode tight margins.
Remember that free-zone companies offering mainland visas must still follow the same federal rules. If your HR team needs clarification, our Amer centre on Sheikh Zayed Road provides bilingual consultations, Emirates ID typing, and document attestation in a single visit.
Step-by-Step Gratuity Calculation
Calculating End- of- service gratuity correctly involves four simple variables:
Step 1 – Confirm Contract Type. Limited-term contracts attract full gratuity for every completed year, while unlimited contracts may be reduced if the employee resigns before five years.
Step 2 – Identify Basic Salary. Only the last drawn basic salary, excluding allowances, commissions, and bonuses, is used.
Step 3 – Apply Statutory Multipliers. For the first five years, the worker earns 21 days of basic salary per year. From the sixth year onward, the rate rises to 30 days.
Step 4 – Add Fractional Years. Months are prorated by dividing the annual entitlement by 12.
If the End-of-service gratuity calculation exceeds two years of total basic salary, the law caps the payment. To avoid manual errors, many firms upload payroll data to our secure online visa application portal and request an automated MoHRE-compliant gratuity report that can be attached to their Tasheel file.
Real-World Examples (2025)
Example 1: Unlimited Contract, Resignation at 4 Years 7 Months
Maria joined a Dubai logistics firm on 1 March 2021 with a monthly basic salary of AED 8,000. She resigns effective 30 September 2025, giving four years and seven months of service.
Because she resigned before completing five years on an unlimited contract, she is entitled to two-thirds of the standard rate.
- Annual entitlement: 21 days × AED 8,000 ÷ 30 = AED 5,600
- Four full years: AED 5,600 × 4 = AED 22,400
- Seven months: AED 5,600 ÷ 12 × 7 = AED 3,267
- Subtotal: AED 25,667
- Two-thirds factor: AED 25,667 × ⅔ = AED 17,111
Maria should therefore receive AED 17,111 in gratuity, payable within 14 days of her last working day under Article 53.
Example 2: Limited Contract, Termination after 8 Years
Ahmed signed a five-year limited contract on 1 June 2017 with a basic salary of AED 12,000. The agreement was renewed once for three more years, and the company terminates him on 31 May 2025 for redundancy.
- First five years: 21 days × AED 12,000 ÷ 30 = AED 8,400 → AED 8,400 × 5 = AED 42,000
- Years six to eight: 30 days × AED 12,000 ÷ 30 = AED 12,000 → AED 12,000 × 3 = AED 36,000
- Total gratuity: AED 78,000
Because termination was initiated by the employer, no reduction applies. Payment over two instalments is permissible only with Ahmed’s written consent.
Example 3: Part-Time Engineer, 30 Weekly Hours
Li works under an official MoHRE part-time contract for 30 hours per week, earning a monthly basic salary of AED 10,000. He completes exactly three years on 15 February 2025.
Under the new pro-rata rule, his average working hours equal 75 % of a full-time schedule (30 ÷ 40). His gratuity therefore equals 75 % of the normal entitlement:
- Annual entitlement: 21 days × AED 10,000 ÷ 30 = AED 7,000
- Three years: AED 7,000 × 3 = AED 21,000
- Pro-rata factor: AED 21,000 × 0.75 = AED 15,750
Li is owed AED 15,750, which must be paid via the Wage Protection System.
Avoiding Common Mistakes
Gratuity disputes often stem from misclassifying allowances as basic salary, ignoring unpaid leave deductions, or missing the statute of limitation, which stands at one year from the contract’s end. Employers must also update gratuity accruals when an employee’s basic salary changes, even if allowances stay flat. Employees, on the other hand, should keep salary slips and bank statements for at least five years. If a dispute does arise, the MoHRE smart app allows either party to file a labour complaint in less than ten minutes. For a step-by-step approach, consult our guide to securing a UAE residence visa, which includes tips on downloading your labour contract. Transparent documentation is the easiest way to avoid surprises.
Quick Compliance Checklist
Before processing any final settlement, HR managers should:
- Verify basic salary in the Wage Protection System.
- Confirm leave balance deductions.
- Generate a MoHRE gratuity slip and obtain employee signature.
- Pay through bank transfer, never cash.
- Upload proof to the MoHRE portal within 14 days.
These five steps keep audits simple and protect reputation.
How Arabian Business Center Supports Employers and Employees
Arabian Business Center is more than a typing center in Dubai; we are an end-to-end compliance partner. Our dedicated account managers can:
- Draft or review employment contracts to ensure the correct basic salary structure.
- Generate MoHRE-approved gratuity statements through our 24/7 online dashboard.
- Submit Tasheel requests, visa cancellations, and Emirates ID Typing updates in under an hour.
- Arrange free document pick-up and delivery anywhere in the UAE.
By consolidating Amer, Tasheel, DET, and translation services under one roof, we eliminate paperwork loops and hidden fees, allowing both employers and employees to focus on their next opportunity.
Conclusion
Whether you are a multinational with hundreds of staff or a freelancer contemplating a career pivot, knowing your end-of-service rights is non-negotiable. The 2025 rules reward accurate record-keeping and proactive planning. For personalised guidance, visit our Amer center on Sheikh Zayed Road or call us to transparent government services.
