UAE Gratuity Formula Made Easy

Employee end-of-service benefits are a key part of HR and payroll management in the UAE. Whether you’re an employer or employee, understanding UAE gratuity law, gratuity calculation formula, and how to calculate gratuity in the UAE is essential. In this blog, we’ll explain everything — and how Token Talent’s payroll system simplifies gratuity management for HR teams across the GCC.

What Is Gratuity in the UAE?

Gratuity is an end-of-service benefit that an employee receives after completing at least one year of continuous service under a valid UAE employment contract. It’s a lump-sum payment based on the employee’s basic salary and length of service, in line with the UAE Labour Law (Federal Decree-Law No. 33 of 2021).

Common Search Keywords:

gratuity UAE
gratuity calculation UAE
UAE labour law gratuity
end of service benefit UAE
gratuity payment rules UAE
gratuity calculator UAE
UAE gratuity for limited and unlimited contract

Updated UAE Gratuity Law 2025

Under the UAE Labour Law, gratuity is calculated as follows:

For employees under a limited or unlimited contract:

Less than 1 year: No gratuity.
1 to 5 years: 21 days’ basic salary per year of service.
More than 5 years: 30 days’ basic salary per year after the first 5 years.

The total gratuity cannot exceed two years of wages.

Related keywords:
UAE labour law 2025, gratuity law UAE update, gratuity entitlement UAE, gratuity calculator formula, gratuity rights for expats.

How to Calculate Gratuity in UAE — Step-by-Step

To calculate gratuity manually:

Step 1: Find your daily wage
= (Basic Monthly Salary × 12) ÷ 365

Step 2: Multiply by the number of gratuity days earned
= Daily Wage × (21 or 30 days × Years of Service)

Example:
If your basic salary is AED 10,000 and you’ve worked for 6 years,

For the first 5 years → 21 days × 5 = 105 days
For the 6th year → 30 days × 1 = 30 days
Total = 135 days
Gratuity = (10,000 × 12 ÷ 365) × 135 = AED 44,383

Simplify Gratuity Calculation with Token Talent

Instead of complex manual calculations, Token Talent’s Payroll System provides an automated gratuity calculator built according to UAE Labour Law.

Key Payroll Features in Token Talent 4.0:

Automated Gratuity & End-of-Service Rewards
WPS-Compliant Payroll for UAE
Real-time Leave and Attendance Tracking
Seamless Expense & Reimbursement Management
Detailed HR Analytics & Reports
Multi-country support — UAE, KSA, Qatar, Kuwait, and Pakistan

Top SEO Keywords:
gratuity system UAE, payroll software UAE, WPS payroll, HR software UAE, online gratuity calculator, employee benefits management.

Why HR Teams Across GCC Choose Token Talent

Accuracy: 100% compliant with local labour laws.
Efficiency: Save time with automated calculations.
Transparency: Employees can view gratuity details via the ESS App.
Scalability: Works for startups and enterprises in Dubai, Abu Dhabi, Riyadh, Doha, Kuwait City, and Lahore.

Regional SEO Keywords:
HR software UAE, HR software KSA, payroll management Qatar, HR system Kuwait, HR software Pakistan, end of service calculator GCC.