Is gratuity calculated on basic salary in UAE?
Written by Usama Afzal, Founder & Editor, GratuityHisab. Last updated: October 2026. Based on the UAE Labour Law; not legal advice.
Yes. Is gratuity calculated on basic salary in UAE? Absolutely — UAE Labour Law (Federal Decree-Law No. 33 of 2021, Article 52) prices end-of-service gratuity on your last basic wage only. Allowances such as housing, transport, food and cost-of-living are excluded, whatever their nature, as are overtime and bonuses. So a worker on AED 8,000 basic + AED 4,000 housing allowance gets gratuity on AED 8,000: 21 days' basic wage for each of the first 5 years, then 30 days per year, with the award capped at 2 years' wages.
Is gratuity calculated on basic salary in UAE? The short version
The one-line answer to "is gratuity calculated on basic salary in UAE" is yes: take your last basic monthly wage — the basic figure on your payslip, before any allowances — and that number alone goes into the formula.
Housing, transport, food, overtime and bonuses are left out entirely. Award capped at 2 years' wages.
So whenever someone asks "is gratuity calculated on basic salary in UAE", the law's answer is basic wage only — not the gross total that lands in your bank account. To skip the maths, run our free UAE gratuity calculator — it asks for basic salary separately from allowances.
The legal rule: UAE gratuity is on basic wage, not total salary
Article 52 of Federal Decree-Law No. 33 of 2021 is the reference point. Paraphrased: end-of-service gratuity is calculated on the basic wage — allowances, whatever their nature, are excluded. That is why "is gratuity calculated on basic salary in UAE" is one of the most-searched gratuity questions in the Emirates: most workers only ever see their total salary.
- 21 days' basic wage per year for each of the first 5 years of service.
- 30 days' basic wage per year for every year after the first 5.
- Daily wage = last basic wage ÷ 30 (fixed by Cabinet resolution).
- Fractions of a year count pro-rata — 6 extra months = half a year's award.
- Less than 1 year of service = no gratuity at all.
- The award cannot exceed 2 years' wages (24 months of basic salary).
Only the last basic wage goes in — the figure you were on when the contract ended, not the salary you started on. See how gratuity is calculated in the UAE for the full UAE gratuity formula walkthrough.
Does gratuity include allowances in UAE?
No. The related question "does gratuity include allowances in UAE" has the same answer as "is gratuity calculated on basic salary in UAE": allowances are out. The excluded list includes housing allowance, transport allowance, food allowance, cost-of-living allowance, education allowance, mobile allowance, overtime pay, bonuses and commissions — unless your contract expressly folds a fixed amount into the basic wage itself.
How to find your basic salary on your UAE payslip
Pull up your latest payslip and look for the line labelled "basic salary" or "basic wage". A typical Dubai payslip reads: basic salary AED 8,000; housing allowance AED 3,000; transport AED 500; food AED 500; overtime AED 300; total AED 12,300. Your gratuity base is AED 8,000 — everything below that line is ignored by the formula.
If your payslip shows no separate basic line, check your offer letter or contract — and get the split in writing from HR before your final settlement. The UAE gratuity calculator keeps basic and allowances in separate fields for exactly this reason.
Worked example: is gratuity calculated on basic salary in UAE?
Take a worker with a basic wage of AED 8,000 and a housing allowance of AED 4,000, who completes 6 years of service. This example proves the gratuity formula in the UAE:
- Daily wage: 8,000 ÷ 30 = AED 266.67.
- Years 1–5: 21 days × 266.67 × 5 = AED 28,000.35.
- Year 6: 30 days × 266.67 = AED 8,000.10.
- Total gratuity: 28,000.35 + 8,000.10 = AED 36,000 (rounded).
Now watch what happens if someone wrongly uses the AED 12,000 gross: daily wage becomes AED 400, and the same 6 years price out at AED 54,000 — a gap of AED 18,000 that no labour court would uphold. That is why "is gratuity calculated on basic salary in UAE" matters so much in practice: the wrong wage figure is the single most expensive mistake in any UAE gratuity calculation.
UAE gratuity on basic salary: quick table for common wages
The table below prices gratuity on the basic wages people search for most, using the correct basic-salary basis (not gross):
| Monthly basic wage | 3 years | 5 years | 10 years |
|---|---|---|---|
| AED 3,000 | 6,300 | 10,500 | 25,500 |
| AED 5,000 | 10,500 | 17,500 | 42,500 |
| AED 8,000 | 16,800 | 28,000 | 68,000 |
| AED 10,000 | 21,000 | 35,000 | 85,000 |
| AED 12,000 | 25,200 | 42,000 | 102,000 |
Because the formula is flat after year 5, awards grow in a straight line with service. For more service lengths see UAE gratuity worked examples.
Part-time workers and the basic-salary rule
Part-time employees get gratuity too — Cabinet Resolution No. 89 of 2022 makes it proportional to working hours. The basic-salary rule still applies: the hourly rate comes from the basic wage, and the award is scaled by the hours you actually worked compared to a full-time role.
Example: a part-timer working 20 of a standard 40 hours on AED 4,000 basic gets half the full-time award. If a full-time 5-year award would be AED 14,000 (4,000 ÷ 30 × 21 × 5), the part-timer's share is AED 7,000.
Does resignation change the basic-salary calculation?
No. Under the new law, an ordinary resignation does not reduce the award — the same basic-salary formula applies whether you resign or the employer ends the contract. The old 1980 law's resignation tiers (two-thirds, one-third reductions) were repealed when Federal Decree-Law No. 33 of 2021 took effect.
To keep the full amount, serve your notice period — skipping notice can cost you notice pay, deducted from the settlement. See gratuity if you resign in the UAE and notice period in the UAE.
7 mistakes that shrink your UAE gratuity
- Using gross salary instead of basic salary. Allowances are excluded — the most expensive error in the answer to "is gratuity calculated on basic salary in UAE".
- Counting housing or transport allowance as basic. Only a contractual fixed basic counts; labelled allowances never do.
- Using your starting salary, not your last basic wage. A recent raise lifts the whole award.
- Applying the repealed 1980 resignation tiers. Resignation no longer reduces gratuity under the 2021 law.
- Throwing away part-years. Extra months count proportionally.
- Forgetting the 2-year-wages cap. The award can never exceed 24 months of basic salary.
- Signing the final settlement without a breakdown. If the employer's figure differs from yours, ask for their written calculation before signing.
Gratuity vs final settlement: what else you are owed in the UAE
The basic-salary question — "is gratuity calculated on basic salary in UAE" — is only half of the end of service benefits in the UAE. On top of the end-of-service award you are also owed: unused annual leave encashed at the basic wage (leave pay is also basic-based), notice-period pay if notice was not served, and any unpaid overtime. These are separate from — and added to — the gratuity figure.
Check each line against our guides: final settlement in the UAE, how overtime is paid in the UAE and notice period in the UAE.
Your 5-minute basic-salary gratuity checklist
- Find your basic wage on your latest payslip — allowances below that line don't count toward the answer to "is gratuity calculated on basic salary in UAE".
- Confirm your continuous service in years and months — fractions count pro-rata, but less than 1 year means nothing.
- Apply the formula: (basic ÷ 30) × 21 × first 5 years + (basic ÷ 30) × 30 × later years — or run the UAE gratuity calculator.
- Sanity-check against the 2-year-wages cap — the award can't exceed 24 months of basic salary.
- Before signing the final settlement, check gratuity + unused leave + notice pay are listed separately — and ask for a written breakdown if any figure differs from yours.
Frequently asked questions
Is gratuity calculated on basic salary in UAE?
Yes. Article 52 of Federal Decree-Law No. 33 of 2021 prices UAE gratuity on your last basic wage only, excluding allowances whatever their nature. The formula: (basic ÷ 30) × 21 days for each of the first 5 years, then (basic ÷ 30) × 30 days for every year after, capped at 2 years' wages. Less than 1 year of service means no gratuity.
Does gratuity include housing allowance in UAE?
No. Housing, transport, food, cost-of-living and other allowances are excluded from the gratuity calculation in the UAE. For example, a worker on AED 8,000 basic + AED 4,000 housing allowance gets gratuity on AED 8,000 only — using the AED 12,000 gross would overstate a 6-year award by AED 18,000.
How is the daily wage calculated for gratuity in UAE?
Daily wage = last basic wage ÷ 30. On AED 8,000 basic the daily wage is AED 266.67; on AED 10,000 basic it is AED 333.33. Allowances are stripped out before this division — a Cabinet resolution fixes the 30-day divisor.
How much gratuity after 5 years in UAE with basic salary of AED 10,000?
AED 35,000. The daily wage is 10,000 ÷ 30 = AED 333.33, and 5 years price out at 21 days × 5 = 105 days: 105 × 333.33 = AED 35,000. Allowances are excluded from the calculation.
Does gratuity reduce on resignation in UAE?
No. Under Federal Decree-Law No. 33 of 2021 an ordinary resignation does not reduce gratuity — the same basic-salary formula applies whether you resign or the employer ends the contract. The old 1980 law's resignation tiers were repealed. Serve your notice period to keep the full amount.
Work out your own amount
Enter your dates and salary to see your end-of-service pay instantly.
More questions
- Full gratuity if you resign?
- What is the notice period?
- How is overtime paid?
- Final settlement not paid? What to do
Sources
This guide is based on the UAE Labour Law (Federal Decree-Law No. 33 of 2021). Labour laws are amended from time to time; for the latest version, always check the official gazette of UAE.
