Leaving a job in the UAE can feel overwhelming, especially for private sector workers who are unsure about their legal rights when an employment contract comes to an end.

A key part of this process is the end of service gratuity, a mandatory payment that eligible employees are entitled to receive upon leaving their position. Still, many workers remain unclear about how the amount is calculated, what factors can reduce it, and how to respond if the payment is delayed or disputed.

Under the UAE Labour Law, here is what private sector employees need to know.

How gratuity is calculated

End of service gratuity for a foreign employee is calculated based on the last basic wage the employee was receiving, not the full gross salary.

The general formula is 21 days of basic wage for each of the first five years of service, and 30 days of basic wage for each additional year beyond five, provided the employee has completed at least one full year of continuous service.

Employees are also entitled to a pro rated gratuity for any partial year of service. The total gratuity cannot exceed the equivalent of two years of basic wage.

Unused annual leave is not included in the gratuity calculation. It is treated as a separate final settlement entitlement and should be paid separately if the leave was accrued but not taken.

General gratuity rules by length of service

Less than one year: No gratuity is paid

Between one and five years: 21 days of basic salary for each year of service

More than five years: 21 days of basic salary for each of the first five years, plus 30 days of basic salary for each year after the first five

Maximum limit: Gratuity cannot exceed two years of total salary

What happens if your salary is reduced

Because gratuity is tied to your last basic wage, a salary reduction shortly before leaving a job could significantly lower your final payout.

Employees should be cautious before signing any salary reduction agreement close to the end of their employment. If the basic wage is validly reduced before the contract ends, the gratuity calculation will reflect that lower amount. However, if the reduction was imposed unfairly or used as a way to reduce statutory entitlements, the employee may have grounds to challenge it.

How long employers have to pay

Under the Labour Law, employers must pay all wages and gratuity within 14 days of the contract end date.

What to do if gratuity is delayed

If the matter is not resolved directly with the employer, the employee may file a labour complaint with the relevant government authority. An initial attempt at an amicable settlement is usually made before any dispute is referred to court.

An employer cannot withhold gratuity simply because a dispute exists, because they are unhappy with the employee’s performance, or because the employee resigned. Gratuity is a statutory end of service entitlement once the legal conditions are met.

Can gratuity be deducted

An employer may deduct from end of service benefits any amounts legally owed by the employee, or amounts payable under a court judgment, as long as the deduction follows the required legal conditions and procedures.

Examples of lawful deductions include recovery of loans or overpayments, disciplinary penalties applied through due process, and compensation for damages caused by the employee.

Should you sign a final settlement paper

Employees should request a written final settlement breakdown before signing any clearance, waiver, or document stating that all dues have been received. Avoid signing a final settlement that confirms full payment unless the payment has actually been made, or unless the document clearly preserves your right to claim any shortfall.