Basic Salary vs Gross Salary: What Counts for Gratuity?
One of the most common sources of confusion is which salary figure to use. Under Article 53 of Federal Decree-Law No. 33 of 2021, gratuity is calculated on your basic salary — not your total or gross salary.
Your basic salary is the fixed amount stated in your employment contract, excluding allowances such as housing, transport, or other benefits. If your contract states a basic salary of AED 8,000 plus AED 4,000 in allowances (total AED 12,000), your gratuity is calculated on AED 8,000.
Practical tip: Check your MOHRE-registered employment contract for the exact basic salary figure. If your employer has been calculating gratuity on a lower figure than your contractual basic salary, you may be entitled to the difference.
Resignation vs Termination: Current Rules
Under the current UAE Labour Law (Federal Decree-Law No. 33 of 2021, effective February 2022), there is no difference between resignation and termination for gratuity purposes. The old rules that reduced gratuity for employees who resigned (the 1/3 and 2/3 reductions) were abolished.
Whether you resign or your employer terminates your contract, you are entitled to the same gratuity calculation: 21 days' basic wage per year for the first five years, and 30 days' basic wage per year thereafter — provided you have completed at least one year of continuous service.
The only exception is termination under Article 44 (gross misconduct), where gratuity may be forfeited. In all other cases, including mutual agreement, the full gratuity applies.
Mainland UAE vs DIFC and ADGM
Most employees in the UAE fall under Federal Decree-Law No. 33 of 2021. However, two major financial free zones have their own employment frameworks:
- DIFC (Dubai International Financial Centre): Operates under DIFC Employment Law No. 2 of 2019. Since February 2020, the DEWS (DIFC Employee Workplace Savings) plan replaced traditional gratuity for most employees. Employers contribute 5.83% of monthly basic salary (for service under 5 years) or 8.33% (for 5+ years) to a savings plan.
- ADGM (Abu Dhabi Global Market): Has its own Employment Regulations. Similar to DIFC, ADGM has moved toward a savings-plan model for end-of-service benefits.
If you work in DIFC or ADGM, use our dedicated free zone calculators rather than the standard mainland calculator, as the rules differ significantly.
Common Gratuity Calculation Mistakes
- Using gross salary instead of basic salary: This inflates the estimate. Always use the basic salary from your MOHRE contract.
- Forgetting the 30-day salary cap: Total gratuity cannot exceed two years' wages. For very long service periods, the cap applies.
- Counting unpaid leave: Days of unpaid absence are deducted from the service period when calculating gratuity.
- Applying old resignation reductions: The 1/3 and 2/3 reductions for resignation were abolished in 2022. Some outdated online calculators still apply them.
- Ignoring probation: If you complete less than one year of service (including probation), no gratuity is payable.
- Using 30 days for all years: The first five years use 21 days per year, not 30. Only years beyond five use the 30-day rate.
Our calculator handles all of these correctly, applying the current legal formula with proper caps and thresholds.