UAE end of service gratuity: how it is calculated and what to do with the money

End of service gratuity is a lump sum an employer pays when a job in the UAE ends. For many expats it is the largest single payment they will receive, often arriving at the same time as a move, a visa change and a pile of final bills. The calculation is usually straightforward. What to do with the money, and what tax follows it if you go back to the UK, is where the thinking is needed.

Who gets gratuity and when it is paid

For private sector employees on the mainland, the rules sit in Federal Decree Law No. 33 of 2021 on the regulation of employment relationships. The UAE Government Portal sets out the main points for expatriate workers on full time contracts.

• One year of continuous service. Nothing is due for less than a year. After one year, part years are paid in proportion. Days of unpaid absence do not count towards service.
• Basic pay only. The law defines the basic wage as the wage in the contract, not including allowances or benefits in kind. Housing, transport and utilities allowances are left out. This is why the figure is smaller than people expect when most of their package is allowances.
• Payment within 14 days. The employer must settle final wages, other entitlements and gratuity within 14 days of the end of the contract. The employer can deduct amounts you owe it.
• Time limit for claims. A law firm summary of the 2024 amendments says you now have two years from termination to bring a labour claim. Keep your records.
• Not covered here. UAE nationals are covered by pension and social security rules, and federal government employees have a separate scale.

How the calculation works

The law sets the amount in two bands for a full time expatriate worker:

• 21 days of basic wage for each year of the first five years of service.
• 30 days of basic wage for each year beyond five.
• A cap on the total at two years of wages.

To turn days into dirhams, you need a daily rate. The usual approach is to take monthly basic pay and divide by 30, although the formal detail sits in the executive regulations, so confirm it with your employer or MOHRE.

Notice what the figure is not. It is not a share of your total salary, and it is not linked to your tax or to the length of your visa. If your contract promises more than the statutory minimum, the contract terms apply to the extent they are better for you.

Contracts, resignation and what has changed

Many guides still talk about limited and unlimited contracts. That distinction used to drive the result. Under the old law, an employee who resigned from an unlimited contract could lose part or all of the gratuity if they had completed fewer than five years, and a worker who ended a limited contract early could lose it altogether. Those are the rules in older articles and in many HR handbooks, so be careful about which year a source was written.

• Fixed term only. Under the 2021 law, onshore employment contracts are for a specified term. Article 8 of the translated text states a term not exceeding three years that can be renewed or extended, and legal commentary says employers had until 2 February 2023 to convert unlimited contracts to fixed term. Commentary also says that a later ministry decision removed the three year limit, so check what your own contract says.
• Resignation. Commentary on the 2021 law says the reduction in gratuity for resignation was removed, and that gratuity is calculated on the same 21 and 30 day basis however the contract ends. That is the position described to employers, but the law's text should be read against your own contract, and any dispute should be raised with MOHRE early.
• Notice. Either party can end the contract for a legitimate reason with at least 30 and at most 90 days written notice. If you do not serve notice, you may owe a notice allowance. Article 45 lists cases where a worker can leave without notice and keep end of service rights, such as certain employer breaches, harassment or being given fundamentally different work.
• Dismissal for cause. Commentary says that dismissal for cause no longer removes gratuity. Absconding allegations and work permit bans are separate issues and can affect your ability to take a new job in the UAE for a period.

Free zones, DIFC and savings schemes

If you work in a free zone, the rule book may be different from the federal one. The two financial free zones are the best known.

DIFC and the DEWS scheme

In the Dubai International Financial Centre, employers stopped accruing a traditional gratuity from 1 February 2020. Instead they make monthly contributions to a qualifying scheme, which can be the DIFC Employee Workplace Savings Plan (DEWS) or an alternative scheme certified by the DIFC authority. As described in law firm commentary, the contribution is 5.83% of basic salary for employees with less than five years of service and 8.33% afterwards. You can make extra contributions, and a booster element can be withdrawn before you leave. The employer contributions stay in the scheme until your employment ends. The commentary says that on termination you can withdraw, or you can leave the money invested and take it later, including after leaving the DIFC or leaving the UAE. Gratuity accrued before February 2020 was frozen, and by default it remains the employer's liability, to be paid on exit, unless transferred into the scheme.

Arithmetic shows why these percentages were chosen. 21 days a year across a 360 day year is 5.83%, and 30 days a year is 8.33%. The monthly contribution is therefore roughly what a traditional gratuity accrual would cost the employer, with the difference that the money is invested, and its value rises or falls with markets.

ADGM

The Abu Dhabi Global Market has its own employment regulations. Commentary on the 2024 regulations, which came into force on 1 April 2025, says they clarify the gratuity calculation, remove the previous cap of two years' pay, and allow employers to offer a pension or savings scheme as an alternative to gratuity. Confirm the position with your employer, because it is recent.

The voluntary scheme for mainland and other free zone staff

Cabinet Resolution No. 96 of 2023 created a voluntary alternative scheme, which MOHRE and the Securities and Commodities Authority launched in November 2023. Employers may opt in, and if they do, the traditional gratuity stops accruing for the covered staff and previously accrued gratuity is settled. According to the government portal, employer contributions are 5.83% of basic salary for under five years of service and 8.33% above, you can add voluntary contributions of up to 25% of your wage, and you receive the contributions and returns within 14 days of leaving and can withdraw at any time. Investment choices include capital guaranteed, risk based and Sharia compliant portfolios, and the scheme also covers free zones. Other free zones, such as those run by individual authorities, may follow federal law or their own rules, so ask your HR team which applies.

Options for the lump sum

The right answer depends on where you plan to live next, when you will need the money and how you feel about risk. Here are the main routes, with their trade offs.

• Hold cash. Sensible for a transition fund: rent deposits, a move, a few months without income. Cash earns less than inflation over time, and it may be in a currency you will not spend.
• Clear expensive debt. Paying off a credit card or a high rate loan is a guaranteed return, which beats most investments.
• Pay into a pension. A pension can offer tax relief where you are a UK taxpayer or another relevant taxpayer. As a non resident with no UK earnings, relief on UK pension contributions is limited, so check with the provider.
• Invest in a flexible account or a tax wrapper. A tax wrapper is a structure that holds investments and can stay in place if you move, with tax usually considered when you take money out and by reference to where you live then. It adds charges and rules on withdrawals, so compare the total cost.
• Property. A deposit for a purchase can make sense, but concentrating your wealth in one asset and one currency is a risk.
• Leave it in the scheme. Where a DEWS style scheme lets you leave money invested after you go, you save paperwork, but you should check charges, fund choice and how the money will be taxed once you are somewhere else.
• Supporting family. Gifts and loans to relatives have their own tax and inheritance tax consequences if the donor has been UK resident.

Whatever you choose, think about the currency. The dirham is pegged to the US dollar, so if you are going home to the UK or retiring in another country, a dollar based sum can lose value against the currency you will spend. Our guide on currency risk in expat retirement covers this.

UK tax if you are returning to the UK

The UAE does not tax the gratuity. Whether the UK does depends on timing, and this is a technical area where a mistake is costly, so take UK tax advice before the move date is fixed.

• If you are non resident when you receive it. A UK non resident is generally taxed in the UK only on UK source income, so a gratuity for work done in the UAE and paid while you are non resident would not normally be a UK matter. This should be confirmed in each case.
• If you are UK resident when it is paid. Money you receive after you have become UK resident again may be taxable in the UK, and the answer depends on whether it counts as earnings, a termination payment or investment income, and on rules such as the split year treatment for the year of arrival. The simple point is that receiving the lump sum a few weeks before or after your arrival date can change the result.
• If the money stays invested. Growth after you return is a different question from the original payment. Interest, dividends and gains within a scheme or a fund can fall within UK tax once you are UK resident. Some overseas funds, if they are not UK reporting funds, can be taxed as income on sale. Check the fund type before buying.
• Foreign income and gains regime. The old remittance basis has been replaced for people arriving from April 2025. Reports describe a four year exemption on foreign income and gains for people who have been non resident for ten consecutive tax years before arriving, but the conditions should be checked against HMRC guidance. It may matter for someone returning after a long stay.
• Temporary non residence. If you were UK resident for at least four of the seven years before you left and return within five years, certain income and gains received while you were away can be taxed in the year you return. HMRC's list includes some pension lump sums, close company distributions and life policy gains. A gratuity is not on that list, but the same logic applies to anything you arrange around it.

Common mistakes

• Not checking the calculation. Employers sometimes include allowances, or leave them out, or count the wrong dates. Work it out yourself first.
• Using old rules. Online calculators and older articles may still apply the old resignation reductions.
• Leaving it in a current account. Idle cash is exposed to inflation and sometimes to the closing of your UAE account after you leave.
• Taking the payment in the wrong tax year. If you are returning to the UK, timing matters.
• Locking into a long plan. A regular savings plan sold at the point of departure can come with long terms and early charges. Ask for the total cost.
• Forgetting the deadline for claims. If your employer fails to pay, you have a limited time to claim.
• Assuming all free zones are the same. DIFC and ADGM differ from the mainland and from each other.
• Closing the bank account first. Keep the account open until the final payment has arrived.

Questions to ask

• Which law or free zone rules apply to my contract, and does my employer use a savings scheme?
• What is the exact basic salary used, the start date used and the daily rate?
• When will I be paid, and in which currency and bank account?
• If I leave the money in a scheme, what are the charges, the fund choices and the withdrawal terms?
• Where will I be tax resident when I receive it, and when will I become UK resident again?
• Would a pension, a tax wrapper or a simple investment account suit my timeline?
• What currency will I spend this money in?

What to do next

1. Ask HR for a written gratuity statement showing your basic salary, service dates and the formula used, and check it against the worked example above.
2. Find out whether your employer uses DEWS or another savings scheme, and what happens to the balance when you leave.
3. Decide what the money is for: a cash reserve, a pension, an investment, or a purchase.
4. If you are going back to the UK, take UK tax advice on timing before you set your arrival date or resign.
5. Keep copies of your contract, payslips and the final settlement.

Living abroad, 12 minute read. Last reviewed October 2026. Applies to: UAE. General information, not personal advice.