UAE Gratuity Formula
Years 1–5 of service:
Gratuity = (Basic Salary ÷ 30) × 21 × Years of Service
Years beyond 5:
Gratuity = (Basic Salary ÷ 30) × 30 × Additional Years
Maximum cap:
Total Gratuity ≤ 24 months of basic salary
Example: An employee with 7 years of service and AED 8,000 basic salary is entitled to: (8,000 ÷ 30 × 21 × 5) + (8,000 ÷ 30 × 30 × 2) = AED 28,000 + AED 16,000 = AED 44,000 gratuity
Why Attendance Records Are Critical for Gratuity
Your attendance system holds three pieces of data that directly affect gratuity:
- Verified start date — determines total years of service
- Unpaid leave periods — extended unpaid absence may reduce the service calculation
- Basic salary history — gratuity uses the last basic salary, tracked separately from allowances
Errors in any of these — due to paper records, manual spreadsheets, or absent records — lead to incorrect gratuity payments and potential MOHRE disputes.
How AITIME Links Attendance to Gratuity
- Records verified start date and maintains complete employment history
- Tracks all unpaid leave periods separately from regular leave
- Stores basic salary history for every employee
- Calculates projected gratuity at any point during employment
- Generates end-of-service summary for off-boarding and payroll
Frequently Asked Questions
How is gratuity calculated in UAE?
UAE gratuity (end-of-service benefit) is calculated based on the employee's last basic salary and years of service. For the first 5 years: 21 calendar days of basic salary per year. For each year beyond 5 years: 30 calendar days of basic salary per year. The total gratuity is capped at 2 years' basic salary.
Does attendance affect UAE gratuity calculation?
Yes. Accurate service length — the foundation of gratuity calculation — depends on verified employment start and end dates tracked in your attendance system. Unpaid leave periods may also affect the service calculation under certain UAE Labour Law provisions.
What is the difference between basic salary and total salary for gratuity?
UAE gratuity is calculated on the basic salary only, not the total package. Allowances (housing, transport, food) and commissions are excluded from the gratuity base. AITIME tracks basic salary separately from allowances to ensure correct gratuity calculations.
Can AITIME calculate gratuity automatically?
Yes. AITIME uses verified attendance data — precise start date, any unpaid leave periods, and current basic salary — to calculate the end-of-service gratuity entitlement for any employee at any point in time.