1. Legal Essentials — Who’s Eligible & What’s Required
Under UAE labor law, employees must complete one year of continuous service to qualify for gratuity. Absences without pay don’t count toward this threshold. Gratuity is calculated based on basic salary only, excluding allowances or bonuses.
Gratuity Structure:
1–5 years: 21 days’ basic salary per service year
Beyond 5 years: 30 days per service year
Cap: Total gratuity must not exceed two years’ basic salary
For unlimited contracts, employers must recognize partial entitlements upon early resignation:
1–3 years: 1/3 of the 21-day rate
3–5 years: 2/3 of the 21-day rate
5+ years: Full entitlement applies
Timeliness is non-negotiable: legally, gratuity must be paid within 14 days of contract termination to avoid penalties and disputes.
2. Recent Updates — More Flexibility and Broader Eligibility
2025 brought pivotal changes:
Part-time, remote, and flexible role workers now receive gratuity pro-rata.
Employees are required to have their basic salary explicitly stated in contracts to avoid confusion.
A voluntary Savings Scheme now complements or replaces lump-sum payouts. This fund-based model lets employers and employees contribute regularly into Sharia-compliant, capital-protected, or market-linked accounts. It smooths cash-flow and offers long-term flexibility.
3. The Risks of Non-Compliance
Ignoring these rules isn’t just unethical—it’s risky. Employers face:
Fines or business license suspension
Legal complaints from ex-employees
Damage to employer branding and hiring appealFacebook Instagram
Clear record-keeping, precise contract terms, and accurate calculations are essential defenses.
4. Why ConnectHR Leads the Way
Enter ConnectHR — your full-stack solution for gratuity compliance:
Automated gratuity calculator: Accurately handles limited and unlimited contracts, partial years, varied termination reasons, even part-time roles.
Timely compliance: Tracks deadlines and triggers payouts within the 14-day legal window.
Savings Scheme integration: Supports government-approved fund alternatives alongside traditional payouts.
Streamlined HR workflows: Incorporated into broader HRMS features—from offboarding and payroll to document automation and dashboards.