Your UAE gratuity is built on basic salary. The allowances do not count.
It is the most common mistake in end-of-service pay, and it runs in both directions. Workers ask for too much and employers offer too little, because both are using the wrong number.
What the law says
Two clauses decide it, and they agree with each other.
Article 51(2): the gratuity is “calculated according to the basic wage”.
Article 51(5): the gratuity “shall be calculated according to the last basic wage received by the foreign Worker”.
Basic wage, twice, in the calculation and in the base it is measured from. Housing, transport, phone, fuel and any other allowance sit outside it. They are part of what you are paid. They are not part of what the gratuity is built on.
The arithmetic, with real numbers
Basic salary AED 8,000. Total salary with housing and transport AED 12,000. Six years of service.
| Step | On basic 8,000 | On total 12,000 |
|---|---|---|
| Daily wage | 266.67 | 400.00 |
| First five years, 105 days | 28,000 | 42,000 |
| Sixth year, 30 days | 8,000 | 12,000 |
| Total gratuity | 36,000 | 54,000 |
The difference is AED 18,000, a third of the correct figure. That is why the number on the contract matters more than the number in the offer letter.
The one place allowances can matter
Article 51(6) caps the total at “two years' wage”. It says wage, not basic wage, after saying basic wage twice in the paragraphs above it. If the cap is measured on the wider figure, allowances can make a difference at the ceiling.
They only get you there after 25 years of service, as the arithmetic in our other piece shows. Below that, the cap never applies and the basic salary is the whole story.
What to do with this
- Find the basic salary line on your contract or payslip, not the total.
- Divide it by 30 to get the daily wage.
- Count 21 days for each of the first five years, 30 for each year after, plus the proportion of an incomplete final year once you have completed one full year.
- Multiply and compare. If the answer is under 720 days of wage, ignore the cap entirely.
If your employer offers a figure based on total salary, it is in your favour and worth checking twice before you sign anything. If they offer one based on a basic salary lower than your contract says, that is a different conversation.
Sources
- Federal Decree-Law No. 33 of 2021, Article 51, UAE Legislation portal. Read 2 November 2026.
- The table is our arithmetic from the day counts in clauses 2 and 6.
General information, not legal advice. Free zones can set different rules.