Note: UAE labour law and how it is applied can change. This article explains the general rules under UAE Federal Law No. 33 of 2021. For your own case, speak to a UAE employment lawyer or HR professional.
When you leave a job in the UAE, your employer must pay end of service gratuity. This is not a bonus. It is a legal payment under UAE labour law.
Many UK workers are not used to that. In the UK, you normally get your final salary and that is it, unless you qualify for redundancy pay. In the UAE, gratuity is a separate payment on top of everything else.
It matters for two reasons. First, it changes how much money you take home when you leave a UAE job. Second, it can affect your UK tax position if you return to the UK or if you are still within the UK tax system.
For a picture of how UAE employment compares with working in the UK, the break-even analysis covers the full financial picture.
What is UAE end of service gratuity and who qualifies?
End of service gratuity is a payment your employer makes when your job ends. It applies to private sector employees in the UAE who have completed at least one year of continuous service.
If you leave before one year, you do not get gratuity. One year is the minimum.
The payment is based on your last basic salary. It does not include allowances such as housing, transport, or medical cover. Overtime is also excluded.
Gratuity applies to private sector employees, whatever their nationality. If you work for a UAE company on an employment visa, you should qualify. UK nationals are treated the same as anyone else.
Government employees follow separate pension schemes. This guide covers private sector employment.
How is UAE gratuity calculated?
The calculation changed with the 2022 labour law update. The current rules are:
For the first 5 years of service:
21 days of basic salary for each year worked.
For service beyond 5 years:
30 days of basic salary for each year worked after year 5.
The maximum gratuity is 2 years of total salary.
Example:
You earn a basic salary of AED 15,000 per month. You work for 7 years.
Years 1 to 5: 5 x 21 days = 105 days of salary
Years 6 and 7: 2 x 30 days = 60 days of salary
Total: 165 days of salary
Daily salary = AED 15,000 / 30 = AED 500
Gratuity = 165 x AED 500 = AED 82,500
This is the formula under UAE labour law as published by the Ministry of Human Resources. Online calculators exist, but this formula is the source.
What happens to gratuity if you resign or are made redundant?
Under the current UAE labour law, the calculation is the same whether you resign or are made redundant. You receive the full amount based on your years of service.
That is different from the older UAE labour law before 2022. Under the old rules, gratuity could be reduced if you resigned before completing 5 years. That rule no longer applies to contracts issued under the current law.
If you are on an older unlimited contract that started before 2022, the old rules may still apply to service periods under that contract. Many UK nationals who moved after 2022, or who renewed their contracts after 2022, are under the new law.
Check your contract. If you are not sure which rules apply, speak to an employment lawyer.
Your employer must pay gratuity within 14 days after your employment ends. If they delay, you can file a complaint through the Ministry of Human Resources.
Is UAE gratuity taxable when you return to the UK?
This is where things can get tricky.
If you are non-UK resident when you receive the gratuity, it is generally not subject to UK income tax. The UAE has no income tax, so in that case you do not pay tax there either.
If you are still a UK tax resident when you receive it, HMRC may treat the gratuity as employment income. UK income tax rates would then apply.
The double taxation treaty between the UK and UAE sets out which country has taxing rights over employment income. In most cases, employment income is taxed in the country where the work was done. So UAE gratuity for UAE work should usually not be UK taxable once you are non-UK resident.
Gratuity paid after you return to the UK, or while you are still treated as UK resident, is a different matter.
Get advice before you leave. The tax treatment depends on the timing of the payment, your residency status, and your employment setup. If you think gratuity may create a UK tax event, UAE tax filing and compliance support can help you plan.
For foreign income and UK tax rules, HMRC’s guidance on foreign income is the starting point.
The new UAE savings scheme (DEWS): what changed?
The DIFC Employee Workplace Savings scheme, or DEWS, launched in 2020. It first applied to DIFC-registered employers.
Under DEWS, employers pay monthly contributions into an individual savings account for each employee. For covered employers, this replaces the traditional end of service gratuity lump sum.
The contributions are:
- 5.83% of monthly salary for employees with less than 5 years of service
- 8.33% of monthly salary for employees with more than 5 years
The employee owns the pot. It builds over time and is paid out when employment ends. The employer makes smaller monthly payments instead of one large payment at the end.
For DIFC employees, this gives better protection. The money sits in a regulated fund rather than staying with the employer until you leave. That lowers the risk of not getting paid on exit.
Outside DIFC, the standard gratuity system still applies. The UAE government has also signalled a wider rollout of savings schemes in future. If you join a DIFC employer, check whether they use the DEWS scheme at dews.ae.
Practical points for UK expats
- Include gratuity in your financial plan. If you expect to work in the UAE for 5 to 10 years, the amount can be meaningful. Build it into your exit plan.
- Do not leave before one year. If you quit before 12 months, you get nothing. If you are close to the year mark, think carefully before walking away.
- Your basic salary matters more than the total package. If your contract uses a low basic salary and high allowances, your gratuity base will be lower. Check the contract terms.
- Keep your contract. You will need it if you want to challenge a gratuity calculation. The Ministry of Human Resources dispute process needs documents.
- Get UK tax advice before you receive a large payment. If gratuity is significant and your residency status is changing soon, timing matters.
How We Help
If your UAE gratuity payment creates a UK tax question, the team can help you understand your tax filing in the UAE position and what UK reporting may be needed.
Frequently Asked Questions
What happens to gratuity if I resign in the UAE?
Under the current UAE labour law from 2022, you get the same gratuity whether you resign or are made redundant. The amount depends on your years of service and last basic salary. The old rules that reduced gratuity after resignation before 5 years no longer apply to contracts under the current law.
How is UAE gratuity calculated?
You get 21 days of basic salary for each year during the first 5 years of service. You then get 30 days of basic salary for each year after that. The maximum is 2 years of total salary.
Is UAE gratuity taxable in the UK?
If you are non-UK resident when you receive the gratuity, it is generally not subject to UK income tax. If you are still UK tax resident when the payment arrives, HMRC may treat it as employment income. The exact treatment depends on your residency status and the timing of payment. Get professional advice for your own case.
Is gratuity mandatory in the UAE?
Yes. UAE labour law requires private sector employers to pay end of service gratuity to employees who have completed at least one year of continuous service.