The Mathematics Behind UAE Gratuity Calculations

Calculating your end-of-service benefits requires converting your monthly basic salary into a daily basic wage, measuring exact calendar days of continuous employment, and splitting service into tier 1 (years 1–5) and tier 2 (years 5+).

Step 1: Determine Daily Basic Wage

Under UAE Ministry of Human Resources and Emiratisation (MOHRE) standards, a payroll month is standardized as 30 calendar days for all severance derivations.

Daily Basic Wage = Monthly Basic Salary ÷ 30

Step 2: Pro-Rata Days Calculation

Uncompleted years are calculated on an exact pro-rata basis. For example, 3 years and 219 days equals 3 + (219 ÷ 365) = 3.60 years of continuous service. Unpaid leave days taken during employment are subtracted from the service tally.

Step 3: Apply Two-Tier Statutory Multipliers

  • Tier 1 (First 5 Years): 21 days basic salary for each completed or partial year.
  • Tier 2 (Service Beyond 5 Years): 30 days basic salary for each subsequent completed or partial year.

Comprehensive Worked Calculation Example

Consider an employee with a Monthly Basic Salary of AED 15,000 who worked continuously for 7 years and 180 days (7.493 years) without unpaid leave:

1. Daily Basic Wage: AED 15,000 ÷ 30 = AED 500 / day

2. First 5 Years Payout: 5 years × 21 days × AED 500 = AED 52,500

3. Remaining 2.493 Years Payout: 2.493 years × 30 days × AED 500 = AED 37,395

4. Total Calculated Severance: AED 52,500 + AED 37,395 = AED 89,895

5. Cap Verification: Maximum allowed cap is 24 × AED 15,000 = AED 360,000. Since AED 89,895 is below AED 360,000, the full amount is payable.