Daily Basic Rate = Basic Monthly Salary ÷ 30

For years 1 to 5:
Gratuity = Daily Basic Rate × 21 × Number of Years (and pro-rata months)

For years beyond 5:
Gratuity (years 1–5) = Daily Basic Rate × 21 × 5
Gratuity (years 6+) = Daily Basic Rate × 30 × (Total Years − 5)

Total Gratuity = Sum of both bands
Cap: Total Gratuity cannot exceed 2 × Annual Basic Salary
Annual Basic Salary = Monthly Basic Salary × 12

Partial years are calculated on a pro-rata basis. If you worked 3 years and 4 months, the 4 months is counted as 4 divided by 12 of a year, multiplied by the applicable daily rate.

What Counts as Basic Salary in the UAE

UAE law is strict on this. Basic salary for gratuity purposes is the fixed monthly amount stated in your employment contract as “basic salary.” It excludes every other payment: housing allowance, transport allowance, food allowance, shift allowances, overtime, commissions, target bonuses, profit-sharing, and any other benefit in cash or kind. The only exception is if your contract explicitly states that all allowances are to be included in gratuity calculations, which is unusual.

This matters practically. Many Nigerian workers in the UAE receive a competitive total package but a relatively low basic salary, because employers structure packages this way. A worker earning AED 12,000 total might have a basic salary of only AED 5,000 and allowances of AED 7,000. The gratuity is calculated on AED 5,000.

Table of Truth: Gratuity Estimates at Common Salary Levels

All figures assume limited contract, resignation or termination (same under new law). The two-year salary cap may apply at higher salary levels and longer service periods.

The Two-Year Cap: What It Means in Practice

No matter how long you work in the UAE, your total gratuity cannot exceed two times your annual basic salary. Two years of annual basic salary equals 24 months of basic salary.

For a worker earning AED 8,000 basic salary, the cap is AED 8,000 × 24 = AED 192,000. This is unlikely to be hit at 8,000 basic salary unless they work for a very long time. But for a worker on AED 20,000 basic salary, the cap is AED 480,000. Long-serving, higher-paid workers should check whether their calculated gratuity exceeds the cap and will be reduced to it.

Realistic Scenarios for Nigerian Workers in the UAE

Scenario 1: Junior worker, 2 years and 3 months service, AED 4,000 basic

Emeka works as an administrator. His basic salary is AED 4,000. He has worked for 2 years and 3 months. All under a limited contract. He resigned. Daily rate: AED 4,000 ÷ 30 = AED 133.33. Gratuity for 2 full years: AED 133.33 × 21 × 2 = AED 5,600. Gratuity for 3 extra months (3/12 of a year): AED 133.33 × 21 × 0.25 = AED 700. Total estimated gratuity: AED 6,300. In Naira at ₦377: approximately ₦2.375 million.

Scenario 2: Mid-career professional, 6 years service, AED 10,000 basic

Adaeze is a finance officer who has been with her employer for 6 years exactly. Basic salary: AED 10,000. She is leaving for a better role. Daily rate: AED 333.33. First 5 years: AED 333.33 × 21 × 5 = AED 35,000. Year 6: AED 333.33 × 30 × 1 = AED 10,000. Total estimated gratuity: AED 45,000. In Naira: approximately ₦16.97 million.

Scenario 3: Senior employee, 12 years service, AED 18,000 basic, two-year cap applies

Tunde is a senior engineer who has been with the same Dubai firm for 12 years. Basic salary: AED 18,000. Daily rate: AED 600. First 5 years: AED 600 × 21 × 5 = AED 63,000. Years 6 to 12 (7 additional years): AED 600 × 30 × 7 = AED 126,000. Calculated total: AED 189,000. Two-year cap: AED 18,000 × 24 = AED 432,000. The cap is not triggered here. Total gratuity: AED 189,000. In Naira: approximately ₦71.3 million.

When You Do Not Get Gratuity

Two situations result in no gratuity entitlement. The first is if you have worked for less than one full year of continuous service. The second is if you are dismissed for gross misconduct as defined under Article 44 of Federal Decree-Law No. 33 of 2021. Gross misconduct includes fraud, theft, physical assault, and disclosure of confidential information. Ordinary termination, redundancy, or mutual agreement to end employment do not affect your gratuity entitlement.

Does Free Zone Employment Follow the Same Rules?

Not necessarily. Some UAE free zones, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), operate under their own employment regulations and have different gratuity rules. If you work in a free zone, verify whether the MoHRE rules apply to you or whether your free zone has its own employment law. This tool uses the MoHRE federal rules only.

Common Questions About UAE Gratuity for Nigerians

Is UAE gratuity taxed in Nigeria when I bring it home?

UAE does not tax gratuity. Nigeria does not typically tax foreign-source gratuity payments for non-resident individuals, though you should confirm your tax residency status if you spend significant time in Nigeria. For most Nigerian workers receiving gratuity as a lump sum upon leaving the UAE, there is no applicable Nigerian tax in practice.

Can my employer reduce my gratuity or refuse to pay it?

Employers cannot legally reduce gratuity below the statutory minimum unless you were dismissed for gross misconduct under Article 44. Refusing to pay within 14 days is a violation. File a complaint with MoHRE if this happens.

What if my employer is enrolled in the UAE Savings Scheme instead of standard gratuity?

The UAE has introduced a voluntary Alternative End-of-Service Benefits (Savings) Scheme for employers who opt in. Under this scheme, employers make monthly contributions to an approved investment fund on your behalf instead of paying a lump-sum gratuity at the end. If your employer participates, the traditional gratuity formula applies only up to the date of enrolment. After enrolment, your benefit comes from the fund. Check with your employer or HR department whether you are in the standard gratuity system or the Savings Scheme.

Does my gratuity include overtime pay or commission?

No. Gratuity is based strictly on basic salary. Overtime, commission, target bonuses, performance pay, and any other variable or allowance components are excluded from the gratuity calculation base.

What if I worked for the same employer but under two different contracts?

If you worked continuously for the same employer but had a contract change, such as a promotion or a new contract upon renewal, the continuous service period is what counts, not the individual contract periods. Service is not reset by a contract change with the same employer.

If I die while working in the UAE, does my family receive gratuity?

Yes. UAE Labour Law entitles the eligible heirs of a deceased employee to receive the end-of-service gratuity. The estate or designated beneficiaries can claim the amount. Your employer is required to settle this with your family upon the end of employment due to death.

Assumptions This Tool Uses

• Gratuity formula: Federal Decree-Law No. 33 of 2021, Article 51. 21 days basic salary per year for the first 5 years; 30 days per year for each additional year beyond 5.
• Partial years are calculated pro-rata as (extra months ÷ 12) × applicable daily rate × days per year band.
• The two-year salary cap is applied: total gratuity is capped at basic monthly salary × 24.
• For limited contracts (new law): the same entitlement applies whether resigned or terminated.
• For unlimited contracts (old type): resignation after 1 to 3 years = one-third; 3 to 5 years = two-thirds; 5+ years = full entitlement. Termination always gets full entitlement.
• Gross misconduct dismissal = zero gratuity, regardless of years served.
• Free zone employment may have different rules; this tool uses MoHRE mainland rules only.
• Alternative End-of-Service Savings Scheme participation is not modelled in this tool.
• AED to NGN rate: default ₦377/AED (late March 2026). Update for accuracy.

Disclaimer