Table of Contents
- Final Settlement in the UAE: Key Rules for 2027
- What Is Included in a Final Settlement?
- End-of-Service Gratuity in the UAE
- Gratuity Calculation Examples
- Full Final Settlement Example
- Final Settlement Payment Deadline
- Alternative End-of-Service Savings Scheme
- What Should Employers Check Before Paying a Final Settlement?
- What If the Employer Does Not Pay the Final Settlement?
- Need Help With Final Settlements in the UAE?
- FAQs on Final Settlement in the UAE
Last updated: 3 November 2026 | Applies to: UAE private sector (MoHRE-registered employers)
A final settlement is the total amount an employer must pay an employee when employment ends, whether through resignation, termination, retirement or the end of a contract. It includes unpaid salary, pay for unused annual leave, the end-of-service gratuity and any other dues, less lawful deductions.
The rules are set by Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations and its executive regulations. The gratuity and final settlement provisions have not changed for 2027. The main development is the voluntary alternative end-of-service savings scheme, which some employers now use instead of the gratuity system. This guide explains both, with worked examples.
Final Settlement in the UAE: Key Rules for 2027
- Payment deadline: within 14 days of the end of the employment contract.
- Gratuity eligibility: at least one year of continuous service.
- Gratuity rate: 21 days’ basic wage per year for the first 5 years, 30 days’ basic wage per year after that.
- Gratuity cap: the total cannot exceed two years’ wage.
- Resignation: no reduction in gratuity under the current law.
- Unused leave: paid on the basic wage, separately from gratuity.
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What Is Included in a Final Settlement?
| Item | How it is calculated |
|---|---|
| Salary up to the last working day | Full monthly wage ÷ 30 × days worked in the final month |
| Unused annual leave | Basic monthly wage ÷ 30 × unused leave days |
| End-of-service gratuity | 21 or 30 days’ basic wage per year of service (see below) |
| Notice pay (if notice is not served) | Wage for the notice period, payable by the party that did not give notice |
| Other contractual dues | Overtime, commissions, bonuses or a repatriation ticket, if due under the contract |
| Lawful deductions | Amounts the employee legally owes, such as an outstanding loan or a court-ordered amount |
End-of-Service Gratuity in the UAE
Who is eligible?
Foreign employees in the private sector who complete at least one year of continuous service are entitled to end-of-service gratuity. UAE and GCC nationals are generally covered by their pension and social security system instead. Part-time employees are entitled to gratuity in proportion to their actual working hours.
Gratuity formula
Daily basic wage = Last basic monthly salary ÷ 30
First 5 years: 21 × daily basic wage × years of service
After 5 years: 30 × daily basic wage × years after 5
Total gratuity cannot exceed two years' wage.- Gratuity is calculated on the last basic wage, not the gross salary with allowances.
- Part years are paid in proportion to the time worked.
- Days of unpaid absence are not counted as service.
- If the contract or company policy gives a more favourable formula, the more favourable terms apply.
Does resignation reduce gratuity?
No. Under the current Labour Law, an employee who resigns after completing at least one year of service receives the same gratuity as an employee whose contract is terminated. The old reductions for resignation under the previous labour law no longer apply.
Gratuity Calculation Examples
All examples use a last basic salary of AED 10,000.
Daily basic wage = 10,000 ÷ 30 = AED 333.33Example 1: 3 years of service
Gratuity = 21 × 333.33 × 3 = AED 21,000Example 2: 7 years and 4 months of service
First 5 years: 21 × 333.33 × 5 = AED 35,000
Next 2 years 4 months: 30 × 333.33 × 2.333 = AED 23,333.33
Total gratuity = AED 58,333.33Example 3: Less than one year of service
An employee who leaves after 10 months is not entitled to gratuity, but must still receive their outstanding salary and pay for any unused annual leave.
Full Final Settlement Example
An employee resigns after 3 years of service. Their basic salary is AED 10,000 and their full monthly wage, including allowances, is AED 15,000. They worked 10 days in their final month, have 12 days of unused annual leave and owe AED 2,000 on a company loan.
| Item | Calculation | Amount (AED) |
|---|---|---|
| Salary for final month | 15,000 ÷ 30 × 10 | 5,000 |
| Unused annual leave | 10,000 ÷ 30 × 12 | 4,000 |
| End-of-service gratuity | 21 × 333.33 × 3 | 21,000 |
| Less: company loan | (2,000) | |
| Net final settlement | 28,000 |
Final Settlement Payment Deadline
The employer must pay all wages and entitlements, including gratuity, within 14 days of the end of the employment contract. Final settlement payments should be processed and recorded properly, and salary components should go through the Wage Protection System (WPS).
Alternative End-of-Service Savings Scheme
Under Cabinet Resolution No. 96 of 2023, private-sector employers can choose to join a voluntary alternative end-of-service savings scheme instead of paying gratuity at the end of employment.
- The employer pays monthly contributions into an approved investment fund: 5.83% of basic salary for employees with less than 5 years of service, and 8.33% for 5 years or more.
- Employees can add voluntary contributions of up to 25% of their salary.
- Gratuity earned before an employee joins the scheme remains payable under the Labour Law, calculated on the basic salary at the enrolment date.
- A participating employer must stay in the scheme for at least one year.
- The scheme does not apply in the DIFC or ADGM, which have their own end-of-service schemes.
Also read: New End-of-Service Savings Scheme for Employees in UAE | Leave Salary Calculation in UAE
What Should Employers Check Before Paying a Final Settlement?
- The correct last working day and total service period, excluding unpaid absence.
- The last basic salary and full wage from payroll records.
- The employee’s annual leave balance.
- Whether notice was served in full, or notice pay is due.
- Any lawful deductions, with supporting documents.
- Whether the employee is enrolled in the alternative savings scheme.
- That the payment is made within 14 days.
What If the Employer Does Not Pay the Final Settlement?
The employee can file a labour complaint with the Ministry of Human Resources and Emiratisation (MoHRE). MoHRE first tries to settle the dispute amicably. If it is not resolved, the case is referred to the labour courts. Delayed payment can also lead to administrative penalties for the employer.
Need Help With Final Settlements in the UAE?
Final settlement errors are a leading cause of labour complaints. Our payroll services in the UAE calculate gratuity, leave encashment and final dues accurately and process payments on time through WPS, so every exit is compliant.
Looking for Expert Support?
Connect with our experienced team for trusted advice and dedicated assistance. We’re committed to supporting you throughout the entire process.
FAQs on Final Settlement in the UAE
Sources:
UAE Government Portal – End-of-service benefits in the private sector
