When Does UAE Gratuity Hit Its Maximum? A Surprising Look at the “Two-Year Salary Cap”
Introduction
In the UAE, End of Service Benefits (often called “gratuity”) provide a vital financial cushion when an employee leaves a job. But did you know that your gratuity doesn’t increase indefinitely? Under Federal Decree-Law No. 33 of 2021, there’s a two-year salary cap on how high your gratuity can climb.
In Article 51(6) of the law (as cited at UAE Labour Law Federal Law No. 33 of 2021), it states that an employee’s end-of-service benefits “in their entirety” shall not exceed the wage of two years. So, at some point, your gratuity hits a ceiling—and it might surprise you how long that takes!
Let’s break it down step-by-step.
UAE Gratuity Payment Regulations
Under the current rules in Federal Decree-Law No. 33 of 2021, your gratuity payment calculation depends on:
Years of Service
Less than 1 year: Zero gratuity.
1 to 5 years: 21 days of basic wage for each year.
Over 5 years: 21 days/year for the first 5, plus 30 days/year thereafter.
Two-Year Wage Cap
The law limits total gratuity to 24 months of your basic salary.
This is confirmed in Article 51(6): “It is required … that the end of service benefits … does not exceed two years’ wage.”
The Math: Gratuity vs. the 2-Year Cap
Let’s look at how gratuity grows over time and see when you finally max out.
1. 21 Days/Year for First 5 – Over 5 years, that’s 105 days total.
2. 30 Days/Year for Each Year Beyond 5 – If you’ve worked “Y” total years (Y>5), the total days earned =
3. Link to Your Monthly Basic Wage – If your monthly basic wage is “B,” your daily basic wage is B/30. So your gratuity is days × (B/30).
4. Maximum of 2 Years’ Basic – The law says “2 years’ wage” = 24 months × B.
Solving for the point where gratuity = 24B reveals it happens at about 25.5 years of service. In other words:
You’d need to work for the same employer for 25.5 years before the standard gratuity formula would have otherwise exceeded that two-year wage cap—but by law, it cannot go higher.
Why It’s Useful to Know
Career Planning: If you’re a long-serving employee, it’s good to know that after roughly 25.5 years of continuous service, your gratuity stops growing. Some people might say that’s the perfect time to explore new roles or negotiate other benefits!
Financial Awareness: Understanding that “end of service benefits legal requirements” cap at two years’ salary can help you plan a realistic retirement or exit strategy.
Employer Negotiations: When you’re already near the gratuity payment regulations limit, you may want to focus on other perks like bonuses, equity, or promotions—since your gratuity is essentially maxed out.
“Pub Quiz” Fact
If you’re ever asked (perhaps in a pub quiz or an HR workshop!) “When does an employee’s end of service benefits amount stop growing?” you now know the magic figure: around 25.5 years. Yes, it’s a bit of an obscure piece of trivia—but it can definitely impress your colleagues or friends.
Calculate Your Own
Curious about your gratuity payment calculation under the new law? Try our End-of-Service Calculator custom report generator. It’s free, easy to use, and provides a detailed written breakdown taking into account how your employment ends, whether you’ve served the correct notice and forth—and no more guesswork on whether you’ve crossed the threshold!
In Summary
Gratuity in the UAE (for non-GCC expats) follows a 21-days/30-days formula after 1 year of service, capped at two years’ basic.
You only “hit” that 24-month ceiling after about 25.5 years with the same employer.
Once you do, your gratuity payment can’t grow further, legally speaking.
Now that you know about the 2-year wage cap, you can plan your career path (and your witty pub banter) with confidence. If you want more detail or to see how close you are to the maximum, don’t forget to check out our End-of-Service Calculator!
