A Practical Guide to Leave, Attendance & Gratuity Computation
Getting leave balances, attendance records, and end-of-service gratuity right is not a payroll footnote — it is a direct exposure line under the UAE Labour Law and a frequent source of MOHRE complaints and Labour Court claims against employers. Annual leave accrual, sick leave entitlement, unpaid leave deductions, and the end-of-service gratuity formula each carry precise statutory rules that change with contract type, length of service, and reason for termination — and a single miscalculation compounds across every employee it touches.
What You're Really Buying
Leave, attendance, and gratuity computation is the set of payroll and HR-compliance calculations that determine how much annual leave, sick leave, and other statutory leave an employee has accrued and used; how attendance and unauthorised absence affect pay and leave balances; and — on separation — how much end-of-service gratuity (and any unused leave encashment) the employer owes. In the UAE these calculations sit on a specific statutory foundation: Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) and its Executive Regulations (Cabinet Resolution No. 1 of 2022).
For the full scope, current process and what PNPC includes, see the dedicated Leave, Attendance & Gratuity Computation service page.
Is This Relevant to Your Business?
- You run monthly or bi-weekly payroll for UAE staff and need annual leave, sick leave, and other statutory leave balances tracked accurately alongside WPS salary processing, not reconstructed manually at year-end
- An employee is resigning, being terminated, or reaching contract expiry, and you need a defensible end-of-service gratuity calculation before final settlement is paid and the employee's status is cancelled with MOHRE and GDRFA
- You operate across mainland, one or more free zones, and possibly DIFC or ADGM, and need each employee's leave and gratuity computed under the correct statutory or contractual regime rather than a single blanket policy
- A former employee has filed or threatens a MOHRE complaint or Labour Court claim alleging unpaid leave, incorrect gratuity, or wrongful termination, and you need an independent, defensible recalculation
Before You Assume You Need This
- You need full monthly payroll processing including salary calculation, payslip generation, and WPS file submission — that is the core payroll processing engagement, of which leave/attendance/gratuity computation is typically one component bundled in
- Your dispute has already progressed to active Labour Court or DIFC/ADGM Courts litigation and you need courtroom representation — PNPC can prepare the underlying financial computation as an expert working paper, but litigation conduct itself sits with your legal counsel
- You need to design or renegotiate employment contract templates, notice periods, or non-compete clauses — that is an employment contract advisory engagement, not a leave/gratuity computation
Quick Answers
How is end-of-service gratuity calculated for a mainland UAE employee?
Under Federal Decree-Law No. 33 of 2021, an employee who completes one year or more of continuous service is entitled to gratuity based on basic wage (excluding housing, transport, and other allowances) at 21 calendar days' wage for each of the first five years of service, and 30 calendar days' wage for each additional year beyond five, with the total capped at two years' wage. An employee with less than one year of continuous service is generally not entitled to gratuity.
Does gratuity apply differently depending on whether the employee resigns or is terminated?
Under Decree-Law No. 33 of 2021, the pre-2022 rule that reduced gratuity for unlimited-contract employees who resigned before completing a set number of years no longer applies: an employee with at least one year of continuous service is entitled to gratuity on the same statutory formula whether they resign or are terminated. Unlimited-term contracts had to be converted to fixed-term contracts (the deadline was extended to 31 December 2023), but the contract's history, its start date and any more favourable contractual terms should still be checked. PNPC verifies the contract's actual terms and start date before finalising any figure rather than assuming a single blanket rule.
What happens to gratuity if an employee is terminated for gross misconduct?
Article 44 of Decree-Law No. 33 of 2021 sets out specific circumstances under which an employer may terminate without notice after a written investigation — but even then the employee remains entitled to end-of-service gratuity, which the employer cannot forfeit. The statutory conditions for summary dismissal are strict, and the burden is on the employer to document that the specific grounds genuinely apply. A termination labelled 'for cause' by the employer without proper investigation, written warnings, or documented evidence is highly vulnerable to challenge before MOHRE or the Labour Court.
Working With PNPC Global
Get your leave, attendance, and gratuity figures right the first time — talk to PNPC's Dubai payroll and compliance team before your next separation, audit, or MOHRE deadline.
PNPC Global has advised Dubai businesses since 1986. Explore the full Accounting, Payroll, CFO & E-Invoicing practice for related services, or go straight to the Leave, Attendance & Gratuity Computation page for specifics.
This is a general explainer, not a substitute for checking today's rules with PNPC or the relevant authority — figures and deadlines move, so none are quoted here as fixed.