Do allowances count towards the award in United Arab Emirates?

Wages in United Arab Emirates are assessed on the "basic wage only, excluding allowances" basis. See "How is the award calculated?" above for details.

When and how is the award paid?

All end-of-service entitlements must be paid within 14 days of the contract’s termination (Article 53). Scope: private-sector mainland; DIFC/ADGM and domestic workers follow separate regimes.

Are fractions of a year counted?

Yes — fractions of a year are pro-rated to the actual period of service.

End-of-Service Benefits Guide: United Arab Emirates

This guide explains the key end-of-service rules in United Arab Emirates in plain language, based on Federal Decree-Law No. 33 of 2021 Regulating Labour Relations. Every figure comes from the official texts listed under Sources below, and the worked example is computed by our own calculator.

Scope: private-sector employees covered by the labour law. Excludes domestic workers, free-zone employees under separate regimes, and workers covered by national pension/social-insurance systems.

Who qualifies?

On termination or contract expiry: minimum: 1 year of service.
On resignation: minimum: 1 year of service.

The old labour law and its resignation reductions were repealed; current law applies no reduction to resignation.

How is the award calculated?

The award is based on the "basic wage only, excluding allowances", with fractions of a year pro-rated to actual service. The formula:

21 days for each year during the first 5 years of service
a full month for each year after that

Worked example

An employee on a monthly wage of 10,000 AED with 6 years of service (termination case):

5 years × 21 days of the wage = 35,000 AED
1 year × a full month of the wage = 10,000 AED
Total: 45,000 AED

Resignation vs termination

The law does not distinguish between resignation and termination when calculating the award — the result is the same either way.

Cap on the award

statutory cap: 24 months of wages

Notice period and annual leave

Notice (Either party, 30–90 days as agreed in the contract (Art 43)): employee 30 days / employer 30 days.
Annual leave: 30 days — After 1 year of service; 2 days per month for service between 6 months and 1 year (Art 29).

Common mistakes

Assuming resignation reduces the award — current law applies no reduction at all.
Including allowances in the base — the law uses basic salary only.
Ignoring the cap on long service periods.

Official sources

Every figure in this guide comes from the following official sources:

Federal Decree-Law No. 33 of 2021 Regulating Labour Relations — Article 51 (paras 2–7)

Official UAE legislation portal (UAE Official Gazette). Figures verified against the consolidated law text: 21 days/year (first 5 years), 30 days/year after, on the last basic salary, pro-rata fractions, 2-year cap.
https://elaws.gov.ae
Federal Decree-Law No. 33 of 2021 Regulating Labour Relations — Articles 29, 43, 53

Art 29: 30 days annual leave after 1 year (2 days/month for 6–12 months). Art 43: 30–90 days notice. Art 53: entitlements paid within 14 days.
https://elaws.gov.ae

Frequently asked questions

Do allowances count towards the award in United Arab Emirates?: Wages in United Arab Emirates are assessed on the "basic wage only, excluding allowances" basis. See "How is the award calculated?" above for details.
Is the award lower if I resign?: No — the law does not distinguish between resignation and termination when calculating the award.
When and how is the award paid?: All end-of-service entitlements must be paid within 14 days of the contract’s termination (Article 53). Scope: private-sector mainland; DIFC/ADGM and domestic workers follow separate regimes.
Are fractions of a year counted?: Yes — fractions of a year are pro-rated to the actual period of service.