Your offer letter says one number, your first payslip says another. Very often the gap is gratuity. Some UAE employers quote a “cost to company” (CTC) figure that includes the money they set aside for your end-of-service benefit. This guide explains whether gratuity is really part of your CTC, how much of your salary it represents, and whether it touches your take-home pay.
Quick tool: To see what your own gratuity would be, use our UAE gratuity calculator.
Last updated: September 2026. Rewritten to follow UAE rules only. An earlier version quoted figures from another country’s gratuity law.
What Is CTC (Cost to Company)?
CTC is the total yearly cost of employing you. In the UAE it usually covers basic salary, allowances (housing, transport and others), and sometimes items such as health insurance, annual flight tickets, visa costs and the gratuity provision. Your take-home pay is only the part that is paid into your bank account each month.
Is Gratuity Part of CTC?
It can be. Gratuity is a cost the employer will almost certainly pay one day, so many companies accrue it monthly in their accounts and include it when they present a CTC figure. That is an accounting view. Legally, gratuity is a separate entitlement under the UAE Labor Law and it is paid on top of your salary when your contract ends. It is never meant to be taken out of your monthly pay.
So if your offer letter shows gratuity inside the CTC, read it as “money we are setting aside for you”, not “money we are deducting from you”.
How Much of Your Salary Does Gratuity Represent?
UAE gratuity is based on basic wage only:
- Years 1 to 5: 21 days of basic wage per year, which is about 5.83% of your annual basic salary
- Year 6 onwards: 30 days per year, which is about 8.33% of annual basic
- Minimum service: one year; cap: two years of wages
So an employer accruing gratuity for a new hire usually sets aside roughly 5.8% of basic pay each month. You can run your own numbers with the free gratuity calculator or follow the step-by-step gratuity calculation guide.
Example CTC Breakdown
Here is how a package might look for someone in their first five years with a basic salary of AED 10,000:
| Component | Monthly (AED) | Paid to you now? |
|---|---|---|
| Basic salary | 10,000 | Yes |
| Housing allowance | 4,000 | Yes |
| Transport allowance | 1,500 | Yes |
| Other allowances | 1,000 | Yes |
| Gratuity provision (21 days a year) | 583 | No, paid when you leave |
| Cost to company | 17,083 | Take-home: 16,500 |
The gratuity line adds AED 583 to the CTC (10,000 × 21 ÷ 30 ÷ 12), but your take-home stays at AED 16,500. After five full years that line would rise to about AED 833 a month.
Myths vs Reality
“Gratuity is deducted from my salary every month.”
No. UAE law does not allow an employer to fund your gratuity by cutting your wage. It comes from the employer.
“If gratuity is in my CTC, I am paying for it myself.”
Not in the UAE. The CTC figure is just a way of showing the employer’s total cost. Your agreed salary is what must be paid each month.
“I need five years to get gratuity.”
That is a rule from a different country. In the UAE you qualify after one year of continuous service.
“Resigning early cuts my gratuity.”
Not any more. Since February 2022, resigning after a year gives you the same gratuity as being terminated.
How to Read Your Offer Letter
- Check whether the headline figure is gross monthly salary or CTC.
- Find your basic salary. Gratuity is calculated on it, so a low basic means a smaller payout.
- Look for items that are not cash, such as gratuity, insurance or tickets, and subtract them to see your real monthly pay.
- Make sure the basic and allowances in the offer match the MOHRE contract you sign.
If your basic looks unusually low compared with your total pay, our guide to basic salary in the UAE explains why that matters.
Frequently Asked Questions
What percentage of salary is gratuity in the UAE?
About 5.83% of annual basic pay for each of the first five years and about 8.33% after that.
Is gratuity taxed?
No. The UAE does not tax personal employment income, including end-of-service benefits.
Can my employer refuse gratuity if it was shown in my CTC?
No. Showing it in CTC does not change your legal right. See when a UAE employer can deny gratuity for the few situations that do affect it.
Do domestic workers follow the same rules?
No, they have their own law and a lower rate. Read our gratuity guide for UAE domestic workers.
General information only, not legal or financial advice.
