Gratuity Calculation in UAE | Do You Know How to Calculate Your End of Service Benefits?

Gratuity calculation in UAE

Gratuity calculation in UAE

Gratuity calculation in UAE, as per UAE labor Law an employee who completed one or more years of continuous service shall be entitled to get the End of service benefits.

  • 21 calendar days’ basic salary for each year of the first five years of service.
  • 30 calendar days’ basic salary for each additional year.

The days of absence from work without pay shall not be included in the calculation of period of service. The Gratuity is calculated on the basic salary in the last drawn Wages. Other allowances such as housing, conveyance, overtime pay, education allowance etc. will not be considered for calculating Gratuity. In any case the entire Gratuity does not exceed 2 year’s total salary pay. (Refer Article 132 and 134 of UAE Labour Law)

An employee shall be entitled for the gratuity for any fraction of a year he served, provided that he has completed one year of continuous service. (Refer Article 133 of UAE Labour Law)

If the employee owes any money to the employer, the employer may deduct the amount from the employee’s gratuity. (Refer Article 135 of UAE Labour Law)

The Gratuity computation may vary depends upon the type of contract, period of service, nature of cessation of the contract etc. (Refer Article 137 & 138 of UAE Labour Law).

An employee is not entitled to End of Service Benefits where he has been terminated due to misconduct as per the provisions of UAE Labour Law (Refer Article 120 of UAE Labour Law)

How Gratuity is calculated in an Unlimited Employment Contract is as below:



Illustrative Example of Unlimited Contract when Termination is given by the employer

Scenario 1: An Employee earns a salary of AED 10,000/- (Basic Salary -5000, HRA 2000 and Transportation allowance AED 2,000).

Calculation of Gratuity:

21days Basic Salary will be AED 5,000 X 21/30 = AED 3,500/-

Period of service completed Eligible Gratuity
If the employee has not completed 1 year of service. Gratuity – Zero
If the employee has served for 4 years Gratuity will be AED 3,500*4=14,000/-  (21  days basic salary  for each year )
If an employee has served for 7 years Gratuity will be (AED 3500*5) +(AED 5,000*2) =27,500/-( 21 days basic salary for first 5 years and 30 days basic salary for additional two years.


Example of an unlimited contract when Resignation is given by Employee

Calculation of Gratuity (Based on the illustration in Scenario 1)

Period of service completed Eligible Gratuity
If the employee has not completed 1 year of service. Gratuity – Zero
If the employee completed 2 years of service Gratuity will be (AED 3500*2*1/3) =2,333/-(1/3rd of 21 days basic salary per year)
If the employee has served for 4 years  Gratuity will be (AED 3,500*4*2/3) =9,333/- (2/3rd of 21 days basic salary for each year )
If an employee has served for 7 years Gratuity will be (AED 3500*7) =24,500/-( 21 days basic salary for 7 years )


How Gratuity Calculated under Limited Employment Contract is as below:

 

Illustrative Example of a Limited Contract when Resignation is given by the employee
Calculation of Gratuity (Based on the illustration in Scenario 1)

Period of service completed Eligible Gratuity
If the employee has not completed 1 year of service.  Gratuity – Zero
If the employee has served for 5 years  Gratuity – Zero
If an employee has served for 7 years Gratuity will be (AED 3500*5) +(AED 5,000*2) =27,500/-( 21 days basic salary for first 5 years and 30 days basic salary for additional two years.

 

These calculations are not to be treated as law, they are for your reference onlyFor any disputes or further clarification, contact the UAE Ministry of Human Resources and Emiratization.

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