Is there any plan of resigning from the current job on your end? Are you going to quit UAE for some good reason? If yes, then you should have firm knowledge about the end of service gratuity in UAE as per Article 51 of the new labor law. The entire process is not much complicated when you count in end-of-service payments. However, you cannot deny the importance of calculating your gratuity to avoid possible errors. Here, we will brief the whole process regarding End of Service gratuity in UAE calculation.
Contract Types
Two contract types are considered by UAE Labour law mainly named fixed-term contracts and unlimited contracts.
- Fixed-term contracts define a specific period that is required to be followed by employees. They have to stay in their organization during that period. In case they quit their jobs before it, they will no longer be able to avail end of service benefits. Limited contracts are automatically renewed after the expiry date.
- Unlimited-term contracts on the other hand have no limitations on time and they are open-ended, flexible, and commonly adopted by UAE workers. The project can be ended by any side but it is required to inform about the decision by bestowing a notice period of 1 to 3 months.
The Basis for Gratuity Pay Calculations
The basis of gratuity pay is defined by basic salary excluding additional bonuses or subsidies. Labor law depicts that rules for estimating overall end of service gratuity will not count expenditures involved in compensations, traveling, housing subsidies, social services allowances, etc.
Is there anyone who will not avail end of service benefits?
A worker will not be eligible for gratuity compensation if they leave their job voluntarily before working for an entire year. If the employee completes a full year of continual duty, he or she is qualified to end of service benefits for the portion of the year that was worked.
The conclusive gratuity is decided on the basis of the worker’s main wage, that is the very recent amount of wage that the worker was receiving from the organization. Thus, benefits like furnishings, utilities, transportation, and housing will not be included in it. Moreover, if the worker is responsible for paying any dues or debts to the employer, then the employer can surely deduct it from the end of service gratuity of the worker.
Calculations for Limited Contract Gratuity Pay
If you leave your work without accomplishing one year, you are not qualified for gratuity. However, if an employee completes one year of service and works for the organization for any period between one to five years, he has complete rights over end-of-service benefits. He will be paid according to the twenty-one day’s salary for every work year.
A worker who has worked for more than 5 years is privileged to a full gratuity of thirty days’ pay for every additional year of employment. The overall gratuity should never be more than two years’ worth of pay.
Example
Suppose your basic salary is 20,000 dirhams. Your per day wage would be 666.6 AED. Now calculate it for 21 days which would be 21×666.6= 14,000 AED. This twenty-one-day salary is 16,000 AED in gratuity entitled for each year of service. If the service is up to 5 years multiply per day wage by 30 i.e. 666.6×30=20,000 AED.
Calculations for Unlimited Contract Gratuity Pay
Quitting your job before the completion of one year will terminate the option of gratuity pay. However, If your service period is expanded between one to three years, you will be entitled to ⅓ of twenty-one days of gratuity wage. You will get ⅔ of twenty-one days gratuity pay in the case your service consists of between three to five years. Similarly, UAE labor law suggests that a worker is entitled to full twenty-one-day gratuity pay when his service is exceeding 5 years.
Example
Identify your daily wage as per your basic salary. Suppose your basic salary is 10000 dirhams then pay per day will be 333.3 AED. Now multiply the figure per day pay by 21 days which is equivalent to 6,999.30 AED. Now find ⅓ of 6,999.30 AED (one to three years) and ⅔ of the figure to obtain the cumulative gratuity pay. However, if your working period is above 5 years, you have full rights over AED 6,999.30 for each year.
Will the Maternity Leave Period be included in the gratuity calculation in UAE?
According to the Federal Decree Law no. 33, maternity leave of 60 is allowed for female workers if it is medically proven. During this period, female workers will receive their wages as prescribed by the labor law. However, this term will not be included when calculating the end of service benefits or gratuity of the female workers.
Choose the Best Services
Learn more about the end of service gratuity and its calculation from our experts. Payroll middle east experts have complete knowledge of how business regulations apply in different situations for different workers. Take our help in calculating your end of service benefits UAE Freezone.
Bibliography
- Federal Decree Law Regarding the Regulation of Employment Relationship
<https://u.ae/-/media/Documents-2022/Federal-DecreeLaw-No-33-of-2021.ashx>
| Questions | Answer (Yes/No) | Explanation |
| · Does your content clearly demonstrate first-hand expertise and a depth of knowledge (for example, expertise that comes from having actually used service)? | Yes | The content is entirely based on utmost knowledge. |
| · After reading your content, will someone leave feeling they’ve learned enough about a topic to help achieve their goal? | Yes | The content is made to increase knowledge and awareness. |
| · Will someone be reading your content leave feeling like they’ve had a satisfying experience? | Yes | The content is purely for people’s satisfaction. |
| Is the content primarily to attract people from search engines, rather than made for humans? | No | The content is entirely for humans. |
| Are you mainly summarizing what others have to say without adding much value? | No | The content is created after thorough research and experience. |
| Are you writing about things simply because they seem trending and not because you’d write about them otherwise for your existing audience? | No | The content is only for people who are interested in our services. |
| Does your content leave readers feeling like they need to search again to get better information from other sources? | No | The content is created to cover a topic from all aspects and for answering the readers’ queries as much as possible. |
| Does your content promise to answer a question that actually has no answer, Example: New law will implement from this date when one isn’t confirmed? | No | The content fakes no information. |
