Calculating your end-of-service (gratuity) pay is important. Knowing how the total sum is reached will help you identify any errors made by your company.
“Calculations differ depending on whether you’re on a Limited contract or an Unlimited contract”Share on facebookTweet this
Contract types
A limited or fixed term contract is where the employee agrees to stay with the company for a certain number of years with a set end date. Resigning before the end of this period could mean one or all of these; a labour ban, loss of labour rights or even payment of compensation to the employer.
An unlimited contract has no such period clause or number of years, and therefore, has no end date. However, a notice period of one to three months is applicable for termination of contract from either side.
Gratuity pay is calculated based on the most recent salary paid into your account without allowances and/or bonuses. Check Article 134 of the Labour Law here to get clarification on what this constitutes.
If you are terminated from your job, unless you break the rules as stated in Article 139 of the Labour Law, the employee is still entitled to gratuity pay.
Calculations for Limited Contract gratuity pay
Less than 1 year of service
Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.
Between 1 year and 5 years of service
Employee is entitled to full gratuity pay based on 21 days salary for each year of work.
5 or more years of service
Employee is entitled to full gratuity pay based on 30 days salary for each year of work.
Calculation example
Basic salary example: Dh10,000
a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh333.30
b. 333.30 x 21 = 6,999.30. So 21-days salary is Dh6,999.30 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to 5 years.
Use 30 days calculation for those exceeding 5 years of service.
c. 333.30 x 30 = Dh9,999. So 30-days salary is Dh9,999 in gratuity entitlement for each year of service – so long as the total figure does not exceed two years total salary figure.
Calculations for Unlimited Contract gratuity pay
Less than 1 year of service
Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.
Between 1 year and 3 years of service
Employee is entitled to one third (1/3) of the 21-days gratuity pay.
Between 3 years and 5 years of service
Employee is entitled to two thirds (2/3) of the 21-days gratuity pay.
5 or more years of service
Employee is entitled to full 21-days gratuity pay.
Calculation example
Basic salary example: Dh10,000
a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh333.30
b. 333.30 x 21 = 6,999.30. So 21-days salary is Dh6,999.30
Of this figure of Dh6,999.30, only 1/3 is payable if you have worked between 1 and 3 years, so the total gratuity pay would be Dh2,333.10.
Only 2/3 is payable if you have worked between 3 and 5 years, so the total gratuity pay would be Dh4,666.20.
The full Dh6,999.30 is payable for each year if you have completed 5 years or more.
These calculations are not to be treated as law, they are for your reference only. For any disputes or further clarification, contact the UAE Ministry of Human Resources and Emiratisation.
Formula
1. Basic salary ÷ 30 = Daily wage
2. Daily wage x 21 = 1 year gratuity figure (Or x30 if applicable)
3. 1 year gratuity figure x years of service = Total gratuity owed
Only continue for Unlimited Contract calculation
4. Total gratuity owed ÷ 3 = One third (1/3) of total gratuity
5. Either take this figure (between 1 and 3 years) or multiply it by two (between 3 and 5 years)
6. For over 5 years, total gratuity owed will be payable.
Calculate your gratuity here using this formula
Ministry Gratuity Calculator
Source UAE Ministry of Human Resources and Emiratisation
Call centre For any Labour issues, call 800 665
Locate your nearest Ministry of Human Resources and Emiratisation office
Gulf News is not responsible for any amendments made to the UAE Labour Law. All labour disputes must go through the Ministry of Labour. This article may only be used as a guide.
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