Uaegratuity.com

If you're currently working in the land of endless opportunities, AKA the United Arab Emirates, and you're wondering how to calculate your gratuity in UAE (end of service benefits) then this article will provide you with all the information you need.

Calculating Gratuity in UAE

To calculate your gratuity, you need to know that it depends on 4 factors:

1. Type of contract
2. Total number of years served in the company
3. Reason for termination of contract
4. Basic salary

Type of contract

There are two types of contracts in the UAE:

1.     
2. Limited or fixed contract - According to this type of contract, the employee agrees to work in the company for a specific number of years. 
3.    
4. Unlimited contract - This type of contract doesn't limit the employee with a specific number of years and it has no end date.

Calculating Gratuity in UAE for limited contracts

•     
• Less than 1 of service - According to the UAE Labour law, if an employee resigns before completing one year of service, then the employee is not entitled to any gratuity pay or final settlement.
•    
• 1 year to 5 years of service - If an employee has served for more than 1 year but less than 5 years, they are entitled to full gratuity pay based on 21 days' salary for each year of work.
•    
• 5 or more years of service - If an employee has served more than 5 years, they are entitled to full gratuity of 30 days' salary for each year of work following the first five years.

Example:

If an employee's basic salary is AED 10,000 under a limited contract, then this is how gratuity is calculated:

•     
• Calculate daily wage by dividing the basic salary by 30. In this case, the daily wage is 333.30
•    
• Multiply daily wage by 21 or 30 (depending on duration of service in the company as mentioned above). So in case the employee worked more than 1 year and less than 5 years in the company, then they should receive 6,999.30 for every year of service. While if they worked for 5 years and more, they would be receiving 9,999 for every year of service as long as the total figure does not exceed two years total salary figure

Calculating Gratuity in UAE for unlimited contracts

If the employer terminates an employee's unlimited contract, calculation will be as follows:

•     
• Less than 1 year of service - Employee is not entitled to any gratuity pay
•    
• More than 1 year but less than 5 years - Employee is entitled to 21 calendar days' basic salary for each year of the first five years of work.
•    
• More than 5 years- Employee is entitled to 30 calendar days' basic salary for each additional year, provided the entire compensation does not exceed two years' pay.

the employee under an unlimited contract resigns, calculation will be as follows:

•     
• Less than1 year of service - Employee is not entitled to any gratuity pay.
•    
• 1 to 3 years of service- Employee is entitled to one third (1/3) of 21 days' basic salary as gratuity pay.
•    
• 3 to 5 years of service - Employee is entitled to two-thirds (2/3) of 21 days' basic salary as gratuity pay.
•    
• More than 5 years Employee is entitled to full 21 days' basic salary as gratuity pay.

Example:

If an employee's basic salary is AED10,000 under an unlimited contract, then this is how gratuity is calculated:

•     
• Calculate daily wage by dividing the basic salary by 30. In this case, the daily wage is AED333.30
•    
• Multiply the daily wage by 21 to get the 21-days salary. In this case the amount is AED6,999.30
•    
• If the employee has worked for 1 to 3 years within the company, then their gratuity pay is AED2333.1 for each year of service. While if the employee has worked for 3 to 5 years in the company, then they're entitled to AED4666.2 of service.