How to Calculate Gratuity in UAE

When it comes to ending employment in the United Arab Emirates, gratuity is among the most important end-of-service benefits that the employees are entitled to get. Whether you are going to resign, retire, or have been terminated, knowing the rules about gratuity ensures that you get just compensation for your years of service.

What is Gratuity in UAE?

Gratuity in UAE is a mandatory end-of-service payment that employers must provide to employees who complete at least one year of continuous service. This financial benefit is protected under UAE labor law and serves as recognition for an employee’s dedication and contribution to the organization. Similar to other employment contract terms, gratuity provisions must be clearly understood by both parties.

Is Gratuity Mandatory in UAE?

Yes, gratuity is compulsory in the UAE for all employees who fulfill the eligibility criteria. Gratuity is required by law to be paid by employers when the employment is terminated due to resignation, completion of contract, or termination. In fact, it is applicable in all emirates of UAE like Dubai, Abu Dhabi, and Sharjah, and is enforceable through the Ministry of Human Resources and Emiratisation (MOHRE).

What is the New Gratuity Law in UAE?

Over the years, the UAE has made refinements in the labor law framework on gratuity to further protect employees. The basic rules over gratuity remain that it is based on service tenure and basic salary calculations, with clear guidelines for both limited and unlimited employment contracts.

Key provisions include:

• At least One Year Service Eligibility
• Calculations based on basic salary excluding allowances
• Different rules on resignation versus termination
• Maximum gratuity ceiling of two years’ total salary

Gratuity Rules in UAE: Who is Eligible?

Every employee is entitled to gratuity payment provided they fulfill certain qualifications:

1. Service Duration: Must have completed at least one year of continuous service with the employer.
2. Type of Contract: Applies to both limited-term and unlimited-term contracts
3. Employment Status: Full-time employees under the protection of UAE labor law

An employee who resigns before completing one year of service shall not be paid any amount as gratuity.Understanding these employment rights is essential for all workers in the UAE.

How Can I Calculate My Gratuity in UAE?

To calculate gratuity in UAE, several factors determine your final entitlement:

For Unlimited Contracts:

Upon Resignation:

1. Less than 1 year: No gratuity
2. 1-3 years: One-third of 21 days’ salary per year
3. 3-5 years: Two-thirds of 21 days’ salary per year
4. Over 5 years: Full 21 days’ salary for first 5 years, plus 30 days’ salary for each additional year

Upon Termination:

1. Less than 1 year: No gratuity
2. 1-5 years: 21 days’ salary per year
3. Over 5 years: 21 days’ salary for first 5 years, plus 30 days’ salary for each additional year

For Limited Contracts:

1. Less than 1 year: No gratuity
2. 1-5 years: 21 days’ salary per year of service
3. Over 5 years: 21 days’ salary for first 5 years, plus 30 days’ salary for each additional year

Calculation Formula:

Daily Wage = Basic Monthly Salary ÷ 30

Example Calculation: If your basic salary is AED 10,000 and you’ve worked for 6 years under a limited contract:

1. Daily wage: 10,000 ÷ 30 = AED 333.33
2. First 5 years: 333.33 × 21 × 5 = AED 35,000
3. Sixth year: 333.33 × 30 = AED 10,000
4. Total gratuity: AED 45,000

Important Considerations for Gratuity Calculation

• Basic Salary Only: Gratuity calculations include only your basic salary, not the housing allowances, transportation, bonuses, and other benefits.
• Service Years: For some purposes, fractional years of service may be counted proportionally.
• Maximum Limit: Total gratuity cannot exceed two years of your basic salary.
• Payment Timeline: Employers must settle gratuity within 14 days of employment termination. If you experience payment delays, consulting with experienced legal advocates can help expedite resolution.

Common Gratuity Disputes and How to Avoid Them

Disputes often arise from:

• Miscalculation of service years
• Including allowances in calculations
• Unclear contract terms
• Delayed Payments

Safeguard your rights by keeping correct records of your employment contract, salary certificate, and service record.

To protect your rights, maintain clear documentation of your employment contract, salary certificates, and service record. For complex employment matters, seeking professional legal consultation early can prevent disputes from escalating.

When Legal Assistance Becomes Necessary

If you face difficulties receiving your rightful gratuity payment, seeking professional legal consultation becomes essential. At FranGulf Advocates & Legal Consultants, our employment law experts provide comprehensive support for gratuity-related disputes across Dubai, Sharjah, and throughout the UAE. We also handle related matters such as workplace injury claims and other employment disputes.

Why Choose FranGulf for Gratuity Matters?

With over 20 years of UAE labor law experience, FranGulf provides:

• Expert gratuity calculation verification
• Legal Representation for Claims of Unpaid Gratuities
• Review and Advisory of Employment Contracts
• Dispute resolution and negotiation
• Court representation where necessary

Our team of specialist employment lawyers understands the complexity of gratuity law in UAE and works hard to ensure you get every dirham you deserve.

If you face difficulties receiving your rightful gratuity payment, seeking professional legal consultation becomes essential. At FranGulf Advocates & Legal Consultants, our employment law experts provide comprehensive support for gratuity-related disputes across Dubai, Sharjah, and throughout the UAE. We also handle related matters such as workplace injury claims and other employment disputes.

Conclusion

Understanding gratuity rules in UAE is crucial for every employee working in the country. Whether you’re calculating your potential gratuity, facing payment issues, or need clarification on your entitlements, knowing your rights under UAE labor law protects your financial interests. For additional information on employment regulations, you can also visit the UAE Government’s official portal.For personalized guidance on how to calculate gratuity in UAE or assistance with gratuity-related legal matters, contact FranGulf Advocates today. Our experienced legal team is ready to provide the support you need.