UAE gratuity: How to calculate your end-of-service in the UAE, If you are an expatriate employee working in the private sector in the UAE, you may be entitled to receive a gratuity or end-of-service benefit when you leave your job, subject to certain conditions. This is a lump sum payment that is based on your last basic salary and the number of years you have worked for your employer. In this article, we will explain how to calculate your gratuity according to the UAE Labour Law and some common questions you may have.
What is gratuity and who is eligible for it?
Gratuity is a payment that is given to an employee by the employer as a reward for their service and loyalty. It is also a way of compensating the employee for not receiving a pension or social security benefits that are available for UAE nationals.
According to the UAE Labour Law, you are eligible for gratuity if you have completed at least one year of continuous service with your employer. However, there are some exceptions and conditions that may affect your eligibility or amount of gratuity, such as:
If you are terminated for a reason stated in Article 120 of the Labour Law, such as committing a crime, violating safety rules, disclosing confidential information, etc., you will lose your right to gratuity.
If you resign before completing five years of service under an unlimited contract (a contract that does not have a fixed term), you will receive a reduced percentage of gratuity depending on your length of service.
If you have any outstanding debts or obligations to your employer, such as loans, advances, damages, etc., they may be deducted from your gratuity.
If you have signed a contract that provides a different scheme of end-of-service benefits that is equal to or better than the gratuity prescribed by the Labour Law, such as a pension plan or a savings fund, you will receive that instead of gratuity.
How to calculate your gratuity?
The formula for calculating your gratuity depends on whether you have a limited contract (a contract that has a fixed term) or an unlimited contract (a contract that does not have a fixed term), and whether you resign or are terminated by your employer.
- The first step is to identify your basic salary, which is the amount you receive before any allowances, bonuses, commissions or other benefits are added3. You can find this in your employment contract or your pay slip. If your salary varies from month to month, you can use the average of the last three months or the last month, whichever is higher3
- The second step is to calculate your daily basic salary by dividing your monthly basic salary by 301. For example, if your basic salary is AED 10,000 per month, your daily basic salary is AED 333.33.
- The third step is to multiply your daily basic salary by the number of days of gratuity you are entitled to according to the following table132
Contract type Resignation Termination
Limited 21 days for each year of service for the first five years; 30 days for each year of service above five years 21 days for each year of service for the first five years; 30 days for each year of service above five years
Unlimited Less than one year: no gratuity; One year to three years: 7 days for each year of service; Three years to five years: 14 days for each year of service; More than five years: 21 days for each year of service 21 days for each year of service for the first five years; 30 days for each year of service above five years
For example, if you have worked for six years under an unlimited contract and resign from your job, you will receive:
- 7 days x AED 333.33 x 1 year = AED 2,333.31
- 14 days x AED 333.33 x 2 years = AED 9,333.24
- 21 days x AED 333.33 x 3 years = AED
