Detailed Guide to UAE Gratuity Calculator (End of Service Benefits)
If you live and work in UAE or are doing business in UAE, you must make yourselves familiar with the Labour Laws that are present here. The UAE Labour Law provides you with your rights and protection through Ministry of Labour
. (Ministry of Human Resources and Emiratisation)
Employees working in the UAE whether they are in government, semi-government or private regardless of the profession are entitled to gratuity based on certain criteria or the guidelines as per UAE Labour Law.
Gratuity or End of Service is paid after the termination of the employment contract on an accumulated basis for the tenure served.
You may have the following doubts or clarifications on UAE Gratuity Calculations or end of service benefits (EOSB) in UAE:
- How gratuity is calculated in UAE?
- How is 2022 gratuity calculated?
- How much is gratuity after 5 years?
- How much end of service is calculated in UAE?
- How is unlimited contract gratuity calculated in UAE?
- How much gratuity will I get if work for certain years in UAE? (Ex: 1 year, 5 years etc)
Gratuity Calculation can be a daunting task if you are trying to calculate an employee’s gratuity considering the various parameters UAE Labour Law has to it.
As per the Article of the New UAE Labour Law 2022 on Gratuity Calculation for full time workers:
- A national worker shall be entitled to a severance pay at the end of his service pursuant to the Pensions and Social Security Law of UAE.
- A foreign full-time worker who completes one or more years in continuous service is entitled to a severance pay, 21 days’ basic salary for each year of the first five years of employment and 30 days’ basic salary for each year of work after the first five years.
- The End of service benefit is calculated basis of the basic wage.
- Under the law, no gratuity is paid for employees who do not complete one year of employment. A foreign worker shall be entitled to a severance pay for the fractions of the year in proportion to the period of service, provided that he or she has completed one year of continuous service.
- Days of absence from work without pay shall not be counted within the period of service.
- The severance pay for a foreign worker shall not exceed in aggregate two years’ wage.
There can be many possible conditions to calculate gratuity. In this article I will provide you a most comprehensive and easy way to understand and calculate gratuity. By the end of reading this article, you’d have understood various scenarios and possibilities of calculating gratuity.
One of the most important topics under UAE Labour Law is Gratuity Calculation or End of Service Benefits/Remuneration – EOSB. While End of Service Benefits is a broader term, in this article I will use Gratuity as a term which entitles every employee with a rightful amount at the end of their employment with a company. When you resign or are terminated, you are eligible for Gratuity as per UAE Labour Law.
In both the cases resignation or termination the gratuity that you receive at the end of your service can act like a safety net, helping you transition to your next employment. Understanding your employee rights is a very important part of living and working in the UAE. All you need to know about how much gratuity you will get, according to the UAE Labour Law.
If you were confused about how you can calculate your gratuity, based on the UAE Labour Law, This guide will provide you step by step guide to calculate gratuity in case of:
- Resignation;
- Unlimited Contract.
- Limited Contract.
- Termination;
- Unlimited Contract
- Limited Contract.
Further there are many situations under this that are possible like term of employment. At the end of this short tutorial, you will learn how to calculate gratuity under various circumstances.
Fundamentals of Gratuity Calculation!
The end of service law applicable to all UAE employees , make sure you know how to calculate your end-of-service gratuity pay correctly. .
UAE Labour Law lay downs specific guidelines on the disbursement of gratuity whether they are employed in government or semi government or private or in free zone. However, not every worker is entitled to gratuity benefit.
Who is eligible for gratuity?
Gratuity is paid under UAE law, regardless of the worker’s profession. The end of service gratuity is calculated on the basis of the last basic salary which the employee was entitled to, namely the basic salary (without the allowances such as housing, conveyance, utilities, furniture, etc.)
If the employee owes any money to the employer, the employer may deduct the amount from the employee’s gratuity.
Who is not eligible for gratuity?
- If an employee did not give one month legal notice before leaving the job employee is not eligible for gratuity
- If an employee under unlimited contract has served for less than 1 year, he is not entitled to any gratuity pay
- If an employee did not give one month legal notice before leaving the job employee is not eligible for gratuity (however this is depend on company discretion)
- If an employee under limited contract resign before the expiry of the contract
- If an employee is absent for 7 days continuously or 21 days per year without notice to the employer
- If an employee is terminated as per Article 120 of the UAE Labour Law
What type of labour contract do you have?
Since the calculation differs for both type employment contracts (Limited and Unlimited) you need to first check what type of employment contract you have signed with your company.
What is the reason for termination of your contract?
Before you compute the gratuity you need to understand the reason for termination of your contract whether it is voluntary or involuntary as the calculation of the gratuity differ in both the cases.
To calculate gratuity, you need to know two things.
1. What is your base daily salary?
According to the Ministry of Human Resources and Emiratization (MOHRE) the end-of-service gratuity is calculated on the last due basic wage of the employee.. You can refer to your employment contract to learn more about your basic compensation, which is distinct from your total monthly salary.
To determine your daily basic wage, multiply your monthly basic wage by 30 (for each day of the month).
2. How long have you been employed by this company?
If you have worked for a company for five years, you are entitled to 21 days of basic pay for each year of service, per Article 51(2) of the UAE Labour Law.
UAE Labor Law Article 51 (2).
A full-time foreign employee who has worked continuously for a year or longer is entitled to end-of-service benefits, which are determined using the basic pay in the following ways:
- a salary of 21 days is paid for the first five years of employment;
- a salary of 30 days is paid for each year beyond that.
How can you Calculate your daily basic wage?
Check your employment contract to determine your basic compensation if you are a full-time employee who receives payment every month. Multiply that amount by thirty. You’ll receive your daily minimum wage in this way.
UAE Gratuity Calculator:
AAs per the Article 132 of UAE Labour Law, it is mentioned that:
The employee who has completed one year or more in the continuous service, is entitled to the end of service remuneration at the end of his service. Days of absence from work without pay are not included in computing the period of service, and the remuneration is to be calculated as follows:
Here is a simple illustration of various possibilities:
Resignation - Unlimited Contract
Service Less than 1 year EOSB Not Applicable
Service between 1 year to 3 years EOSB at 1/3rd of 21 days Basic Salary X number of years
Service between 3 years to 5 years EOSB at 2/3rd of 21 days Basic Salary X number of years
Service of more than 5 years EOSB at 21 days basic salary for first 5 years + EOSB at 30 days basic salary for rest of the years
Termination - Unlimited Contract
Service Less than 1 year EOSB Not Applicable
Service between 1 year to 3 years EOSB at 21 days Basic Salary X number of years
Service between 3 years to 5 years EOSB at 21 days Basic Salary X number of years
Service of more than 5 years EOSB at 21 days basic salary for first 5 years + EOSB at 30 days basic salary for rest of the years
Resignation - Limited Contract
Service Less than 1 year EOSB Not Applicable
Service between 1 year to 5 years EOSB at 21 days Basic Salary X number of years
Service of more than 5 years EOSB at 21 days basic salary for first 5 years + EOSB at 30 days basic salary for rest of the years
Termination - Limited Contract
Service Less than 1 year EOSB Not Applicable
Service more than 1 year EOSB at 21 days Basic Salary X number of years
UAE Gratuity Calculator Under Unlimited Labour Contract
An unlimited term contract is open-ended and may be terminated for various reasons under the UAE Labour Law .Unlimited term contracts are commonly used in UAE, which is more flexible, and user friendly. This is useful when you employ employees permanently and not for only specific projects.
Important points to be considered while issuing the Unlimited Term Contract as per UAE Labour Law:
- Date of the employment contract issued
- Date of Joining
- Designation
- Nature of work
- Workplace
- Compensation
- Working hours
- Notice Period
How to Calculate Gratuity under Unlimited Contract?
Gratuity Calculation on Involuntary termination (Termination) under unlimited Contract
- If an employee has served for less than 1 year, he is not entitled to any gratuity pay.
- If an employee has served more than 1 year but less than 5 years, he is entitled to 21 calendar days’ basic salary for each year of the first five years of work.
- If an employee has served more than 5 years, he is entitled to 30 calendar days’ basic salary for each additional year, provided the entire compensation does not exceed two years’ pay.
Gratuity Calculation on Voluntary Termination (Resignation) under unlimited contract
- If an employee resigns before completing 1 year of service, he is not entitled to any gratuity pay.
- If an employee has served between 1 and 3 years, he is entitled to one third (1/3 or 7 days) of 21 days’ basic salary as gratuity pay.
- If an employee has served between 3 and 5 years, he is entitled to two-thirds (2/3 or 14 days) of 21 days’ basic salary as gratuity pay.
- If an employee has served more than 5 years, he is entitled to full 21 days’ basic salary as gratuity pay.
An employee is eligible for gratuity pay in UAE if they complete 12 consecutive months of service with the employer.Absence without pay from work is not included when calculating the period of service. The total gratuity payment, regardless of the type of employment contract, will not exceed the amount of the employee’s 2 years’ salary.
According to the UAE gratuity Law, an employee is entitled to immediate payment of their end of service gratuity upon termination, unless the employee is terminated for gross misconduct..
Examples for Gratuity Calculation on Voluntary Termination (Resignation) under unlimited contract
Gratuity calculation on Resignation with Less than a year of Service under unlimited contract
Gratuity is applicable only when an employee completes One Year of continuous service with a company. This is mentioned in the Section 2 – End of Service Remuneration of the UAE Labour Law Article 132.
Gratuity calculation on Resignation with service of more than 1 year but less than 3 years under unlimited contract
If an employee on Unlimited contract who has resigned with a service of more than 1 year and less than 3 years, he/she is eligible for 1/3rd of 21 day’s basic salary for every year of service.
Illustration of the above:
- Basic salary = AED 10,000 per month
- Joining date = 01-01-2010
- End date = 31-03-2011
- Total number of days worked = 455 days
- Total number of years worked = 1.25 years
- 21 days’ Basic salary = AED 6904.1
- Wages per day = AED 10,000*12/365= 328.76
- Amount of wages for number of years: 21*328.76*1.25 = 8,606.49
- Gratuity Amount: 1/3*8606.49 = 2,868.83
Gratuity Calculation on Resignation with service of more than 3 years but less than 5 years under unlimited contract
If an employee under unlimited contract has resigned with a total service of more than 3 years and less than 5 years, he/she will be eligible for a gratuity amount of 2/3rd of the 21 day’s basic salary for every year worked.
Illustration of the above scenario:
- Basic salary = AED 10,000 per month
- Joining date = 01-01-2008
- End date = 31-03-2011
- Total number of days worked = 1,186 days
- Total number of years worked = 3.25 years
- 21 days’ Basic salary = AED 6904.1
- Wages per day = AED 10,000*12/365= 328.76
- Amount: 21*328.76*3.25 = 22,433
- Gratuity Amount: 2/3*22,433 = 14,955.75
Gratuity calculation on Resignation with service of more than 5 years under unlimited contract
If an employee under unlimited contract has resigned with a total service of more than 5 years, for the first 5 years he/she is eligible for 21 day’s basic salary for every year worked and 30 day’s basic salary for every number years worked after that.
Illustration:
- Basic salary = AED 10,000 per month
- Joining date = 01-01-2005
- End date = 31-03-2011
- Total number of days worked (31-03-2011-01-01-2005+1)= 2281 days
- Total number of years he worked=1916/365= 6.25
- 21 days’ Basic salary = 328.76*21= AED 6,904.1
- 30 days’ basic salary=328.76*30= AED 9,863.01
- Wages per day = AED 10,000*12/365= 328.76
- Total gratuity=21*328.76*5=34,520.55+
(2,218/365-5)*30*328.76=2,459. 00=46,842
Examples for Gratuity Calculation on Involuntary Termination (Termination):
Gratuity calculation on Termination with service of less than 1 year under unlimited contract
If you are terminated before the completion of One year of service, you are not eligible for Gratuity. This is the basic rule of Gratuity Calculation.
Gratuity calculation on Termination with service of more than 1 year and less than 3 years under unlimited contract
If you have been terminated from your employment, with a service between 1 and 3 years, you are eligible for 21 day’s basic salary for each year worked.
Illustration:
- Joining date 1-1-2010
- End date 31-03-2012
- Basic Salary 5,000/- per month
- Basic Salary per day =Basic Salary X 12/365=164.38
- Total no of days worked=Joining Date-End Date=821
- Total no of years worked=Total no of days worked/365=2.25
- 21 days’ Basic Salary=Basic Salary per day X 21 days=3452.05
- Gratuity Amount=Total no of years worked*21 days’ Basic Salary=7,764.76
Gratuity calculation on Termination with service of more than 3 years and less than 5 years under unlimited contract
If you have been terminated with a total service of between 3 and 5 years, you are eligible for 21 day’s basic salary for each year of service.
Illustration:
- Joining date 1-1-2010
- End date 31-03-2014
- Basic Salary 5,000/- per month
- Basic Salary per day =Basic Salary X 12/365=164.38
- Total no of days worked=Joining Date-End Date=1551
- Total no of years worked=Total no of days worked/365=4.25
- 21 days’ Basic Salary=Basic Salary per day X 21 days=3452.05
- Gratuity Amount=Total no of years worked*21 days’ Basic Salary=14,668.87
Gratuity calculation on Termination with service of more than 5 years under unlimited contract
If you have been terminated or fired from your employment under unlimited contract with more than 5 years’ of service, you shall be eligible for 21 day’s basic salary for the first five years and 30 day’s basic salary for each year of service after five years.
Illustration:
- Joining date 1-1-2008
- End date 31-03-2014
- Basic Salary 5,000/- per month
- Basic Salary per day =Basic Salary X 12/365= 164.38
- Total no of days worked=Joining Date-End Date= 2282
- Total no of years worked=Total no of days worked/365=6.25
- 21 days’ Basic Salary=Basic Salary per day X 21 days= 3452.05
- 30 days’ Basic Salary=Basic Salary per day X 30 days= 4,931.51
- Gratuity Amount=up to 5 years=21 days salary+30 days salary after 5 years
- Total amount of Gratuity=23,434.79
Gratuity Calculator Under Limited Labour Contract?
A limited term contract is a fixed-term contract for two to three years and is normally linked to the duration of the UAE residency visa. Limited contracts are useful when an employer needs to engage employees for a fixed term specially for a project based companies where the employers know the lengths of those project are known in advance.
Important points to be considered while issuing the Limited Term Contract as per UAE Labour Law:
- Date of the employment contract issued
- Date of Joining
- Designation
- Nature of work
- Workplace
- Compensation
- Working hours
- Contract Period
Under limited contract, if you have terminated the contract, meaning if you as employee resign within 5 years of service, you will not be eligible for gratuity. If you have a limited contract, Gratuity is slightly different in the labor law.
How to calculate Gratuity under Limited Contract?
If an employee has served for less than 1 year, he is not entitled to any gratuity pay.
- If an employee has served for more than 1 year but less than 5 years, he is entitled to full gratuity pay based on 21 days’ salary for each year of work.
- If an employee has served more than 5 years, he is entitled to full gratuity of 30 days’ salary for each year of work following the first five years.
- In all cases, the total gratuity shall not exceed the wage of two years.
- An employee is not entitled to end of service gratuity where he has been terminated summarily for gross misconduct pursuant to the provisions of the UAE Labour Law.
The factor of 1/3rd or 2/3rd does not apply under limited contract. Everything else remains the same. Below I will try and explain it in various scenarios:
Examples for Gratuity Calculation on Voluntary Termination (Resignation):
Gratuity calculation on Resignation without completing your Limited Contract
If you have not completed your Limited Contract as mentioned in your Contract, you will not be eligible for Gratuity under Limited Contract. Meaning, if your limited contract is for a period of 2 years, and you have resigned from your job at 1 year and 2 months, you will not be eligible for any Gratuity. This is mentioned clearly in the UAE Labour Law Article 138. The only exception to this rule is that you resign under limited contract after completing 5 years of continuous service.
Gratuity calculation on Resignation after completing your Limited Contract with service of 1 to 5 years
If you have completed your limited contract and it is within 1 to 5 years, you are eligible for 21 day’s basic salary for each year of service.
Illustration:
- Joining date: 1-1-2008
- End date: 30-12-2012
- Basic Salary: 5,000/- per month
- Basic Salary per day = Basic Salary X 12/365=164.38
- Total no of days worked=Joining Date-End Date=1826
- Total no of years worked=Total no of days worked/365=5 years
- 21 days’ Basic Salary=Basic Salary per day X 21 days=3452.05
- Gratuity Amount=Total no of years worked*21 days’ Basic Salary=17,269.73
Gratuity calculation on Resignation with service of more than 5 years of service under limited contract
If you have completed more than 5 years of continuous service with your company and have resigned, then for the first 5 years you are eligible for 21 day’s basic salary and for service above 5 years, you are eligible for 30 day’s basic salary for every year of service.
Illustration:
- Joining date: 1-1-2008
- End date: 31-12-2013
- Basic Salary: 5,000/- per month
- Basic Salary per day =Basic Salary X 12/365=164.38
- Total no of days worked=Joining Date-End Date=2192
- Total no of years worked=Total no of days worked/365=6.01
- 21 days’ Basic Salary=Basic Salary per day X 21 days=3452.05
- 30 days’ Basic Salary=Basic Salary per day X 30 days(for above 5 years)=4931.4
- Gratuity Amount=5*21 days’ Basic Salary + 1*30 days basic salary = 22,191.00
Examples for Gratuity Calculation on Involuntary Termination (Termination):
Gratuity calculation on Termination with service of less than 1 year under limited contract
If your length of service is less than 1 year and you have been terminated, then you are not eligible for any gratuity. However, you may be eligible for other benefits under limited contract.
Gratuity calculation on Termination with service of more than 1 year under limited contract
In case you are terminated from your services on Limited Contract with a service of more than 1 year up to 3 years, you are eligible for gratuity of 30 days for every year of service.
Illustration:
- Joining date 1-1-2010
- End date 31-03-2012
- Basic Salary 5,000/- per month
- Basic Salary per day =Basic Salary X 12/365=164.38
- Total no of days worked=Joining Date-End Date=821
- Total no of years worked=Total no of days worked/365=2.25
- 21 days’ Basic Salary=Basic Salary per day X 21 days=3451.98
- Gratuity Amount=Total no of years worked 21 days’ Basic Salary=7766.95
FAQ-Frequently Asked Question on UAE Gratuity Calculator
How is 2022 gratuity calculated?
An employee who has worked continuously for one year or more shall be eligible for a gratuity at the end of service.
The worker’s days of unpaid absence will not be counted when calculating his service period and the gratuity will be advertised as follows:
If a worker has worked for less than one year, he will not be eligible for any gratuity payment.
If a worker has worked for more than one year but less than five years, he will be compensated for 21 days of salary for each year of employment.
If a worker has worked for more than five years, he will be compensated for 30 days salary for each year of employment after the first five years.
The overall gratuity cannot be more than a two-year pay.
Is gratuity calculated on basic salary?
Yes, Gratuity. is calculated on the basis of Last drawn basic salary. No other bonus or allowances, such as housing, transportation, overtime, child education, etc., are to be included in the gratuity calculation.
What is the maximum Gratuity that you can get?
Under Article 132 of Labor Law, you can clearly read that the maximum gratuity amount can not exceed 2 years’ gross salary.
Do I get 3 month salary in case of termination?
Under Limited Contract, if you are terminated for any reason other than mentioned in Article 120, you are eligible for 3 month’s compensation or remuneration till the end of your remaining contract, whichever is shorter. This is covered in the Article 115 of the UAE Labour Law.
When is gratuity not applicable?
Gratuity is not applicable in the following scenarios: (covered under Article 139)
If you are terminated or dismissed as per the provisions of Article 120 of UAE labour Law;
If you leave work without serving notice period other than for factors under Article 121 under unlimited contract;
If you leave or resign from limited contract before completion of 5 years.
How about Article 120 of UAE Labour Law?
Read post on Article 120 – Termination Reasons
Article 121 of UAE Labour Law
Read Article on When you can Terminate Labour Contract as Employee
What should you do if your employer does not settle your lawful gratuity?
If you do not receive your gratuity or end of service remuneration, you could visit MOL or log on to their online portal to file a complaint of non-receipt of your gratuity.
For further assistance you can reach out to the Ministry of Human Resources and Emiratisation (MOHRE) on 80060 or through their website www.mohre.gov.ae.
If I resign when I still have the old, unlimited contract, how will my gratuity be calculated?
Since the time allotted for the transition from the old labour contract to the new Labour law is one year, employees who resign under an unlimited contract shall be paid according to the old law, unless their firm has opted to follow the new Labour law regardless of the contract.
How is 2022 gratuity calculated?
Gratuity is calculated on 21 days for first five year and 30 days for every year where the period of service is more than five years. However, Since the time allotted for the transition from the old labour contract to the new Labour law is one year, employees who resign under an unlimited contract shall be paid according to the old law, unless their firm has opted to follow the new Labour law regardless of the contract.
Emiratesdiary is not responsible for any amendment 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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