How is Gratuity (End of Service Benefit) Calculated as per New UAE Labour Law effective from February 2022?

Under the new law – Federal Law No. 33 of 2021 on the regulation of labour relations –Employees in the federal government and the private sector will avail of the same end-of-service benefits announced by the Ministry of Human Resources and Emiratisation, which will come into effect from February 2, 2022. The New Employment Law shall apply to your employment if you continue to work for your existing employer until the New Employment Law takes effect. The law will determine gratuity for employees working in the new temporary, flexible and part-time job models.

As per the Article of the New UAE Labour Law on Severance Pay for full time workers:

1. 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.
2. 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.
3. The End of service benefit is calculated basis of the basic wage.
4. 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.
5. Days of absence from work without pay shall not be counted within the period of service.
6. The severance pay for a foreign worker shall not exceed in aggregate two years’ wage.
7. The Cabinet may, upon the proposal of the Minister and after the coordination with concerned entities, adopt other systems instead of the severance pay system. The decision shall determine the conditions, controls and mechanism for participation in such systems.

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