UAE Gratuity Calculator 2023: How to Calculate your Gratuity in UAE

UAE Gratuity Calculator 2023: How to Calculate Your End-of-Service Benefits

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.

If you have recently quit your job or have been terminated in Dubai, receiving gratuity can be beneficial in helping you move forward with your next employment. However, calculating your gratuity may be confusing. To simplify this process, here is everything you need to know about gratuity according to the UAE Labour Law.

Any expatriate worker who are on full time employment and who has completed one year of continuous service with an employer is eligible for gratuity. This one year of continuous service shall not include any periods of unpaid leaves taken by the employee. However, according to Clause 2, Article 30 of Cabinet Resolution No. (1) of 2022, part-time workers who have worked for less than a year are not eligible to receive gratuity. However, Clause 1 of the same article provides a formula for calculating severance pay for such workers based on their hours worked in comparison to a full-time employee. The formula involves dividing the part-time worker’s hours by the full-time employee’s contracted hours, and multiplying the resulting fraction by 100 to obtain the percentage on which the gratuity will be calculated.

The UAE Labour Law defines some important terms in Article 1. The term “Basic Wage” refers to the amount specified in the employment contract, paid to the employee for their work on a monthly, weekly, daily, hourly, or piecework basis, and does not include any additional benefits or allowances. “Continuous Service” refers to the uninterrupted service with the same employer or its legal successor from the start of the employee’s work.

How to Calculate your Gratuity in UAE

How to calculate your daily basic wage?

To calculate your end-of-service gratuity, you first need to determine your daily basic wage. This information can be found in your employment contract, and it is distinct from your total monthly salary. According to the Ministry of Human Resources and Emiratisation (MOHRE), the end-of-service gratuity is based on the employee’s last due basic wage. Once you have identified your basic wage, you can calculate your daily basic wage by dividing that number by 30, which represents the number of days in a month.

According to Article 51 (2) of the UAE Labour Law, if you have completed five years in a company, you will be entitled to 21 days of basic pay for each year of service.

According to Article 51(2) of the UAE Labour Law, a foreign full-time worker who has served continuously for one year or more is eligible to receive end-of-service benefits. These benefits are calculated based on the worker’s basic wage and are as follows: a. 21 days’ wage for each year of service for the first five years; b. 30 days’ wage for each year of service exceeding the initial five years.

According to Article 51(2) of the UAE Labour Law, a foreign full-time worker who has served continuously for one year or more is eligible to receive end-of-service benefits. These benefits are calculated based on the worker’s basic wage and are as follows:

• 21 days’ wage for each year of service for the first five years;

• 30 days’ wage for each year of service exceeding the initial five years.

The formula to calculate the gratuity is as follows:

Gratuity Calculations if a worker has served continuously for less than five years:

Daily basic wage x 21 x [Number of years of service]

For instance, if an employee has completed two full years of service and their last basic salary is Dh 5,000, they will be eligible for a gratuity of Dh 7,000, calculated as 5,000 divided by 30, multiplied by 21, and then multiplied by 2.

5000/30 x 21 x [2]

Gratuity Calculations if a worker has served continuously more than five years:

To calculate the gratuity for workers who have completed more than five years of service, you need to compute two separate gratuity amounts. The first gratuity amount is calculated based on 21 days of basic wage per year for the first five years of service. The second gratuity amount is calculated based on 30 days of basic wage per year for the remaining years of service. You will then add both these amounts to get the total gratuity.

The formula for calculating the gratuity for workers who have completed more than five years of service is as follows:

Daily basic wage x 21 x 5 [For the first five years of service] + Daily basic wage x 30 x [remaining years of service]

For instance, if an employee has worked for seven years and the last basic salary paid is Dh5,000, they are entitled to a gratuity of Dh17,500 for the first five years of service and Dh10,000 for the remaining two years of service. Thus, the total gratuity amount comes to Dh27,500.

5000/30 x 21 x 5 -[For the first five years of service] + 5000/30 x 30 x 2- [remaining years of service]

Gratuity Calculations for fraction of a year:

The formula for calculating gratuity for a fraction of a year is as follows:

(Daily basic wage ÷ 30) x 21 x (number of years worked)

You would need to calculate the gratuity for the two full years of service based on the standard formula, and then calculate the gratuity for the two months using the formula for a fraction of a year. The two amounts can then be added together to arrive at the total gratuity amount.

Formula

[Gratuity for the last year of service] ÷ 12 ÷ 30 x number of days which are part of the fraction of the year of service

So, if you have worked for two years and two months, for a basic salary of Dh 5,000 here is how you can calculate the gratuity:

Gratuity for two years: Dh5,000 ÷ 30 x 21 x 2 = Dh7,000
+
Gratuity for two months: Dh5,000 ÷ 12 ÷ 30 x the number of days in the two months

As per the UAE Labour Law, employers are required to pay their employees their remuneration and all other entitlements within 14 days from the date of contract termination. The Ministry of Human Resources and Emiratisation (MOHRE) also states on their website that if an employee does not receive their gratuity within the given timeframe, they have the right to file a labour complaint.