UAE end-of-service calculator: Know your legal gratuity now (Explainer and formula)
Leaving your job and confused about gratuity? 5 things to consider
Dubai: Whether you have resigned from a job, or have been asked to leave, the gratuity that you receive at the end of your service can act like a safety net, helping you transition to your next employment.
If you were confused about how you can calculate your gratuity, based on the UAE Labour Law, here is all you need to know.
You should have worked for at least one year to be eligible
Ayush Hans, Legal Consultant at Connect Legal, an online legal support service, referred to Article 51(2) of the UAE Labour Law – Federal Decree Law No. 33 of 2021 – to explain when a person becomes entitled to receive gratuity.
“Any expatriate worker, 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,” Hans said.
While this criteria is for full-time workers, what happens if you are working on a part-time or job-sharing work model?
“Article 30 of Cabinet Resolution No. 1 of 2022 states that part-time or job-sharing model employees can also be eligible for end-of-service benefits as per a different calculation,” Hans added.
The calculation uses a pro rata system, the details for which you can find here.
Any expatriate worker, 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.
Basic Wage: The wage stipulated in the employment contract, which is paid to the worker in consideration of his work under the employment contract, on a monthly, weekly, daily, hourly or piecework basis, and which does not include any other allowances or benefits in kind.
Continuous Service: Uninterrupted service with the same employer or its legal successor, from the date of commencement of work.
Two details you need to calculate gratuity
1. What is your daily basic wage?
The first piece of information you need is to calculate your daily basic wage.
According to the Ministry of Human Resources and Emiratisation (MOHRE), the end-of-service gratuity is calculated on the last due basic wage of the employee. Your basic wage is different from your overall monthly salary, and to find out what your basic wage is, you can refer to your employment contract.
Once you find your basic wage, you have to divide the number by 30 (for each day of the month), to get your daily basic wage.
2. For how many years have you worked in this company?
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.
a. A wage of 21 days for each year of the first five years of service;
b. A wage of 30 days for each year exceeding such period.
Gratuity calculator
Formula for workers who have completed less than five years of service:
Daily basic wage x 21 x [Number of years of service]
“For example, if an employee has worked for two continuous and complete years and the last basic salary paid to him or her is Dh7,000, he or she shall be entitled to a gratuity of 7,000 ÷ 30 x 21 x 2 = Dh9,800,” Hans said.
Formula for workers who have completed more than five years of service:
Important note: You will have to separately calculate the gratuity for the first five years, on the basis of 21 days’ basic wage per year. Then you will need to calculate the gratuity for the remainder of your service, on the basis of 30 days’ basic wage per year. You will then need to add both these amounts.
The formula 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]
“If you have completed seven years of service, you will accumulate 21 days per year for the first five years of your service for gratuity and 30 days thereon for each year that exceeds the five year mark.
“For example, if an employee has worked for seven continuous and complete years and the last basic salary paid to him or her is Dh7,000, he or she shall be entitled to a gratuity of ‘7,000 ÷ 30 x 21 x 5 = Dh24,500’ for the first five years of service, plus ‘7,000 ÷ 30 x 30 X 2 = Dh14,000’; for the remaining years of service. The total gratuity would come up to Dh38,500,” Hans said.
How to calculate gratuity for fraction of a year?
If I have worked for a total of three years and two months, will I also get gratuity for the two months of service? Yes, according to Jihene Arfoui, a Dubai-based legal advisor.
She referred to Article 51 (3) of the UAE Labour Law, which provides details of how the gratuity will be calculated for a fraction of a year.
“For fraction of a year, you need to divide one year’s gratuity by 12 – for each month – and then divide it by 30 – for each day of the month. Multiply this with the number of days which are part of the fraction of the year of service,” Arfoui said.
For fraction of a year, you need to divide one year’s gratuity by 12 – for each month – and then divide it by 30 – for each day of the month. Multiply this with the number of days which are part of the fraction of the year of service.
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 Dh7,000, here is how you can calculate the gratuity:
Gratuity for two years: Dh7,000 ÷ 30 x 21 x 2 = Dh9,800
+
Gratuity for two months: Dh4,900 (Gratuity for the last year of service) ÷ 12 ÷ 30 x the number of days in the two months
You should receive your gratuity within 14 days
Arfoui added that as per the UAE Labour Law, the employer should pay the worker within 14 days from the date of the contract termination, his or her remuneration and all other entitlements.
According to information posted by MOHRE on its website, if you do not receive your gratuity within 14 days, you are entitled to raise a labour complaint.