Dubai: Understanding gratuity payout is crucial for any employee working in the UAE. It’s a financial safety net that you get when you resign or face a job loss. But there are certain aspects of the laws around the gratuity payout that you may not be familiar with.
1. It is not applicable for short stints
Gratuity is only available to employees who have completed at least one year of continuous service with the same company. The UAE Labour Law – Federal Decree Law No. 33 of 2021 – defines ‘continuous service’ as “an uninterrupted service with the same employer or his legal successor, from the service commencement date”.
If you have worked with an employer on short stints, click here to find out how your tenure would be calculated for gratuity eligibility and payout.
2. Unpaid leave doesn't count
Another important aspect of gratuity calculation that you need to remember is that if you have taken unpaid leaves during your time at the company, it will not be counted towards your total tenure for which you will get the gratuity. This means your gratuity payout could be slightly lower if you've taken significant unpaid leave during your tenure.
3. Basic salary matters
The gratuity payout is calculated based on your basic salary, not your total package, which might include allowances for housing, transportation. You can find your basic salary by logging into your employee account, if your human resources department provides one, or get a copy of your monthly salary slip.
4. Longer tenure? Get more gratuity per year of service
As per the UAE Labour Law, gratuity calculation is calculated as follows:
- 1-5 years of service: You receive 21 days' basic salary for each year of service.
- More than five years: 21 days’ basic salary for the first five years of service + 30 days' basic salary for each subsequent year.
For a detailed guide on the gratuity calculation, click here.
5. There's a maximum limit
Finally, it is important to remember that the UAE Labour Law sets a cap on the maximum amount of gratuity that can be paid out to an employee. As per the law, it cannot exceed two years' worth of your basic salary.
