The UAE end-of-service gratuity is a lump sum of money that many parents count on receiving when they leave a job - but the amount you get paid depends on the amount of time that you have been working for your employer.
How do the days taken off for maternity leave and parental leave factor into this calculation? We asked lawyer Anna Marshall and the employment team at Al Tamimi & Co for their advice.
Will I receive gratuity pay?
Employees who have worked for more than one year’s continuous service in a role in the private sector of the UAE are entitled to an end-of-service gratuity upon the termination of their service. The amount of gratuity will vary depending on your salary, contract type and how long you have been working at your place of employment.
How is my gratuity calculated?
Your gratuity is calculated based on your basic salary (not including any allowances), multiplied by the number of years that you have been in service at your place of employment.
Although the exact calculation varies depending on the type of contract you are on (see details below), generally speaking the more years that you have been employed in one company, the higher your gratuity amount will be.
However, any days of absence from work without pay are not included in the calculation of the period of service. But what does this mean for maternity leave absence and other periods of leave related to pregnancy, childbirth or parenting?
Are periods of maternity leave deducted from your gratuity calculation?
Women working in the private sector of the UAE are entitled to 45 calendar days of maternity leave at full pay for those employees who have completed one year of continuous service as at the date of birth. This time should not be deducted from your length of service for end-of-service gratuity calculations, according to the Al Tamimi & Company employment law team:
“For end-of-service gratuity purposes, the 45 calendar day period of statutory maternity leave [for private sector employees] is counted towards the employee’s length of service,” says Al Tamimi’s Anna Marshall.
What if an employee has taken multiple maternity leaves?
“Regardless of how many times a female employee takes maternity leave during her employment, she would continue to accrue end-of-service gratuity in the normal manner during her period(s) of paid statutory maternity leave under the UAE Labour Law,” says Ann Marshall.
What about additional medical leave taken as part of the maternity leave?
After a woman’s 45 days of paid maternity leave is over, she is able to extend her leave by up to 100 days of unpaid leave if she has a valid medical certificate stating that the illness resulted from pregnancy or delivery.
However, if you have taken a period of unpaid leave of this kind, it might not be included in your length of service calculation, says Marshall: “Under the UAE Labour Law, end-of-service gratuity does not accrue during any periods of unpaid leave (however, while not legally required, many companies do allow the employee to continue accruing end-of-service gratuity during the unpaid (medical) leave in these circumstances, especially if the employee has a valid medical certificate).”
The 100 days of unpaid medical leave does not count as a break in service (as the employment is still continuing during the unpaid leave), it's just that the period of unpaid leave would not be included when calculating the employee’s gratuity, explains Marshall: "For example, if an employee works for 5 years and takes 3 months of unpaid medical leave in the middle of that, their employment continues, however the unpaid leave portion would be excluded when calculating the person’s period of service for gratuity purposes (i.e. they would be entitled to gratuity for a total of 4 years and 9 months of employment)."
Does Parental Leave count towards end of service benefit?
Both male and female employees in the UAE private sector are now entitled to 5 days of paid Parental Leave to look after their baby, which may be taken any time between the baby’s birth until he or she reachers 6 months of age, following a federal decree-law amendment made in August 2020.
If a parent takes these five days of paid parental leave they should still count towards your end-of-service benefit calculation. “End-of-service gratuity continues to accrue as normal during these 5 days of paid parental leave,” says Marshall.
If a parent takes additional maternity or paternity leave in the form of unpaid leave or annual leave, would this count towards end-of-service benefit?
“Under the UAE Labour Law, end-of-service gratuity would not accrue during any periods of unpaid leave (unless agreed otherwise by the employer). However end-of-service gratuity would accrue as normal during any periods of annual leave,” says Marshall.
What can you do if your employer is refusing to factor in your period of maternity leave as part of your end of service benefit?
Marshall says: “As the first step, the employee could file a complaint with the Ministry of Human Resources and Emiratisation (if the employer is incorporated onshore) or the relevant free zone authority (if the employer is incorporated in a free zone) for an initial mediation-like process to try to resolve the issue, failing which the employee may wish to pursue a claim in the UAE Labour Court.”
What percentage of your overall salary should your basic salary be?
The end-of-service gratuity is based on your basic salary, not including any bonuses or allowances. “The UAE Labour Law itself does not require that an employee’s basic salary must comprise a certain minimum amount or percentage of the employee’s overall fixed monthly remuneration,” says Marshall.
“However, if the employee’s basic salary is an excessively small percentage of their overall fixed remuneration (e.g. if an employee has 10% as basic salary and 90% as various allowances), in the event of a dispute the UAE Labour Court may consider that the employer is unfairly minimising the employee’s end-of-service gratuity entitlement by artificially keeping their basic salary very low.
"In that scenario, the Labour Court may require the employer to calculate the employee’s end-of-service gratuity on the basis of their overall fixed monthly remuneration (i.e. basic salary plus allowances) rather than the employee’s basic salary only. As a general rule of thumb, an employee’s basic salary should comprise at least 60% of their overall fixed monthly remuneration, with no more than 40% consisting of various allowances.”
A worker is entitled to a gratuity for the served fraction of a year, provided that he or she completes one year of continuous service.
The end of service gratuity is calculated on basis of last wage which the employee was entitled to, namely the basic salary. This means it will not include 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.
How do you calculate your gratuity pay in UAE?
The exact calculation depends on your contract type (see below). However, the starting point of any gratuity calculation is to work out your basic daily salary not including any allowances or bonuses.
To find out your basic daily salary, you divide your basic monthly salary by 30 (to get the rate per day).
If you are entitled to 21 days’ of basic salary, you would then multiply this number by 21.
That figure would then be multiplied by the number of years of service, to give the total gratuity.
A reduction of 1/3 or 2/3 would then be applied, depending on how many years of service you have done all together, as per the different contract types and lengths below.
Gratuity calculation for those under a LIMITED contract
A liimited contract is one that has a specified end date as well as start date. An employee who has spent one year or more in continuous service shall be entitled to an end of service gratuity upon the termination of his service. The days of absence from work without pay shall not be included in the calculation of the period of service and the gratuity shall be calculated as follows:
- 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.
Gratuity calculation for those under an UNLIMITED contract
An unlimited contract is one that is open-ended and has no specified end date. In the event where the EMPLOYER TERMINATES an unlimited contract, calculation will be as follows:
- 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.
In the event where the employee under an unlimited contract RESIGNS, calculation will be as follows:
- 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) 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) 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.