Gratuity Calculation as per UAE Labour Law

PAYMENT OF GRATUITY as per UAE Labour Law.

An employee who completes one year or more in continuous service shall be entitled to gratuity at the end of the service. The gratuity shall be calculated as follows:

21 day’s wages for each year of the first five years.

30 day’s wages for each additional year on condition that the total of the gratuity shall not exceed the wages of two years.

 

Gratuity calculation UAE Labour Law 2012 in case of Resignation:

1. Gratuity Calculation UAE Labour Law: Within one year- No Gratuity

2. Gratuity Calculation UAE Labour Law: More than one year but less than 3 years: 1/3rd of 21 days basic salary each year of service.

Below are details with example:

Example:

Basic salary = AED 10,000 per month

Joining date = 01-01-2010

End date = 31-03-2011

Total number of days worked = 455 days

Total number of years worked = 1.25 years

21 days’ Basic salary = AED 6904.1

Wages per day = AED 10,000*12/365= 328.76

Amount: 21*328.76*1.25 = 8,606.49

Gratuity Amount: 1/3*8606.49 = 2,868.83

In the above example if the you have worked for 1 .5 years, (updated after error notified by Mr. Ali) your total Gratuity will be around: AED 10,500 (but you receive 2/3rd of the total amount in case of resignation).

3. Gratuity calculation UAE Labour law for More than 3 years but less than 5 years: 2/3rd of 21 days basic salary each year of his/her service.

Below are details with example:

Basic salary = AED 10,000 per month

Joining date = 01-01-2008

End date = 31-03-2011

Total number of days worked = 1,186 days

Total number of years worked = 3.25 years

21 days’ Basic salary = AED 6904.1

Wages per day = AED 10,000*12/365= 328.76

Amount: 21*328.76*3.25 = 22,433

Gratuity Amount: 2/3*22,433 = 14,955.75

4. Gratuity Calculation UAE Labour law: More than 5 years

Basic salary = AED 10,000 per month

Joining date = 01-01-2005

End date = 31-03-2011

Total number of days worked (31-03-2011-01-01-2005+1)= 1916 days

Total number of years he worked=1916/365= 5.25

21 days’ Basic salary = 328.76*21= AED 6,904.1

30 days basic salary=328.76*30= AED 9,863.01

Wages per day = AED 10,000*12/365= 328.76

Total gratuity=21*328.76*5=34,520.55+(1,916/365-5)*30*328.76=2,459.00=36,979.5

Gratuity calculation UAE Labour law in case of Termination:

1. within a year – No Gratuity

2. More than a year but less than 5 years: 21 days of Basic Salary for every year of service.

3. More than 5 years: 21 days’ basic salary for up to 5 years plus remaining years*30 days’ basic salary *per day wage.

Where a worker under a definite term contract abandons his employment at his own initiative before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years.

Disclaimer: The above Gratuity calculation UAE Labour law is to be used as a guidance and is not be taken as final calculation. The UAE Labour Law is dynamic and is subject to change. Please take care while calculation by contacting the Ministry of Labour.