Calculate Gratuity in UAE: If you are a working employee in UAE, you must know about gratuity pay and how it is calculated? According to article 134 of UAE labour law, the gratuity pay of an employee is calculated on the basis of their last basic salary.
Employees are entitled to this gratuity pay in UAE regardless of the reason for ending the service including cases like resignation, termination or leaving UAE. A person must have completed at least one year of their employment service to be eligible for gratuity pay.
The gratuity pay calculations for an employee in UAE depends on the following factors.
- Last basic salary
- Type of contract
- Duration of service
- Reasons for leaving the service (termination or resignation)
What is Gratuity Pay?
Gratuity pay is basically an end-of-service benefit provided to employees after their completion of the employment contract as a token of appreciation for their service.
Established by UAE labour law, gratuity pay can be claimed by the employee at the time of resignation, termination, and retirement as mentioned in the company’s contract.
Gratuity Pay Calculation Rule Table
|
Calculation Rule |
For Limited Contracts | At the time of Resignation | At the time of Termination (Involuntary) |
| Gratuity Pay Calculation | If employee’s contract ends –
1) less than 5 years of service 2) more than 5 years of service If employee is fired (involuntary termination) – 3) 1 to 5 years of service 4) 5 years or more service |
1) less than 5 years of service – Basic salary of 21 days for each year of service
2) more than 5 years of service –Basic salary of 21 days for first 5 years + 30 days of basic salary for each year after 5 years |
3) 1 to 5 years of service –
Basic salary of 21 days for each year of service 4) 5 years or more service – Basic salary of 21 days till 5th year of service + 30 days of basic salary for each year after 5th year |
|
Calculation Rule |
For Unlimited Contracts | At the time of Resignation |
At the time of Termination |
| Gratuity Pay Calculations | If employee’s contract ends –
1) 1 to 3 years of service 2) 3 to 5 years of service 3) more than 5 years of service If employee is fired (involuntary termination) – 4) 1 to 5 years of service 5) 5 years or more service |
1) 1 to 3 years of service –
⅓ of 21 days of gratuity pay for each year 2) 3 to 5 years of service – ⅔ of 21 days of gratuity pay for each year 3) more than 5 years of service – Basic salary of 21 days for each year of service |
4) 1 to 5 years of service – Basic salary of 21 days for each year of service 5) 5 years or more service – Basic salary of 21 days till 5th year of service + 30 days of basic salary for each year after 5th year |
NOTE: There is no gratuity pay in case of less than 1 year of service for the employee.
Gratuity Pay Calculations with Examples
1) Gratuity Pay Calculations in Case of Limited Contracts
For Example: Suppose a person has a basic monthly salary of AED 30,000. He has worked in the company for 6 years and resigned from the company at the completion of 6 years. Calculate his gratuity pay. (Limited contract)
Basic salary = AED 30,000 (for 30 days)
Basic salary for 1 day = AED 1,000
Basic salary for 21 days = AED 21,000
Gratuity pay for 6 years = gratuity pay for 5 years + gratuity pay for 6th year [refer the table above]
= (5 ✖ Basic salary for 21 days) + (1 ✖ Basic salary for 30 days)
= (5 ✖ 21000) + (1 ✖ 30000)
= AED 1,35,000
2) Gratuity Pay Calculations in Case of Unlimited Contracts
For Example: Suppose a person has a basic monthly salary of AED 30,000. He has worked in the company for 4 years and resigned from the company at the completion of 4 years. Calculate his gratuity pay. (Unlimited Contract)
Basic salary = AED 30,000 (for 30 days)
Basic salary for 1 day = AED 1,000
Basic salary for 21 days = AED 21,000
Gratuity pay for 4 years = 4 ✖ (⅔ of basic salary of 21 days) [refer the table above]
= 4 ✖ (⅔ of 21000)
= 4 ✖ 14000
= AED 56,000
NOTE: (Limited contracts are for limited-term or fixed contracts while unlimited contracts are open-ended)
Frequently Asked Questions(FAQs)
Q-1. Am I eligible for gratuity if I resign?
Ans- Yes, UAE Labour Law allows employees to claim gratuity pay for more than 1 year of service at a company in case of resignation, termination and retirement.
Q-2. How can I demand my gratuity amount?
- You must be eligible under the payment of gratuity act 1972.
- Do the paperwork needed according to the rule.
- Fill the gratuity form and hand it to your employer.
Q-3. Can I claim gratuity pay for less than 1 year of service at a company?
Ans- No, there is no gratuity pay available for an employee for less than 1 year of service.
Q-4. What is the maximum limit of gratuity pay in UAE?
Ans- The maximum amount of gratuity given to an employee should not exceed his/her current two years of basic salary at that company.
Q-5. Does notice period also come under gratuity pay?
Ans- Yes, as the employee serves till the notice period at a company and receives salary till then, it is included when calculating gratuity pay.