How to Calculate UAE Gratuity Pay
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Read the law to ensure you have calculated your gratuity pay correctly
Use this formula to calculate your correct gratuity pay entitlement
Calculating your end-of-service (gratuity) pay is important. Knowing how the total sum is reached will help you identify any errors made by your company.
Before attempting the calculation, it is important that you read the UAE Labour Law as set out by the Ministry of Labour. Click here.
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It is important to note that the calculations for gratuity pay are different depending on whether you’re on a Limited (Fixed Term) contract or Unlimited (Undefined) contract.
If you are terminated from your job, unless you break the rules as stated in Article 139 of the Labour Law, the employee is still entitled to gratuity pay. If the employee resigns of his or her own free will before completing one year, than they will not be entitled to any gratuity pay.
Note Gratuity pay is calculated based on the most recent salary paid into your account
Calculations for Limited Contract gratuity pay
Less than 1 year of service
Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.
Between 1 year and 5 years of service
Employee is entitled to full gratuity pay based on 21 days salary for each year of work.
5 or more years of service
Employee is entitled to full gratuity pay based on 30 days salary for each year of work.
Calculation example
Basic salary example: Dh10,000
- 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30
- 330.30 x 21 = 6,936.30. So 21-days salary is Dh6,936.30 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to 5 years.
For 30 days calculation for those exceeding 5 years of service
- 330.30 x 30 = Dh9,909. So 30-days salary is Dh9,909 in gratuity entitlement for each year of service – so long as the total figure does not exceed two years total salary figure.
Calculations for Unlimited Contract gratuity pay
Less than 1 year of service
Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.
Between 1 year and 3 years of service
Employee is entitled to one third (1/3) of the 21-days gratuity pay.
Between 3 years and 5 years of service
Employee is entitled to two thirds (2/3) of the 21-days gratuity pay.
5 or more years of service
Employee is entitled to full 21-days gratuity pay.
Calculation example
Basic salary example: Dh10,000
- 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30
- 330.30 x 21 = 6,936.30. So 21-days salary is Dh6,936.30
Of this figure of Dh6,936,30, only 1/3 is payable if you have worked between 1 and 3 years, so the total gratuity pay would be Dh2,312.10.
Only 2/3 is payable if you have worked between 3 and 5 years, so the total gratuity pay would be Dh4,624.20.
The full Dh6,936.30 is payable if you have completed 5 years.
These calcultions are not to be treated as law, they are for your reference only. For any disputes or further clarification, contact the UAE Ministry of Labour.
Formula
- 1. Monthly salary ÷30 = Daily wage
- Daily wage x21 = 1 year gratuity figure (Or x30 if applicable)
- 1 year gratuity figure xyears of service = Total gratuity owed
Only continue for Unlimited Contract calculation
- 4. Total gratuity owed ÷ 3 = One third (1/3) of total gratuity
- 5. Either take this figure or multiply it by two for final figure.
(Source: GulfNews.com)