Gratuity is the amount that is paid by an employer to his employees who worked in his establishment for some defined period of time. The criteria of gratuity (gratuity amount and the time period until which continuous service is required) varies from place to place. It is different for every different place. Let’s discuss about gratuity in UAE.
Gratuity calculation in UAE
Gratuity is calculated in UAE as per gratuity Labor law that states “An employee who completes one or more years of continuous service shall be entitled to get the End of Service benefits”.
- 21 calendar days’ basic salary for each year of the first five years of service.
- 30 calendar days’ basic salary for each additional year.
- The days of absence from work without pay shall not be included in the calculation of period of service.
- The gratuity is calculated on the basic salary in the last drawn Wages.
- Other allowances such as housing, conveyance, overtime pay, education allowance etc will not be considered for calculating gratuity.
- As per Article 132 and 134 of UAE Labor law, in any case the entire gratuity does not exceed total salary paid in 2 years.
- Article 133 of UAE Labor Law states that “An employee shall be entitled for the gratuity of any fraction of a year he served, provided that he has completed one year of continuous service”
- “If the employee owes any money to the employer, the employee may deduct the amount from the employee’s gratuity” this statement is mentioned as Article 135 of UAE labor law.
- “The gratuity computation may vary. It depends upon the contract, period of service, nature of cessation of the contract etc.” is said by Article 136 and 138 of UAE labor law.
- With this, Article 120 of UAE Labor law states, “An employee is not entitled to End of service benefits where he has been terminated due to misconducts as per the provisions of the UAE labor law.
Now the question arises, “How can we calculate the gratuity of UAE? For that purpose there are many calculators available. Calculate your gratuity with the best UAE gratuity calculator.
Let’s see an illustration of an unlimited Contract when termination is given by the employer:
Situation: An employee earns a salary of AED 10,000/- (where basic salary is 5,000 , HRA 2000, and transportation allowance AED 2,000.)
Calculation of gratuity
21 days’ basic salary will be AED 5,000 * 21/30 = AED 3,500/-
|Period of service completed||Eligible Gratuity|
|If the employee has not completed one year of service.||Gratuity -> zero
|If the employee has served for 4 years||Gratuity will be 3,500 * 4 = 14,000 (21 days’ basic salary for each year)|
|If an employee has served for 7 years||Gratuity will be (AED 3,500 * 5) + (AED 5,000 * 2) = 27,500/- (21 days’ basic salary for first 5 years and 30 days’ basic salary for additional 2 years.)|
For Calculation of any other case, use the UAE gratuity calculator.