Getting laid off from your job is no fun. While you may still be recovering from an unexpected layoff, before you know it, it’s that time of the month, when the bills start arriving in your mailbox. It is times like these when you realize that every dirham counts and your end-of-service benefits or gratuity might help you get back on your feet again.

Whether you quit your job or your services are terminated, Article 132 of the UAE Labour Law clearly sketches out the various elements of the end-of-employment-term benefits, explaining how its calculated, who can benefit from it and exceptions.

Am I Eligible For Gratuity?

Yes, if you are an employee who has completed one year or more in continuous service at an organization in the UAE, you will be entitled to the termination indemnities (EOSB) at the end of your service.

Is it the Same For All Types of Contracts?

One of the important things to note while computing your end of service entitlement is the nature of your employment contract. Your gratuity calculation differs depending on whether you were employed on a limited or an unlimited contract.

How Do I Calculate My Gratuity?

 Limited Contract
Less than 1 year of service Not applicable
Between 1-5 years of service 21 days of basic salary x No. of years
5 or more years of service 30 days of basic salary x No. of years

 

 Unlimited Contract
Less than 1 year of service Not applicable
Between 1-3 years of service 1/3rd of (21 days of basic salary x No. of years)
Between 3-5 years of service 2/3rd of (21 days of basic salary x No. of years)
5 or more years of service Full 21 days salary x No. of years

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Illustrative example: (Limited Contract)

Basic salary: AED 10,000 per month

STEP 1: Calculate your daily wage by dividing your monthly salary by 30. For example if you earn a basic monthly salary of AED 10,000, then your daily wage would be 10,000 ÷ 30 = 333.33.

STEP 2: Calculate your 21 days basic salary by multiplying your daily wage by 21. In this case, 333.33 x 21 = 7,000 is your gratuity entitlement for each year.

STEP 3: Multiply this figure with the number of years of your service up to 5 years to arrive at the final amount. The amount will be 7,000 x 2 = 14,000 if the service was terminated after 2 years.

For those exceeding 5 years of service and with a limited contract, end of service benefits will factor in 30 days of basic salary instead of 21.

Illustrative example: (Unlimited Contract)

In case of an unlimited contract the first two steps would be the same as above, calculating your 21 days basic salary.

STEP 1: 10,000 ÷ 30 = 333.33

STEP 2: 333.33 x 21 = 7,000

STEP 3: In this step, your 21 days basic salary will be divided by 1/3 or 2/3 based on the number of years of service.

For example, if you have between 1- 3 years of service, your gratuity payout will be 1/3rd of AED 7,000 which is AED 2,333.33.

If you have between 3-5 years of service, your gratuity payout will be 2/3rd of AED 7000 which is AED 4,666.66.

If you have completed 5 years of service your gratuity payout will be full AED 7,000.

STEP 4: This amount will then be multiplied by the number of years in service, and that will be your final gratuity entitlement.

Keep in mind…

• Days of absence from work without pay will not be counted as service days.
• Your end of service benefits will be calculated based on the most recent salary paid into your account.
• End of service benefits can be withheld by your employer for a number of reasons such as advance salary payment, violation of employment terms, misuse of confidential information, among others as stated by the law.

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