UAE Gratuity Calculator
What Does Gratuity Mean?
Also called the “final settlement” or an “end of service benefit”, it is meant to act as a safety net for individuals in between jobs to help them manage their expenses. Gratuity increases the longer you stay with an employer, so it also incentivizes employees to commit to a job.
3 Factors That Affect Gratuity in UAE
As per the labour regulations in the UAE outlines specific rules on how gratuity is calculated in the country. The regulations were established to standardize the calculation process and highlight certain factors that will influence the gratuity amount. Below are the key provisions:
1. Duration of Employment
2. Type of Contract
Generally, you can be hired under a limited or an unlimited contract. A limited contract just means that your employment has a set end date, but can be renewed. An unlimited contract does not have an end date.
3. Termination vs Resignation
Gratuity Calculation Formula
Gratuity = (Basic Salary x No. of Eligible Days x Years of Service) ÷ 30
Example 1 : Let’s say you were at a company for five years and then resigned. You were hired on an unlimited contract and were paid AED 7,000 as your basic salary. This is how your gratuity will be calculated:
(7,000 x 21 x 5) ÷ 30 = AED 24,500
Example 2 : Or suppose you decided to retire from your job after a 20-year stint, where you had a basic salary of AED 35,000. Your gratuity would be:
(35,000 x 21 x 5) ÷ 30 + (35,000 x 30 x 15) ÷ 30 = AED 647,500
What Happens When Employers Don’t Pay Gratuity?
As the UAE mandates gratuity payments to eligible employees, failure to make these payments can get your employer into trouble with the government. Employees have the right to file a complaint to MOHRE (Ministry of Human Resources and Emiratisation) if they do not receive their gratuity within 14 days of the end of their employment.
Employers that delay payments can face consequences like:
- Heavy penalties
- Legal intervention
- Added interest on pending gratuity payments
- Suspension of trade license
- Difficulty in recruiting new hires
Frequently Asked Questions
Gratuity is calculated based on your basic salary, years of service, and can be affected by whether you resigned or were terminated from your job. The formula is your basic salary multiplied by the number of eligible days multiplied by years of service divided by 30.
You can get gratuity if you resign after one year. The UAE now allows employees to receive gratuity after they complete one year of service at an employer.
You can withdraw some of your gratuity amount in advance, however, this amount will be deducted from your end of service payout when you leave the company. You cannot receive your entire gratuity until you end your employment contract.
Gratuity can now be paid to employees who have completed one year of service at a company in the UAE.
If you are terminated, you might still be eligible for gratuity if you worked at your company for at least one year. If you were terminated for misconduct or other similar reasons, you will not be eligible for gratuity.
According to MOHRE, every employee in UAE is eligible for gratuity after one year of employment at a specific company.
You can receive gratuity if you resign but you you need to have completed a minimum of one year of service to be eligible. If you resign in less than five years at a company, your gratuity amount will be calculated on a pro-rata basis.
Your gratuity payment cannot exceed two years of your basic salary. This is the salary you receive without including benefits or allowances.
The UAE labor law dictates that employees must be employed for at least one year at a company before they can receive gratuity. However, certain conditions may warrant earlier eligibility.
Your employer has 14 days after the end of your contract to pay you the gratuity amount. If you do not receive your final settlement amount within this time, you can file a complaint with the MOHRE (Ministry of Human Resources and Emiratisation).
