uae labour law

How to calculate UAE gratuity pay

Use this formula to calculate your correct gratuity pay entitlement

Guides Report
06:30 August 1, 2017
Accounting

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

Gratuity pay is calculated based on the most recent salary paid into your account

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

a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30

b. 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

c. 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

a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30

b. 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

2. Daily wage x 21 = 1 year gratuity figure (Or x30 if applicable)

3. 1 year gratuity figure x years 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.


Calculate your gratuity here using this formula


Web 2.0 scientific calculator


Source UAE Ministry of Labour

Call centre For any Labour issues, call 800 665

Locate your nearest Ministry of Labour office

Gulf News is not responsible for any amendments made to the UAE Labour Law. All labour disputes must go through the Ministry of Labour. This article may only be used as a guide.