What is the gratuity calculation procedure in United Arab Emirates as per MoHRE

Gratuity or end of service is right of any employee after his hard work to an organisation. Majority of people don't know about the gratuity calculation of his services.

According to a report many people don't know how to calculate the Gratuity so they are not getting the actual amount that should be paid to them.
Every Employee should get the Gratuity according to the labour law of United Arab Emirates.

Gratuity calculation depend on some factors like your Labour contract type (Limited or Unlimited) and end of service type weather it is Resignation from your services or its termination from your company in UAE.
Let's Know about the terms resignation and termination in short before discussing about calculation of gratuity:

Resignation:

Resignation means when an employee leave a company or organisation from his side when he/she don't want to work for that organisation any more for some reason weather upon completion the contract period or before it.

Termination:

Termination means when a company or organisation cancel your contract and they don't need your services any more for some reason and you are forced to leave that organisation.

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Gratuity for Limited Contract:

Gratuity for 1 to 5 years of Services:

If you have completed your services in company from minimum 1 year to 5 years you are entitled to get 21 days of basic salary for every single year of work.

Example:

Basic Salary (You can check your Basic salary on your labour Contract) here. AED 4500/- per Month 4500 (your monthly basic salary) / 30 (Standard days in a month for calculation) x 21 (basic salary days per year) x 3 (total years of services)


Calculation : 4500 ÷ 30 = 150 x 21 = 3150 x 3 = 9450

Gratuity for More than 5 years of services:

If you have completed more than 5 years in the company than you are entitled 21 days basic salary for 5 years and 30 days basic salary for each rest of years.

Example:

Basic salary 3000 per month for 7 years of Job/Services in Company. 3000 (your monthly basic salary) ÷ 30 (Standard days in a month for calculation) x 21 (basic salary days per years for first 5 years ) x5 3000 (your monthly basic salary) ÷ 30 (Standard days in a month for calculation) x 30 (basic salary days per years for after 5 years ) x2

Calculation: 3000 ÷ 30 = 100 x 21 = 2100 x 5 = 10500
3000 ÷ 30 = 100 x 30 = 3000 x 2 = 6000
Total Payable Amount: AED 10500 + 6000 = 16,500

Gratuity for Unlimited Contract:

Gratuity for 1 to 3 years of Services:

If you have completed more than one year and 3 years in a company you are entitled to get 1/3rd of 21 days of basic Salary for each year of Employment in company.

Gratuity for more than 3 years or 5 years of Services:

If you are completed more than 3 Years or 5 years in a company you will get 2/3rd of 21 days of basic salary of each years of Employment in Company.

Gratuity for more than 5 years of Services:

If your are completed more than 5 years of employment in an organisation you are entitled to get 21 days of basic salary for 5 years of employment and 30 days of basic salary for any additional years of Employment as Gratuity.

Note: As per the federal Law Article no 134, The wage used as a basic for calculating of gratuity should not include any payments made to the worker as housing allowances, overtime payments, transport and travel allowances Child education allowance, or any type of bonus or rewards.

Note: As per the Article 135, Any amount due to employer by the worker may be deduct by the employer from the amount of Gratuity.

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In case of Termination from Employment:

Unlimited Contract:

If company terminate the employee from his work 21 days of basic salary from 1years to 5 years of employment should be paid and in case of more than 5 year sof employment worker is eligible to get 30 days of basic salary for each year of employment.

Limited Contract:

If company terminates any worker before completion of the contract worker is entitled to get 30 days of basic salary for each year for years 1 to so on.

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