How to Calculate Gratuity in UAE Labour Law - Keybook

Gratuity is a crucial end-of-service benefit for employees working in the UAE. Understanding how to calculate gratuity in UAE labour law ensures that employees receive their rightful compensation upon resignation or termination. This blog provides a comprehensive guide on gratuity calculations based on the UAE Labour Law.

Understanding Gratuity in UAE Labour Law

Gratuity is a lump sum paid to employees after completing a specific period of service. It acts as financial security, recognizing an employee’s contribution to an organization.

You might be interested in: Maximizing UAE End of Service Benefits: Calculate Gratuity

Who is Eligible for Gratuity?

Under UAE labour law, employees with a permanent contract who have completed at least one year of continuous service are entitled to gratuity. However, gratuity is not applicable to employees terminated due to gross misconduct.

It may be helpful for you: Utilizing an Online Gratuity Calculator

How to Calculate Gratuity in UAE Labour Law

Gratuity calculation depends on several factors, including contract type (limited or unlimited), years of service, and reason for termination. The calculation is based on the last drawn basic salary, excluding bonuses, allowances, and other benefits.

Gratuity Calculation for Limited Contracts

• Less than 1 year: No gratuity entitlement.

• 1-5 years of service: 21 days’ basic salary per year of service.

• More than 5 years of service: 30 days’ basic salary for each year after completing five years.

Gratuity Calculation for Unlimited Contracts

• Resignation after 1-3 years: One-third of 21 days’ salary per year.

• Resignation after 3-5 years: Two-thirds of 21 days’ salary per year.

• Resignation after more than 5 years: Full 21 days’ salary per year up to five years, then 30 days’ salary per year thereafter.

For official guidelines, visit the UAE Ministry of Human Resources & Emiratisation.

Example of Gratuity Calculation

Let’s assume an employee resigns after six years with a last drawn basic salary of AED 10,000:

• First five years: (21 days × 5 years × AED 10,000) ÷ 30 = AED 35,000

• Sixth year: (30 days × AED 10,000) ÷ 30 = AED 10,000

• Total Gratuity: AED 45,000

Explore more legal insights here: Labour Lawyers Dubai

Legal Assistance for Gratuity Claims

Understanding gratuity laws can be complex. Consulting Dubai Lawyers helps employees and employers navigate gratuity disputes effectively.

FAQs on How to Calculate Gratuity in UAE Labour Law

1. Who is entitled to gratuity in the UAE?

Employees with a permanent contract who have completed at least one year of continuous service are entitled to gratuity.

2. How is gratuity calculated for part-time employees?

Gratuity for part-time employees is calculated proportionally based on their working hours and salary.

3. Can an employer refuse to pay gratuity?

Employers must pay gratuity unless the employee was terminated for gross misconduct.

4. Is gratuity taxed in the UAE?

No, gratuity payments are not subject to taxation in the UAE.

5. How long does it take to receive gratuity after leaving a job?

Gratuity must be paid within 14 days of an employee’s termination or resignation.

6. Can an employee claim gratuity after termination without notice?

Yes, if termination occurs unlawfully, the employee is still entitled to gratuity.

7. What legal steps can be taken for unpaid gratuity?

Employees can file a complaint with the UAE Ministry of Human Resources or consult Lawyers in Dubai for legal action.

This could be useful for you: Grasping the Computation of Gratuity

Understanding how to calculate gratuity in UAE labour law ensures employees receive fair compensation. Employers must adhere to UAE labour regulations to avoid disputes.

If you have concerns regarding your gratuity rights, seek legal guidance from Lawyers in Dubai. Their expertise ensures compliance with UAE labour laws and secures your financial entitlements.