Gratuity payment is a severance payment owed to an employee after serving an employer for a certain period. Gratuity is calculated in UAE on an annual basis if the employee has completed at least one year of continuous employment with the employer. End of service gratuity is one of the benefits an employee is entitled to upon completing the employment contract.
End-of-service benefits for full-time employees
- UAE citizens
End-of-service benefits for Emiratis employed in the private sector will follow the laws governing pensions and social security in the UAE.
- For Expats
An end-of-service bonus known as a gratuity may be given to you in a lump amount if you quit your job or were requested to leave it. The following end-of-service rewards are provided to foreign employees working in the private sector following Article 51 of the UAE Labour Law:
- The national worker shall be entitled to End of service benefits at the End of his service, following the legislation regulating the pensions and social securities in the State.
- The full-time foreign worker, who completed a year or more in continuous service, shall be entitled to End of service benefits at the End of his service, calculated according to the basic wage as per the following:
- A wage of (21) twenty-one days for each year of the first five years of service;
- A wage of (30) thirty days for each year exceeding such period.
- The foreign worker shall be entitled to a benefit for parts of the year in proportion to the period spent at work, provided that he completed one year of continuous service.
- The unpaid days of absence from work shall not be included in the calculation of the service term.
Understanding Gratuity calculations
A worker with a continuous service history of at least one year is eligible for end-of-service benefits when employment ends. Days of unpaid leave from work are not counted for determining service time, and the gratuity is computed as follows:
- A person who has worked for more than a year but less than five years is entitled to full gratuity pay, calculated using 21 days of salary for each year of service.
- A worker who has worked for more than five years is entitled to a total gratuity of 30 days’ pay for each additional year of employment.
- The foreign worker will be entitled to benefits for portions of the year in proportion to the period spent at work, provided he completed a year of continuous employment.
- For determining the service period, the days of unpaid leave are not considered.
- Without affecting the laws governing the provision of pensions or retirement benefits to employees in certain establishments, the end-of-service benefits shall be calculated following the last basic wage to which the employee was entitled to those who receive their pay on a monthly, weekly, or daily basis, and following the average daily salary outlined in the provisions of this article for those who receive their income on a piecework basis.
In light of those mentioned above, the total end-of-service benefits for the foreign employee must be at most two years’ pay. Following the terms and guidelines outlined in this document’s implementing regulation, the employer may deduct from the benefits paid after the End of employment any sums due under the law or a judgment.
End of Service Benefits for Workers in other Types of Employment
The Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Labour Relations (“executive rules”) hereof defines the mechanism for regulating end-of-service benefits for foreign workers based on work patterns, other than the full-time basis, in a way that improves the effectiveness and attractiveness of the labour market and as necessary by the interests of both parties to the employment contract.
According to Article 30 of the executive rules, end-of-service benefits for employees with part-time contracts or other work arrangements are calculated according to the number of working hours in the employment contract per year. Article 30 of the executive rules states as follows:
Subject to the provisions of Article (52) of the Decree-Law, the End of service benefits due to workers working in part-time or job-sharing types and not on a full-time basis shall be calculated according to the following mechanism:
- The number of working hours set out in the employment contract per year divided by the number of working hours in the full-time contract multiplied by 100 equals the percentage on which the End of service benefit should be calculated. This percentage should be multiplied by the value of the End of service benefit due for the full-time employment contract.
- The End of service benefit shall only apply in the case of temporary employment if its duration is one year.
Paying the Employees’ Benefits at the End of the Contract Period
The employer must pay the employee’s salaries and any other entitlements specified in the labour law, any resolutions made for its execution, the contract, or the establishment’s bylaws, within (14) fourteen days after the contract’s expiration date.
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