End of Service Gratuity in UAE

The relationship between the employer and an employee is one of the many relationships which human beings create amongst themselves, and it is a relationship of mutual interests and benefits.

There may be some obstacles or hindrances to this relationship, which will result in some rights and duties that fall upon both parties. The UAE Labor laws have clarified and detailed those rights and duties.

One of the more notable rights which may accrue to an employee in the event of the termination of an employment relationship is the payment of Final Dues or the so-called End of Service Gratuity UAE. However, the calculation and payment of such gratuity are subject to certain legislative conditions and requirements which will be addressed in this article.

The UAE Labour Law makes provision for 2 kinds of labor contracts, namely a limited-term (fixed term) and unlimited term contract.

In the event that an employee wishes to terminate an employment contract, whether a limited or unlimited term contract, such employee must do so in terms of Article 113 of the UAE Labour Law which prescribes the conditions in which the employment contract may be terminated or comes to an end.

Calculation of the End of Service Gratuity for a Limited (Fixed Term) Contract

If the employee has been employed for more than one year, he/she is entitled to the End of Service Gratuity and it is calculated in the following manner:

The minimum period from which to start calculating the End of Service Gratuity UAE is one year.

• If an employee has been employed with the employer for more than 1 year but less than 5 years, he/she will receive 21 days for every year employed as an End of Service Gratuity;
• If an employee has been employed with the employer for more than 5 years, he/she will receive 30 days for every year employed after the first five years as an End of Service Gratuity.

Calculation of the End of Service Gratuity for the Unlimited Term Contract

The End of Service Gratuity in terms of an unlimited term contract is calculated depending on who terminated the contract.

If the employer has terminated the unlimited term contract, the End of Service Gratuity is calculated as follows:

The minimum period from which to start calculating the End of Service Gratuity UAE is one year.

• If an employee has been employed with the employer for more than 1 year but less than 5 years, he/she will receive 21 days for every year employed as an End of Service Gratuity;
• If an employee has been employed with the employer for more than 5 years, he/she will receive 30 days for every year employed after the first five years as an End of Service Gratuity. However, this is on the proviso that the total End of Service Gratuity does not exceed two years’ salary.

If the employee terminates an unlimited term contract, the remuneration is calculated as follows:

The minimum period from which to start calculating the End of Service Gratuity UAE is one year.

• If an employee has been employed with an employer for a period of more than 1 but less than 3 years, the employee will receive one-third of the 21-day basic salary for each year employed as an End of Service Gratuity.
• If an employee has been employed with an employer for a period between 3 to 5 years, the employee will receive two-thirds of the 21-day basic salary for each year employed as an End of Service Gratuity.
• If an employee has been employed with an employer for more than 5 years, the employee will receive 21 days for every year employed after the first five years as an End of Service Gratuity.

Arbitrary Dismissal in Terms of UAE Labour Law

UAE Labor Law in case of Resignation 2020

The Ministry of Human Resources and Emiratisation (MOHRE) in the UAE has enacted a number of decisions to guarantee the rights of the employer and the employee.

In the event that the contract of employment specifies a timeframe of employment, i.e. a limited-term contract, the employee must terminate the contract in accordance with what is stipulated in the contract. However, if the contract is not for a specific period, the employee may resign by giving the required notice and the employer may not refuse the worker’s resignation, as the resignation simply serves to inform the employer of the employee’s intention to terminate the employment relationship. The employee must confirm the notification of the resignation to the employer in writing, which may be done by means of fax, e-mail, or mail. The employee should retain proof that the employer received the notification.

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