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How is gratuity computed under the new UAE labour law?

When the United Arab Emirates changed its labour law in November, they made them for the private sector. These changes will make it easier for employers and employees to work together in the private sector. In 2022, a law will affect many parts of work-life in the United Arab Emirates. By February 2022, the Employment Law will be repealed and entirely replaced by the new Federal Decree-Law No. 47 of 2021 on the Standard General Rules of Work in the United Arab Emirates (the New Employment Law).

Dr Abdul Rahman Al Awar, the Minister of Human Resources and Emiratization, stated that the new law gives employees many options for end-of-service benefits, like saving projects. He said that there would be another media briefing to talk about the other options available to employees.

You must read: Some key features of new UAE labour law: what you must know?

Provision relating to gratuity under new Employment Law

According to Article 11, clause 2 of the New Employment Law, an employee’s end of service benefits must be computed based on his or her basic pay. The provisions are as follows (as translated):

Article (11): Benefits at the End of Service

  1. A foreign Employee or Worker who completes (1) one consecutive year of full-time work is entitled to the following end of service incentive based on the Basic Wage:
  2. Twenty-One (21) days for each year of service during the first five years.
  3. Thirty days (30) for each additional year of service.

“The New Employment Law shall apply to your employment if you continue to work for your existing employer until the New Employment Law takes effect.”

Calculation of gratuity at the end of service

When an expat worker in the United Arab Emirates ends his or her job, he or she is entitled to an end of service gratuity.

 If you work for five years, you get 21 calendar days’ basic pay for each of the first five years and 30 calendar days’ basic pay for each year after that. The New Law says that gratuity at the end of the employment period should be based on the number of working days.

It is a significant change from the way things are now, and we don’t know yet if the Ministry of Human Resources and Emiratization will say more about this.

You should know: Unmarried parents, sexual assault, and extramarital relationships are now all covered under a new UAE legislation

There are two forms of employment contracts under current Law:

  1. fixed-term contracts and
  2. unlimited-term contracts.

As stated in this article, all workers will be required to sign fixed-term employment contracts for a maximum of three years under the New Law.

Position under Old Law

If an employee on an unlimited-term contract resigns during the first five years of employment, their end of service gratuity is reduced on a sliding basis. For instance, if they quit between one and three years of work, they get a two-thirds reduction in their gratuity. Their gratuity is lowered by one-third if they resign between three and five years of employment. After five years of service, the entire gratuity would be payable.

Position under New Law

In the case of resignation, there is no provision in the New Law for end of service gratuity reductions. It implies that resigning workers are entitled to receive the entire end of service gratuity payment, provided they have completed at least one year of continuous employment with their company.

HHS Lawyers & Legal Consultants comprises a group of the most significant labour lawyers in Dubai and labour lawyers from Abu Dhabi and other Emirates. We provide a comprehensive range of services, including UAE labour law legal guidance, to help you become a more courteous and responsible employer. Employers must be informed of the employment regulations and effectively comply with them, critical for us. As a result, as UAE labour law experts, we guarantee that you are well-informed on all aspects of this and give you labour law guidance in Dubai.

We have been one of Dubai’s premier labour law companies for more than a decade. Our skilled attorneys will give you outstanding service while adhering to global standards since they completely understand the local legal system and procedures. The unrivaled quality of our service would alleviate you of any responsibilities or discomfort, establishing you as a decent business citizen.

To learn more about the New UAE Law 2022, contact us today.


Hazim Darwish

Hazim Darwish, is a Senior Partner of HHS Lawyers in UAE. Practicing law for almost a decade, he has in-depth knowledge on UAE legislation with particular expertise on legal drafting, contract drafting, labor disputes, family law, and regulatory compliance for business organizations. Hazim Darwish also provides counsel on legal rights and obligations in the UAE to clients, including individuals and businesses subject to investigation or prosecution under Criminal Law by major regulators.