How-to for OFWs

A guide on how to calculate your end-of-service gratuity in UAE

August 11, 2023
TGFM

Navigating the labyrinth of labour laws can be daunting. In the United Arab Emirates, understanding the end-of-service gratuity system is crucial for both employers and employees. Thankfully, the process to calculate this amount has been made easy. Read on to learn how to determine what you’re owed.

1. Introduction to UAE End-of-Service Gratuity

End-of-service gratuity is a compensation for employees who have put in years of work in a company. The amount varies based on several factors like your duration of service, basic salary, and the nature of your job contract.

2. The Tool at Your Service

Dubai Development Authority’s Gratuity Calculator: A simple online tool to figure out your payout. Here’s what you need:

  • Start date
  • End date
  • Basic salary (excluding allowances)

3. The Basics of Calculation

  • Basic Salary is Key: The gratuity is calculated on your basic salary. This does not include allowances like housing, conveyance, or utilities.
  • Tenure Matters:
    • Up to 5 years: Receive up to a 21-day salary payment.
    • Over 5 years: Get 30 days’ worth of basic salary for every additional year.
    • However, remember that any unpaid leave days will be subtracted from this total.

4. Know Your Contract

There are two types of contracts to understand:

  • Limited-term Contract: Typically, for project-based jobs with start and end dates. It isn’t renewed unless specified.
  • Unlimited-term Contract: More flexible and common in UAE, it doesn’t have a set end date.

5. Different Scenarios of Gratuity Calculation

  • If You Resign:
    • Less than 1 year: No gratuity.
    • 1-3 years: 1/3 of 21 days’ basic salary for each year.
    • 3-5 years: 2/3 of 21 days’ basic salary for each year.
    • More than 5 years: Full 21 days’ basic salary for each year.
  • If You’re Terminated:
    • 1-5 years: 21 calendar days’ basic salary for each year.
    • Over 5 years: 30 calendar days’ basic salary for each additional year (capped at two years’ pay).

Remember, unpaid leave days are not included in both scenarios.

6. Key Updates in 2023

This year, the UAE Ministry of Human Resources and Emiratisation (MoHRE) highlighted that unpaid leave days should not be counted in the gratuity calculation. This means a fairer and more transparent system for all.