General Criteria for Calculating the End of Service Gratuity
With reference to Article132 UAE Labour Law, an employee having spent on year or more in continuous service shall be entitled to an end of service gratuity upon termination of his service consisting of 21 days’ salary for each of the first five (5) years of service and additional 30 days’ salary for each additional year in excess of five years provided the aggregate amount shall not exceed 2 years’ remuneration. The period of service shall be calculated excluding days of absence without pay.
The salary mentioned in the foregoing article as basis for calculating end of service gratuity does not include anything given to the employee in the form of housing, transportation, travel, overtime, representation and any other bonuses or allowances as defined in Article 134.
Additional Criteria in Case of Employee Resignation
In case of resignation, employees bound by an unlimited contract shall be entitled to one third (1/3) of the end of service gratuity set forth in Article 132 for a continuous service of at least one year and three years at most, two thirds (2/3) for three years at last and five years at most, and to the full gratuity for service exceeding five years as provided in Article 137.
Reading further in Article 138, employees under a limited contract shall not be entitled to an end of service gratuity unless service rendered exceeds five years in case of resignation prior to expiry of the contract.
Brief Summary
Illustrative Examples
Assumptions: Employee currently earning a gross salary of 10,000/-(Basic Salary -5000, HRA 2000 and Transportation allowance 2,000)
Scenario no. 1: The employee under an unlimited contract resigned after 3 years of service
The computation would be: (5,000 x 21/30 x 3 x 1/3) = 3,500
Scenario no. 2: The employee under an unlimited contract resigned after 4 years of service
The computation would be: (5,000 x 21/30 x 4 x 2/3) = 9,333
Scenario no. 3: The employee under an unlimited contract was terminated after 4 years of service
The computation would be: (5,000 x 21/30 x 4) = 14,000
Scenario no. 4: The employee under an unlimited contract resigned after 6 years of service
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 1) = 22,500
Scenario no. 5: The employee under an unlimited contract was terminated after 7 years of service
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 2) = 27,500
Scenario no. 7: The employee under limited contract was terminated after 3 years of service prior to expiry of the contract.
The computation would be: (5,000 x 21/30 x 3) = 10,500
Scenario no. 8: The employee under limited contract resigned after 3 years of service prior to expiry of the contract.
The computation would be: not entitled to gratuity
Scenario no. 9: The employee under limited contract resigned after 6 years of service prior to expiry of the contract.
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 1) = 22,500
Scenario no. 10: The employee under an unlimited contract resigned after 27 years of service.
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 22) = 127,500, but the employee is only entitle to a maximum of 2 years' remuneration that is equivalent to 120,000(5,000 x 24).
Reference
https://www.mohre.gov.ae/en/laws-legislation/labour-law.aspx
Disclaimer: The calculations above are for illustrative purposes and reference only. These are not to be treated with finality. For any disputes or further clarification, contact the UAE Ministry of Human Resources and Emiratization.
Scenario no. 1: The employee under an unlimited contract resigned after 3 years of service
The computation would be: (5,000 x 21/30 x 3 x 1/3) = 3,500
Scenario no. 2: The employee under an unlimited contract resigned after 4 years of service
The computation would be: (5,000 x 21/30 x 4 x 2/3) = 9,333
Scenario no. 3: The employee under an unlimited contract was terminated after 4 years of service
The computation would be: (5,000 x 21/30 x 4) = 14,000
Scenario no. 4: The employee under an unlimited contract resigned after 6 years of service
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 1) = 22,500
Scenario no. 5: The employee under an unlimited contract was terminated after 7 years of service
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 2) = 27,500
Scenario no. 7: The employee under limited contract was terminated after 3 years of service prior to expiry of the contract.
The computation would be: (5,000 x 21/30 x 3) = 10,500
Scenario no. 8: The employee under limited contract resigned after 3 years of service prior to expiry of the contract.
The computation would be: not entitled to gratuity
Scenario no. 9: The employee under limited contract resigned after 6 years of service prior to expiry of the contract.
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 1) = 22,500
Scenario no. 10: The employee under an unlimited contract resigned after 27 years of service.
The computation would be: (5,000 x 21/30 x 5) +(5,000 x 22) = 127,500, but the employee is only entitle to a maximum of 2 years' remuneration that is equivalent to 120,000(5,000 x 24).
Reference
https://www.mohre.gov.ae/en/laws-legislation/labour-law.aspx
Disclaimer: The calculations above are for illustrative purposes and reference only. These are not to be treated with finality. For any disputes or further clarification, contact the UAE Ministry of Human Resources and Emiratization.
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