Every employee is given with certain benefits which were called end of Service Benefits or Gratuity, laws about gratuity calculation as well as who get this, how much, all of details were defined in UAE labor laws. It is really crucial that you know how Gratuity is calculated according to UAE labor laws so that if any error is happened while calculation of your gratuity by company/employer you could identify it and hence in this way any decrease in Gratuity amount could be reverted. The companies in UAE follows a Labor laws set by UAE government even companies residing in Free Zone of UAE also mention UAE labour laws. Gratuity Calculation is only be done easily if you knows the laws well also understand all the different scenarios of Gratuity Calculation. In below guide i’ll do my best t explain all aspects of Calculation with reference to UAE labor laws. So lets start with some basics of Gratuity definition define by labor laws of UAE.
Gratuity in UAE Labour Laws:
The article number 132 of labour laws define Gratuity as belows:
The worker who spend at least one year or more year continuously on Job shall be given with end of service gratuity in case of termination or resignation. Absentee days were not calculated but paid leave is calculated.
Gratuity is calculated on the basis of last Drawn wage.
Here how the end of service benefits gratuity is calculated
1 – The wage of 21 days for each of the first five years of service.
2 – The wage of 30 days for every additional year.
Always provided that the maximum gratuity does not exceed the wage of two years. Means Maximumm limit of Total Gratuity = Two Years Wage. Above are some basis of Gratutiy laws but I’ll explain all articles related to Gratuity in Future posts. Now lets go directly to calculation of benefits in case of Unlimited Contract:
Notice that these calculations of gratuity were depend on whether you’re on a limited contract or of unlimited contract.
Calculation of Gratuity Unlimited Contract
I disuss here almost 8 situations with all rules applicable situation you can see whether you will be able to fit on these below situation and can easily calculate you Gratutiy:
If Employee Resigns Before completion 1 year:
Under unlimited contract if employees get ready to resigns from his job before completing his 1st year he is not applicable to any kind of Gratuity or End of service benefits according to labour law.
Resignation from job more than 1 year but less than 3 years:
Any employee of company wants to resigns he complete 1 year of service but not more than 3 years he/she is eligible to get 1/3rd of 21 days basic salary for every year of his/her service.
Basic salary = AED 11,000 per month
Date of Join = 01-01-2012
Ending date = 31-03-2013
Total Working days = 455 days
Total Y = 1.25 years
21 days’ Basic salary = AED 7,700
Wages per day = AED 11,000*12/365= 361.64
Amount of wages for number of years: 21*361.64*1.25 = 9,493.05
Gratuity Amount: 1/3*9,493.05 = 3,164.5
Resignation from job more than 3 year but less than 5 years:
If worker/employee is employed against unlimited contract and complete 3 years of service but resigns before completing 5 year than he/she will be qualified for gratuity amount of 2/3rd of the 21 days basic salary for each year of his/her service.
Basic salary >AED 10,000 per month
Joining date > 01-01-2010
End date > 31-03-2013
Total number of days worked > 1,186 days
Total number of years worked > 3.25 years
21 days’ Basic salary > AED 6904.1
Wages per day > AED 10,000*12/365= 328.76
Amount of wage for number of years > 21*328.76*3.25 = 22,433
Gratuity Amount> 2/3*22,433 = 14,955.75
Resignation from job more than 5 year:
In this case any employee on unlimited contract completes 5 year of service and after that if he/she resigns from his job than gratuity amount 21 days basic salary is given. But service after 5 years is eligible gratuity for 30 days of basic salary amount.
Basic salary > AED 12,000 per month
Joining date > 01-01-2008
End date > 31-03-2014
Total number of days worked (31-03-2014-01-01-2008+1)= 2281 days
Total number of years he worked>2281/365= 6.25
21 days’ Basic salary > 394.52*21= AED 8,284
30 days’ basic salary > 394.52*30= AED 11,835.6
Wages per day > AED 10,000*12/365= 394.52
Total amount gratuity> 21*394.52*5=41,424.6+(2,218/365-5)*30*328.76=54168 AED
Calculation of Gratuity limited Contract
For any reason if employee is want to Quit from job in UAE he/she submit a resignation application to his/her sponsor or company. As resignation is different thing for limited period contract from unlimited period contract. It is good to discuss their aspects separately the following things must be consider while giving resignation. The most common resignation problem is calculation of end of service benefits or Gratuity, below we also address this problem. Resignation rules were governed by ministry of labour UAE same as gratuity calculation is also handled by MOL, Uae.
See this post How to Calculate Gratuity on Limited labour contract in UAE.