How to Calculate Gratuity in UAE, Abu Dhabi, Sharjah – GulfExpatsGuide
Gratuity in UAE is the end of service benefits paid to an employee from his company employer as an appreciation token on job termination. UAE labour law states that an employer who performed one or more than one year of continuous job is entitled to severance wage. But, how to Calculate Gratuity in UAE?
Though it becomes critical to calculating gratuity, for those who aren’t well familiar with it; knowing about it (gratuity) will assist you in pinpointing any calculating mistake made by the company. So let’s know about Calculating gratuity in detail through this easy-to-understand guide. How to open a zero balance account in UAE.
Steps Involved to Calculate Gratuity in UAE.
Firstly, it’s essential to know about the factors involved in Calculating Gratuity in UAE.
Contract Type
The first important factor is contract type; usually, there are two (UAE) Limited Contract and Unlimited Contract. Rules for calculating gratuity are different for both contract types.
Basic Salary
Only basic salary is used rather than anything involved like overtime, conveyance, housing, and other services.
Employment Duration
A minimum of one year of continuous employment duration is required for becoming eligible for gratuity.
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How to Calculate Gratuity (Limited Contract)?
Limited Contract
In a limited contract type, an employee is bound to the company he contracted for a certain number of years. An employee, in case, resigns before the end date, isn’t eligible for gratuity.
Gratuity Calculation (Limited Contract)
Employment Duration Gratuity Pay
Less than one year of employment Not entitled or applicable for Gratuity pay
Between one and five years of employment Get total gratuity based on twenty-one days’ wage for each working year.
Five or more years of Employment Get total pay based on thirty days’ wage for each working year.
Gratuity Calculation Example (Limited Contract)
Dh 10,000 Basic Salary
10,000 ÷ 30 = 333.30
So, the daily salary will be Dh 333.30.
Calculating between one and five years of Employment
The daily salary (333.30) x days (21) = 6,936.30 (Approximately Dh7,000)
Calculating five or more than five years of Employment
The daily salary (333.30) x days (30) = 9,999 (Dh9,999)
Unlimited Contract
There is no time or end date boundary in an unlimited contract that binds an employee. However, according to the company rule, one or three months of notice applied.
Gratuity Calculation (Unlimited Contract)
Employment Duration Gratuity Pay
Less than one year of employment Not entitled or applicable for Gratuity pay
Between one and three years of employment Get total gratuity based on (1/3) of twenty-one days’ wage for each working year.
Three to five years of Employment Get total gratuity based on (2/3) of twenty-one days’ wage for each working year.
Five or more years of Employment Get total gratuity based on twenty-one days’ wage for each working year.
Gratuity Calculation Example (Unlimited Contract)
Dh 10,000 Basic Salary
10,000 ÷ 30 = 333.30
So, the daily salary will be Dh 333.30.
The 21 days salary;
The daily salary (333.30) x days (21) = 6,999.30 (Approximately Dh7,000)’
For Employment between 1 to 3 years
1/3 is payable to the employee of (21-Days wage) Dh6,999.30, which is Dh2,333.10.
For Employment between 3 to 5 years
2/3 is payable to the employee of (21-Days wage) Dh6,999.30, which is Dh4,666.20.
For Employment between 5 or more years
Full Dh6,999.30 is payable to the employee.
Important Consideration
If an employee is terminated before his contracted period end date due to breaking rules, he isn’t eligible for gratuity pay (Article 139, Labor Law UAE).
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