This is only a broad guideline and does not represent the UAE law. Please refer to the concerned authorities and your lawyer for accurate information.
Calculating your end of service gratuity is something that comes up very frequently in conversation between Dubai residents? And why not? It is extremely important to be aware of the rules for calculation of gratuity so that one can clearly manage one's financial plans and also be up to speed in case the situation arises.
The starting point is the type of contract one has with his or her employer. There are 2 types of contracts and yours will fall into one of the types. Either an unlimited contract or a contract for a limited time. Before we get into the details of gratuity let us first differentiate between the 2 types of contracts.
A limited contract is one where both parties have agreed that the contract for employment is for a set number of years with a start and end date. In this case, the employee is not allowed to resign prior to the end of the contract. An unlimited contract as the name suggests is for an unlimited number of years and therefore has no end date.
An employee is eligible for end of service gratuity after completing a minimum term of 1 year with the employer. The below applies to onshore companies only. Free zones may follow their own set of rules.
Gratuity in case of a limited contract
Service between 1 and 5 years
Gratuity is calculated at 21 days basic salary multiplied by number of years in employment
Service between 3 and 5 years
Gratuity is calculated at 30 days of basic salary multiplied by number of years in employment
Gratuity in case of an unlimited contract
Service between 1 and 3 years
Gratuity is calculated at one third of 21 days basic salary multiplied by number of years in employment
Service between 3 and 5 years
Gratuity is calculated at two thirds of basic salary multiplied by number of years in employment
Service beyond 5 years
Gratuity is calculated at full 21 days of basic salary multiplied by number of years for the first 5 years. thereafter gratuity is calculated at full 30 days of basic salary multiplied by number of years in service for the years after the first 5 years.
