How to Compute End Service Benefits or Gratuity Pay





Expats are entitled to receive end service benefits after working for an employer in the UAE. If you are currently working in this country, this is something you need to be aware of. Some domestic workers and expats here miss this information because they don’t know what’s all about it. They think that after the contract with employers, the connection ends without receiving any value from the business relationship they built together.

Well, it’s good news for you if you are new to the country. You can now claim your End Service Benefits or Gratuity Pay after your long years of service to your boss.

Your gratuity pay is not something you shouldn’t leave out as this is one of the most important parts of your employment (apart from your salary) especially if you are aiming to go back to your home country after years of spending your life here in the UAE. This is a benefit you are entitled to.

For you to exercise and claim this benefit, you need to be knowledgeable about it because if not, similar to employers keeping your passport, they might use your lack of awareness to their advantage. Also if you are not aware of your Gratuity, your employers might not give the right amount you should receive in exchange for your service. To help you out, we gathered all related information about gratuity pay in UAE in this blog.

What is Gratuity Pay?

Gratuity pay is a benefit you receive after long years of service to your employer in the UAE. That’s the simplest way to describe your end service benefit.
To support your understanding of it, here are some of the things you shouldn’t miss out on.

Who is entitled to receive gratuity pay?

Anyone who is employed in the private or public sector in the UAE is entitled to receive his/her gratuity pay.

Whether you are an employee in a private sector or you are serving the government of the UAE, you have the right to receive your end service benefits. It doesn’t matter who your employer is. The name of the company is not a big deal because this policy covers all businesses regardless if it’s private or public.

End of Service Benefits For Private Employees

Now, let’s talk about the provisions for end of service benefits for private employees. This is in accordance with what the UAE Labor Law. The government of the UAE states the same regulations on its website. Here are the provisions you need to be mindful of:

• Gratuity pay is not given to employees who resign right before they complete one year of service of a particular employer.
• To be able to qualify for gratuity pay, an employee needs to complete one year of continuous service. If he/she resigns after a year but before two years, he/she is still entitled to receive benefits equivalent to a fraction of the year.
• The calculation of the end of service gratuity pay is based on the last wage or the basic salary of the employee entitled to the benefit. Housing, utilities, conveyance, furniture, or any allowance should not be included in the computation. We will discuss this further in this blog.
• If the employee owes money to the employer, the employer has the right to deduct the amount from the employee’s gratuity pay.

End of Service Benefits For Public Employees

On the other hand, if you are a public employee in the UAE, there are different provisions when it comes to the end of service benefits. Here are they:
• The expat must complete at least one year of service for the government or federal entity.
• The calculation of benefits for public employees differs from private employees. If the public employee reaches 5 years of service, his/her benefit is equivalent to his/her one-month basic salary for each year.
• For the next 5 years, the employee is entitled to receive 1 ½ of his/her basic salary for each year on the basis of the average basic salary for the last 5 years.
• Thereafter, an employee may get two month’s basic salary for each year on the basis of the average basic salary for the last 5 years.

Type of Contract under the UAE Labor Law

You might be curious as to why you need to know the types of contracts when we are talking about gratuity pay. That’s because you need to know what contract you are under to compute your own benefit. You have to be aware of how employers calculate the end of service benefits so you would know if you are receiving the right amount or not. You can use this as evidence against your employer in case he/she will not give you the correct amount of benefits.

Here are the types of contracts you should know:

  • Limited Contract – this is a form of contract with fixed terms. This means that you and your employer agreed to work for a specified period of time, for instance, 2 years. If you file your resignation before the contract date, your employer may impose a labor ban on you and ask for compensation in exchange for the damage you’ve caused.
  • Unlimited Contract – this is a contract without fixed terms. There is no specified period of time as to when your employment will end. If you resign, you need to render one to three months of notice period before the contract terminates. Else, your employer may take action against your negligence.

Computing Gratuity Pay Under A Limited Contract

In general, Article 134 of the UAE Labor Law says that the “end of service gratuity pay shall be calculated on the basis of the last wage dues to the monthly, weekly, and daily-paid workers.” The allowances are not included based on the provisions stated a while ago.

If you are dismissed from work for any employment violation stated in Article 120 (examples are forging of documents and false identity) or you left work without giving notice to your employer, you won’t be entitled to any gratuity pay at the end of your employment.

The following applies when you are calculating your gratuity pay under a limited contract:

• No gratuity pay for services for less than 1 year.
• Full gratuity pay based on 21-day salary for each year of service for services for more than 1 year up to 5 years.
• Full gratuity pay based on 30-day salary for each year of service for services for more than 5 years.

So for instance, if your basic salary is AED 15,000 and you reached more than 5 years of service, this is what you are going to get:
AED 15,000 for 30 days.
AED 15,000 x 5 years = AED 75,000 as gratuity pay.

Computing Gratuity Pay Under An Unlimited Contract

• No gratuity pay for services for less than a year.
• 1/3 of 21-day gratuity pay for services rendered from 1 to 3 years.
• 2/3 of 21-day gratuity pay for services rendered from 3 to 5 years.
• Full 21-day gratuity pay for services rendered for more than 5 years.

So, for instance, if you worked for 4 years with AED 15,000, here’s what you are going to get.

AED 15,000 / 30 days = AED 500 per day
AED 500 x 21 days = AED 10,500
AED 10,500 x 0.66 (2/3) = AED 6,930 as gratuity pay.

Why is gratuity pay important?

You are receiving gratuity pay for good reasons. First, it represents your loyalty to your employer. Those who only provided their services for less than a year are not entitled to it but those who served for long years can get a significant amount of benefit. It’s a big help for expats who are planning to retire after working here in the UAE.

If you have plans to travel, go back to your home country to build your business, permanently retire from a job, or similar other plans, you can use your gratuity pay to do it all.

The UAE Labor Law stated all the facts with regards to your end of service benefits. If your employer refuses to pay you, you can immediately raise your concern to the Labor Office and go to a Labor Court if nothing happens after you file the complaint.

But, before you do this, it is important that you are aware of the laws regulating the benefit. If you are not familiar with any of it, the chances of losing the case are high. So, take time to compute your gratuity pay and don’t forget to share this with your family and friends!

Disclaimer: UAELabour.org is an informational site only and should serve as a guide. For updated details and policies, always contact proper authorities for assistance. If you are facing challenges at your work, please contact the Ministry of Human Resources and Emiratisation (MoHRE) or previously known as UAE Ministry of Labour for guidance. You may also seek help from a lawyer regarding your case.

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