How to calculate your gratuity in the UAE

Avoid any errors to ensure you don’t end up out of pocket when you change jobs.

Space
By
Team getthat
August 20, 2017

Avoid any errors to ensure you don’t end up out of pocket when you change jobs

If you’ve been a diligent worker, burning the midnight oil to bring success to your company, the last thing you deserve is to depart without your entitled pay out. Luckily, if you’re more Homer Simpson than Elon Musk and you’ve been sacked or made redundant, you could still be due a severance payment (as long as you haven’t broken Labour Law). And, if you resign, you’re still entitled to gratuity, as long as you’ve worked for the same company for more than one year.

Check your contract
The first thing you need to consider is the type of employment contract you have. Essentially, the calculations for gratuity are different for fixed term (limited) contracts to unlimited (undefined) contracts, where there is no fixed end date.

Use your last salary payment
If you’re fortunate enough to have climbed the ladder in your current job and your salary has increased accordingly, you’ll be pleased to discover that your gratuity will be based on the most recent salary paid into your account.

Get calculating
Fixed-term contract

Less than 1 year of employment in the same company
If you leave work before completing one year of service, you are not entitled to any gratuity.

Between 1 year and 5 years of employment in the same company
You’re entitled to full gratuity based on 21 days’ salary for each year of work.

5 or more years of employment in the same company
You’re entitled to full gratuity based on 30 days’ salary for each year of work.

The maths

Basic salary: Dh10,000

 Step 1. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30

 Step 2. 330.30 x 21 = 6,936.30. Your 21 days’ salary is Dh6,936.30 in gratuity entitlement for each year of employment. Multiply this figure for every year of employment up to 5 years.

If you’ve been employed by the company for more than 5 years, you calculate 30 days’ salary for each year of employment.

 Basic salary: Dh10,000

 Step 1. 330.30 x 30 = Dh9,909. You’re entitled to 30 days’ salary, which is Dh9,909 in gratuity entitlement for each year of service – as long as the total figure does not exceed two years’ total salary figure.

Unlimited term contract

Less than 1 year of employment in the same company
If you leave work before completing one year of service, you are not entitled to any gratuity.

Between 1 year and 3 years of employment in the same company, you’re entitled to 1/3 of the 21 days’ gratuity.

Between 3 year and 5 years of employment in the same company, you’re entitled to 1/3 of the 21 days’ gratuity.

Five or more years of employment in the same company, you’re entitled to full 21 days’ gratuity.

The maths

Basic salary: Dh10,000

 Step 1. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30

 Step 2. 330.30 x 21 = 6,936.30. So 21 days’ salary is Dh6,936.30

 From the Dh6,936,30, only 1/3 is payable if you have worked between 1 and 3 years, so the total gratuity would be Dh2,312.10.

 Only 2/3 is payable if you have worked between 3 and 5 years, so the total gratuity would be Dh4,624.20.

 The full Dh6,936.30 is payable if you have completed 5 years.

These calculations are not to be treated as law and they are for your reference only. For any disputes or further clarification, contact the UAE Ministry of Labour.