Understanding the gratuity entitlement is crucial for employees, as it ensures you are aware of the end of service benefits owed to you when you leave your job for good either you are resigning or get terminated. Knowing how to calculate gratuity in UAE can help you plan for the future and ensure you are receiving everything you own.
If you are a UAE Resident and curious about computation for gratuity in UAE, this guide on Gratuity Calculator UAE will make the process much simpler and transparent. In this post, we will guide you through the UAE Gratuity Law, key factors that determine gratuity and how to calculate gratuity in UAE online.
Check your Contract Type:
Important point before starting UAE Gratuity Calculation is to know your contract type, if it is limited term contract or unlimited term contract, because end of service benefits depends on your contract type and is based on the reason for end of service either it is resignation or termination?
- Limited Term Contract: A limited term contract in the UAE is a fixed-term contract and is normally linked to the duration of the UAE residency visa. It will automatically terminate at the end of the term unless earlier resignation or termination by either party or renewed by both parties. An annex of a limited term employment contract is linked here.
- Unlimited Term Contract: An unlimited-term contract is open-ended in nature. It has a defined start date but no fixed end date, making it more flexible for both the employer and the employee. In unlimited term employment contract, the terms and conditions continue until the contract is terminated by one or both parties.
Difference between Resignation and Termination?
Resignation means if employee quit/leave job either before completing his/her contract while Termination means where employer terminates an Employee.
Important Point: Gratuity will always be calculating by basic salary of worker in the UAE.
How to Calculate Gratuity in UAE for Limited Contracts:
No Gratuity without Completing Limited Contract:
It is clearly mentioned in UAE LABOUR LawArticle 138 that if employee has not completed his/her limited contract period as signed in agreement, he/she will not be eligible for any gratuity.
In simple words, if someone signed a limited term contract which mostly is for 2 years or maximum 3 years but resigned after 6
months, 12 months, 14 months or without completing the contract, company will do not pay any gratuity to that worker.
months, 12 months, 14 months or without completing the contract, company will do not pay any gratuity to that worker.
Gratuity for 1-5 Years of Service:
If you have completed your limited contract and it is within 1 to 5 years, you are entitled for 21 day’s basic salary wage for every single year of work.
Gratuity for 5 Years of Service:
If you have completed 5 years of continuous service with your company and have resigned, then for the first 5 years of work you are eligible for 21 days’ basic wage & for the service above 5 years, you will get paid 30 day’s basic wage for each year of service.
What if Company Terminates the Employee under Limited Contract?
In case you have been terminated by your Company and you have not completed your 1 year yet, you will not eligible for any gratuity, but if you worked with the company for more than 1 year and less than 3 years, you will get 30 days of basic salary for No. of years your served before termination.
How to Calculate Gratuity for Unlimited Contracts:
No Gratuity for less than one year of service:
Please keep in mind that gratuity is only applicable when an employee completes 1 year of service with a company, so as
per UAE LABOR Law Article 132, Section 2, if worker resigns with less than a year of service, he/she will not get any gratuity.
per UAE LABOR Law Article 132, Section 2, if worker resigns with less than a year of service, he/she will not get any gratuity.
Gratuity for more than 1 & Less than 3 Years of Service:
If worker resigns and he/she worked between 1-3 Years, he/she should take 1/3rd of 21 days of basic salary for each year of
employment.
employment.
Gratuity for more than 3 & Less than 5 Years of Service:
If worker resigns and he/she worked for more than 3 years but less than 5 years, he/she should take 2/3rd of 21 days for each year of work.
Gratuity calculation for more than 5 Years of Service:
If worker is resigning under unlimited contract after 5 years of continued service, the worker should take 21 days basic salary for every year he/she worked and the 30 days basic salary for additional years after completing 5 years.
What if Company Terminates the Employee?
In case of unlimited contract where the company terminates the worker, 21 days of wages from minimum 1 and maximum 5 years
should be paid to Employee, if employee worked for more than 5 years, he/she will be eligible for 30 Days of Basic wage for each year of his/her service.
should be paid to Employee, if employee worked for more than 5 years, he/she will be eligible for 30 Days of Basic wage for each year of his/her service.
Online Gratuity Calculator:
Many asked us about how our gratuity calculated in UAE by the company, the answer is, please follow below mohre gratuity calculator formula and links as per your contract types.
Gratuity Calculator Dubai Formula:
UAE Gratuity Calculation Formula 1:
Basic Salary ÷ 30 (days in Month) x 21 (basic salary days) x 2 (years of service) Example:3000 ÷ 30 x 21 x 2 = 4200
How it Works?
3000 ÷ 30 = 100 your daily Wage is 100 AED
100 x 21 = 2100 so, your 21 days of basic wage is 2100.
Now Multiply your basic wage with the No. of years you work : 2100 x 2 = 4200
UAE Gratuity Calculator 2025 Formula 2:
Basic Salary x 21 days x No. of years of service/30 Example: 3000 x 21 x 2/30 = 4200 AED
If there is any dispute between worker and company for gratuity payment or amount payable to the company, such case should
be put to the Ministry of Labour office (MOHRE/free zone) for investigation.
be put to the Ministry of Labour office (MOHRE/free zone) for investigation.
FAQs of Computation for Gratuity in UAE:
Q: Can company deduct any payment from the gratuity payable to the worker?
Yes, the company (employer) may deduct any amount due and payable to the employee (worker) to the employer (company) from his/her gratuity payment and pay for the balance to the employee.
Q: Shall an employee be entitled to gratuity if he/she died?
Yes, in the event of a worker’s death, the employer (company) must pay the end-of-service gratuity to employee beneficiaries (heirs).
Q: What is the maximum Gratuity that we can get?
As per UAE LABOUR LAW, Article 132, maximum gratuity amount for employee cannot exceed 2 years’ gross salary.
Q: What is the worker entitled to at the termination of his/her contract?
The worker (employee) at the termination of his/her employment contract will be entitled for to the following:
1: A notice period, or any amount due in lieu of the notice period, only in case of unlimited contract.
2: Compensation (payment/reward) for the unreasonable dismissal if the contract was terminated by the company (employer) for unreasonable cause, only in-case of unlimited contract.
3: If employee is working under limited contract, compensation equivalent to the period until the end of the contract, or three month’s salary whichever is greater.
4: Payments equivalent to the balance of un-utilized leave or any part thereof.
5: Payments for overtime or any other pending balance or salary.
6: End of service benefits, gratuity.
Q: Can I get 3-month salary in case of termination?
Yes, if you are terminated for reason other than mentioned in UAE LABOR LAW Article 120, you are eligible for 3 month’s
compensations.
compensations.
Q: Will absence be calculated in Gratuity?
The day of absence from work without pay shall not be included in calculating the time period of service. However, if the employee (worker) completed 1 year in service he/she will be entitled to a gratuity for the fraction of the year proportional for the part of the year he spent in company if he has completed 1 year in continuous service.
What is Voluntary End of Service Benefits Scheme:
A voluntary scheme through which end-of-service benefits of employees are invested in well-proven investment funds with good record. The scheme aims to provide investment returns to employees on their end-of-service benefits.
To know more about saving scheme click below link. https://www.mohre.gov.ae/assets/f66ecbb7/savings-scheme-document-en.aspx
The guide gratuity calculator UAEends here, hope you’ve now learned how to calculate gratuity in UAE? if not and still have question about gratuity calculator Dubai, feel free to ask your questions in below comment box.
