gratuity calculator UAE 2024 New way to calculate

Last Updated on September 15, 2024

The United Arab Emirates (UAE) labor law clearly states that employers are responsible for paying end-of-service compensation to employees based on their years of service. The Gratuity Calculator UAE is developed in line with the provisions of the UAE labor law, enabling you to calculate the gratuity amount you may be entitled to after ending your employment.

Before calculating your gratuity, it’s essential to understand the type of contract you signed with your employer. In the UAE, there are three types of employment contracts:

 1. Limited Contract;

This is a contract signed for a specific duration, such as one or two years. Once your contract ends, you either return to your home country or renew the contract to continue working.

Every time the contract expires, you need to sign a new one if both parties agree to continue the employment relationship. Additionally, you must renew your visa, labor card, and other official documents to work and stay in the UAE.

2.  Unlimited Contract

An open-ended contract that doesn’t require renewal with your employer. You can work and stay in the UAE as long as you wish, but you must renew your residency visa every two years. This contract can be terminated by mutual consent between the employer and the employee.

3. Temporary Contract

Employers may hire employees temporarily for specific projects. when the contract finishes, your contract will expire, but the employer might offer another contract for a different project.

Understanding Limited and Unlimited Contracts:

Suppose you signed a limited contract with your employer for two years. After completing those two years, you need to either return to your country or sign a new two-year contract to continue working. This process can continue as long as both you and your employer agree to it.

Download the UAE Gratuity and Overtime Calculator on your phone 

gratuity calculator in UAE 2024

UAE Labor Law Gratuity Calculation

Not everyone is entitled to gratuity, as there are various terms and conditions for end-of-service compensation. After an unlimited or limited contract expires, the employer must pay the end-of-service benefits to eligible employees.

 Conditions Where No Gratuity is Paid:

• Service Less Than 1 Year: If you leave the job before completing one year of service.
• Dismissal Without Notice: If the employer dismisses you without notice due to reasons such as:
  • Submitting false identity, nationality, or forged certificates/documents to obtain a visa and job.
  • Being under probation and dismissed during or at the end of the probationary period.
  • Committing a fault resulting in substantial material loss to the employer, provided the employer notifies the labor department within 48 hours.
  •  Disobeying safety instructions at work, especially if these instructions are in writing, posted conspicuously, and communicated verbally if you’re illiterate.
  • Defaulting on basic duties under the contract and failing to correct such defaults despite a written warning.
  •  Convit by a competent court of a crime against honor, honesty, or public morals.
  • Revealing any confidential information about the employer.
  •  Drink alcohol or under the influence of narcotics during working hours.
  •  Assaulting the employer, manager, or any colleagues during working hours.
  • Absence from work without a valid reason for more than 20 non-consecutive days in one year or more than seven consecutive days.

Conditions Where Gratuity is Still Paid Despite Dismissal:

• Employer’s Failure to Honor Obligations: If the employer fails to honor obligations towards you as provided in the contract or labor law.
• Assault by Employer: If you or the employer’s legal representative assault you.

 How is Gratuity Calculated in the UAE?

Although our Gratuity Calculator UAE will calculate the accurate amount for you, here’s the formula according to the UAE labor law gratuity calculation:

 For Limited Contracts:

• Service Less Than 1 Year: No gratuity.

Service Between 1 and 5 Years: 21 days’ basic salary for each year of service.

• • Formula: `(21 * Basic Salary / 30) * Years of Service = Gratuity Amount`
  • Example: If your basic salary is AED 3,000 and you’ve completed 4 years:
  • (21 * 3,000 / 30) * 4 = AED 8,400 gratuity`

Service Over 5 Years: 30 days’ basic salary for each year of service.

Formula: (30 * Basic Salary / 30) * Years of Service = Gratuity Amount`

Example: If your basic salary is AED 3,000 and you’ve completed 6 years:

(30 * 3,000 / 30) * 6 = AED 18,000 gratuity`

For Unlimited Contracts:

• Service Less Than 1 Year: No gratuity.
• Service Between 1 and 5 Years: 21 days’ basic salary for each year of service.
• Use the same formula as above.*
• Service Over 5 Years: 30 days’ basic salary for each year of service.
• Use the same formula as above.

Until 2022, the method for calculating gratuity in the UAE differed based on the type of contract, but the government has since unified the approach for all contracts.

Companies in the UAE use the above formula to compute employee gratuities. For each additional month of work, you will receive one day’s remuneration.

Gratuity in the UAE is a provision of federal labor law, so it’s applicable throughout the country, regardless of the organization’s location. If you’re looking for a gratuity calculator in Dubai, you can use the Gratuity Calculator UAE mentioned above, as the labor laws are consistent across the UAE.

Conclusion

The Gratuity Calculator UAE we have developed based on the UAE labor law gratuity calculation. If your employer refuses to pay the gratuity, you can report the issue to MOHRE (Ministry Of Human Resources and Emiratisation)or file a case in the UAE labor court.

Remember: Gratuity is your right under the UAE labor law. Use the Gratuity Calculator to know what you will pay, and don’t hesitate to take action if your employer doesn’t comply with the law.