Gratuity calculation in Abu Dhabi, Dubai, UAE
Guide to how to calculate final gratuity salary payment (or annual bonus as some might call it) in Abu Dhabi, Dubai, UAE when your job is terminated, based on federal UAE Labour Law information.
This should not be read as any sort of legal document or interpretation, it is only our opinion of what we understand of the UAE Labour Law and should not be assumed to be accurate or correct. Consult the UAE Labour Department or a lawyer in the UAE to get authoritative or professional information.
Some job categories are not covered by the UAE Labour Law - maids and other domestic servants for example, which means they are not automatically entitled to a gratuity payment irrespective of years of service.
Maids and domestic workers in the UAE - gratuity update
Limited contract holders (or fixed term contracts) longer than 1 year
Limited contract holders shorter than 1 year
Unlimited or indefinite contract holders
Additional notes on calculating severance pay
Confusion and differences between limited and unlimited contracts
UAE Labour Law on gratuity and severance pay
Below is the original text of the UAE Federal Labour Law with the section on gratuity payments. Articles 132, 137, and 138 refer specifically to the calculation of gratuity.
Federal Law No 8, For 1980, On Regulation of Labour Relations
Chapter VII: Termination and Severance Pay
Section II: Severance Pay
A worker who has completed one or more years of continuous service shall be entitled to severance pay at the end of his employment. The days of absence from work without pay shall not be included in calculating the period of service. The severance pay shall be calculated as follows:
A worker shall be entitled to severance pay for any fraction of a year he actually served, provided that he has completed one year of continuous service.
Without prejudice to the provisions of laws that grant pensions or retirement benefits to employees in certain firms, severance pay shall be calculated on the basis of the wage last due for monthly, weekly and daily paid workers, and on the basis of the average daily wage referred to in Article 57 hereof for those paid on piecemeal. The wage used as a basis for calculating severance pay shall not include whatever is given to the worker in kind, housing allowance, transport allowance, travel allowance, overtime pay, representation allowance, cashier’s allowances, children education allowance, allowances for recreational and social facilities, and any other bonuses or allowances.
An employer may deduct any amounts owed to him by a worker from the latter's severance pay.
For the purposes of Article 132, no severance pay shall accrue for the employment cases that preceded the enforcement of this Law except where the worker is a National. This, however, shall be without prejudice to any rights acquired by the worker under the repealed labour laws, the employment contract, or under any agreement, regulations or work rules of the firm. In the event of the worker's death, his severance pay shall be paid to his legal heirs.
Where a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article. Such a worker shall be entitled to two thirds of the said severance pay if his continuous service exceeds three years up to five years, and to the full severance pay if it exceeds five years.
Where a worker under a definite term contract abandons his employment at his own initiative before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years.
A worker shall forfeit entitlement to his entire severance pay in any of the following two cases:
Where a firm has a provident fund for the workers and the rules of the fund stipulate that whatever the employer pays into the fund for the worker's account is in discharge of his legal obligation in respect of severance pay, the worker shall be paid the savings balance in his account or the severance pay due under the Law, whichever is the greater. Where the rules of the fund do not stipulate that the amounts paid by the employer are in discharge of his legal obligation toward the severance pay, the worker shall receive whatever is due to him in the provident fund in addition to the statutory severance pay.
Where a firm has a retirement, insurance or a similar scheme, a worker who is entitled to a retirement pension may opt for treatment under the said pension or severance pay or under the pension or insurance scheme, whichever is more advantageous to him.
Last update Monday 10-Sep-2012. Page development 4L 5C.