Thursday 25 April 2019 (UAE)

Gratuity calculation in Abu Dhabi, Dubai, UAE

Gratuity calculation in Abu Dhabi, Dubai, UAE

Guide to how to calculate final gratuity salary payment, severance pay, (or annual bonus as some might call it) in Abu Dhabi, Dubai, UAE when you resign, or get fired, or 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. Your HR department or PRO is not necessarily an authoritative source of information and opinion - remember that they are paid by the employer to do their job, not by the employee.

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
Termination, resignation, being fired - what's the difference?

Note that a resignation is not something your employer can choose to accept or not. He might be able to negotiate or try to manipulate you into changing your mind, but his refusal to accept a resignation is meaningless (legally) if you want to terminate your contract. Of course there are consequences to your decision but you do have the choice to terminate a contract whenever you like. Just as your employer does.

Limited contract holders shorter than 1 year
Unlimited contract holders working less than 1 year
Limited contract holders (or fixed term contracts) longer than 1 year
  1. Did you complete your contract? If yes, you are entitled to 21 days salary for every year of employment less than 5 years, and 30 days salary for each year of employment over 5 years, up to a maximum of 2 years salary.
  2. If you did not complete your contract, then you get nothing if you were employed less than 5 years, otherwise the full amount according to the calculation in step 1.
Unlimited or indefinite contract holders longer than 1 year
  1. Were you terminated by your employer, fired, or did you resign? If terminated or fired by your employer, you should be entitled to the full amount of gratuity with the same calculation as for limited contract holders. If you resigned, then probably not. If you think you can negotiate a better deal than the calculation below, do it before you resign (and get something in writing), it is unlikely your employer will do you any favors after you resign.
    • If you were asked to resign, and you agreed because you felt like you had no choice, then you still resigned, even if it did not feel like a voluntary resignation. An involuntary resignation is not the same as being fired or terminated by your employer, and that will probably make a difference when it comes to gratuity payments. Which appears to be a financial incentive for employers to encourage you to resign when they don't want you any more.
  2. Did you resign (Article 117 of the Labour Law - "... left his work at his own option ..."), and give the correct notice period (usually 30 days)? If yes, then the amount is according to the following:
  3. If you did not give the correct notice period, then no gratuity entitlement unless the employer has not fulfilled their obligations according to the UAE Labour Law, or the employer has assaulted the employee (Article 121 conditions for permission to leave employment without notice). You might have to file a case with the Ministry of Labour in the UAE to claim your gratuity in this case, and they might not agree with your claim.
Additional notes on calculating severance pay
Confusion and differences between limited and unlimited contracts
Article 138 clarification (minimum 5 years employment on limited contracts?)

This information related to limited contracts only, not unlimited (or indefinite) contracts.

Other End of Service benefits due to employees
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. Different sources of what appears to be the original text might have slightly different wording, which might or might not be important.

Federal Law No 8, for 1980, on Regulation of Labour Relations

Chapter VII: Termination and Severance Pay

Section I: Termination of Employment Contract

Article 113

The employment contract is deemed to be terminated in any of the following cases:

ARTICLE 117

  1. The employer and employee may terminate the employment contract with unlimited period, for a valid reason at any time after conclusion of the contract by written notice duly given to other party, thirty days at least prior to termination.

Section II: Severance Pay

Article 132

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:

  1. 21 days' wage for each of the first five years of service.
  2. 30 days' wage for each additional year of service provided always that the aggregate amount of severance pay should not exceed two year's wage.

Article 133

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.

Article 134

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.

Article 135

An employer may deduct any amounts owed to him by a worker from the latter's severance pay.

Article 136

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.

Article 137

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.

Article 138

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.

Article 139

A worker shall forfeit entitlement to his entire severance pay in any of the following two cases:

  1. If he is dismissed from service for any of the reasons specified in Article 120 hereof or if he abandons his employment in order to avoid being dismissed in accordance with that Article.
  2. If he abandons his employment of his own accord, otherwise than in either of the two cases specified in Article 121 hereof, without notice (in the case of indefinite term contracts) or before completing five years of continuous service (in case of definite term contracts).

Article 140

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.

Article 141

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 Wednesday 14-Aug-2013. Page development 4L 5C.
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