Home Tips How to Calculate Your Gratuity or “End of Service” Pay in UAE

How to Calculate Your Gratuity or “End of Service” Pay in UAE

If you have worked in the same job for at least one year, then you are entitled to gratuity pay. The UAE Labour Law states that a worker “having spent one year or more in continuous service shall be entitled to an end-of-service gratuity upon the termination of his service” (Article 132).

Knowing how to calculate your gratuity pay is very important. It enables you to check if your employer is giving you the right amount when you leave the company. In this article, we will discuss how to estimate your end-of-service pay, based on your contract type and years of service.

Do you know how much your end-of-service pay will be?

Guide to Calculating Your Gratuity Pay as per UAE Labour

Your end-of-service pay is computed based on the most recent salary paid to your account. Article 134 mentions, “…end of service gratuity shall be calculated on the basis of the last wage dues to the monthly, weekly, and daily-paid workers.” It does not include allowances or bonuses.

If you have been terminated from your job, you are still entitled to gratuity pay. However, Article 139 mentions that you will not receive it if you: “(a) are dismissed from service for any of the reasons set forth in Article 120 (i.e. adopting a false identity, forging documents, etc.); and (b) leave your employment of your own accord and without notice.”

Types of Contracts
The type of contract you have will also determine your gratuity pay. The two basic types of contracts in the UAE are limited contracts and unlimited contracts.

As the term suggests, a limited contract is a “fixed term” contract where you agree to work with a company for a specific number of years. If you resign before the set “end date,” you may face a labour ban or even be asked to pay compensation to your employer.

In contrast, an unlimited contract does not include a specific period and has no end date. In this case, either the worker or employer has to give a one-month up to three-month notice period before terminating the contract.

Learn how to compute your end-of-service pay.

Calculating Gratuity Pay for Limited Contracts
The following rules apply for those with limited contracts:

  • Less than 1 Year of Service – No gratuity pay
  • 1 Year to 5 Years of Service – Full gratuity based on 21-day salary for each year of service
  • More than 5 Years of Service – Full gratuity based on 30-day salary for each year of service

For example, if you have a basic salary of AED 12,000 and worked for 3 years

AED 12,000 / 30 days = AED 400 (daily wage)
AED 400 x 21 days = AED 8,400 (21-day salary)
AED 8,400 x 3 years = AED 25,200 (gratuity pay)

…You are entitled to an end-of-service pay of AED 25,200.

Calculating Gratuity Pay for Unlimited Contracts
Meanwhile, the rules for unlimited contracts are as follows:

  • Less than 1 Year of Service – No gratuity pay
  • 1 Year to 3 Years of Service – One third (1/3) of 21-day gratuity pay
  • 3 Years to 5 Years of Service – Two thirds (2/3) of 21-day gratuity pay
  • More than 5 Years of Service – Full 21-day gratuity pay

For example, if you have a basic salary of AED 12,000

AED 12,000 / 30 days = AED 400 (daily wage)
AED 400 x 21 days = AED 8,400 (21-day salary)
AED 8,400 x 0.33 = AED 2,800 (one third gratuity pay)
AED 8,400 x 0.66 = AED 5,600 (two thirds gratuity pay)

…You are entitled to AED 2,800 if you worked between 1 and 3 years; AED 5,600 if you worked between 3 and 5 years; and AED 8,400 if you worked for more than 5 years.

Knowing how to calculate your gratuity pay can help you avoid future problems.

Knowing how much you will receive upon the end of your service can help you avoid any future problems or misunderstandings with your employer. So take the time to learn how to calculate your gratuity pay as early as today!

DISCLAIMER: The topics presented in this article are for information-sharing purposes only. They may be used as personal guide, but they should not be used as basis for actual labour concerns or legal proceedings. To learn more about gratuity pay and the latest labour updates, please visit the Ministry of Human Resources and Emiratisation or MoHRE official website.

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