Gratuity is an end-of-service benefit that an employee working in the UAE receives after completing a minimum term of one (1) year in employment. It is a one-time monetary benefit that the employee receives as a token of appreciation for the services in the organization. This amount can be used for making an investment in the UAE. The gratuity amount usually depends on a number of factors, as mentioned below:
These are the factors that influence gratuity calculation in UAE.
In the UAE, there are two types of employment contracts – limited contract and unlimited contract. Depending on the type of contract, the rules for calculating the gratuity amount are different.
While calculating the gratuity amount in UAE, only the last basic salary drawn by an employee is taken into consideration. All other bonuses and allowances, such as housing, conveyance, overtime, etc., are not included in the gratuity calculation.
Please note that the gratuity calculator assumes that there is a continuous service between the period of the first and last working day. In other words, the one-year employment period must not include the time period when an employee was absent from work without pay during his/her period of service.
A gratuity calculator is a financial tool that helps employees in the UAE to get an estimation of the gratuity amount they will receive when they quit their job. It is a beneficial tool to ascertain the gratuity amount if you are planning to leave the organization. The gratuity calculator is simple to use and functions on the standard gratuity calculation method used in UAE. As per the UAE labor laws, the gratuity calculation is based on the type of employment contract, i.e., limited contract and unlimited contract. Let us see how to calculate the gratuity amount based on the types of employment contracts in the UAE.
In a limited employment contract, an employee agrees to stay with the company for a certain number of years and set a date. In case the employee resigns before the agreed time period, he/she can get a labor ban imposed on them, lose their labor rights, or even be liable to pay compensation to their employer. The gratuity calculation for the employee in a limited contract will be on the following rules:
Let us take an example to understand this a little better.
Let’s assume that an employee’s basic salary is AED 15,000.
So, their per day wage will be = 15,000/30 = AED 500
To calculate the gratuity amount of the employee, we need to multiply the per day wage by either 21 or 30 ( based on the duration of their service in the company), 500*21 = 10,500. So, the 21 days of salary would be AED 10,500. This amount will be received by the employee for each service year.
Please note that the total gratuity amount for employees working for 5 years or more should not exceed more than the total salary amount of two years.
In the unlimited employment contract, there is no specific period of years where the employee has to work for the organization. Generally, in this type of contract, an employee has to serve a 1 to 3 month notice period before leaving the organization. The calculation, in this case, will be on the basis of the duration of service.
Here is an example to understand it better:
Let’s assume that an employee’s basic salary is AED 15,000
So, the employee’s per day wage will be = 15,000/30 = AED 500
The 21 days of salary becomes = 21*500 = AED 10,500
Depending on the years of service, one-third or two-thirds of the 21 days of salary (10,500) will be gratuity pay for the employee in an unlimited contract. For employees with more than 5 or more years of service, the 21 days of salary will be calculated for the first five years and additional 30 days of salary for each month after 5 years of service.
Follow these steps to calculate gratuity online using the Zimyo gratuity calculator: