Employees in the UAE must know what to do and what to expect once their contract terminates. In this regard, one of the most expected is the gratuity payment. So, as an employee, you should use a gratuity calculator UAE to determine how much you will receive.
In this article, we are going to explain how to calculate gratuity. Also, we will guide you step-by-step on a gratitude calculator and what essential information you need.
- Do you know what are the types of contracts in the UAE?
- Understanding what the gratuity pay is
- Is there an eligibility criterion for gratuity pay?
- See how to calculate gratuity pay for a limited contract
- Steps to calculate gratuity pay for unlimited contract
- What about the gratuity pay under other types of employment?
- The basic information for your gratuity calculator UAE
1. Do you know what are the types of contracts in the UAE?
Before starting with the gratuity calculator UAE, there are several aspects you need to know first. And, since gratuity is based on the type of contract, you have to know the types of contracts in the UAE.
As you may know, to be able to work in the UAE you must have your valid residence visa by the mol.gov.ae visa and a UAE employment contract.
And, in the UAE there are a variety of types of employment. For example, some individuals work part-time in the UAE. Others may have full-time employment, and others may work as temporary or contract employees.
Therefore, each type of contract has a specific procedure to calculate gratuity. Nevertheless, most contracts for full-time employees are limited or unlimited.
1.1 Limited contracts in the UAE
A limited contract, also known as a fixed-term contract, has a set end date. Thus, the employee agrees to work for the employer for a certain period.
This type of contract does not allow much flexibility, and for this reason, is not the most popular among employees. In some cases, if the employee resigns before the end date, he or she may face a UAE Travel Ban.
1.2 Unlimited contracts in the UAE
An unlimited contract does not have a set end date. Therefore, it is an open contract and the employee can work in the company for as long as they want.
Although this type of contract was the most commonly used in the UAE, the legislation surrounding changed. According to the latest news, unlimited contracts have to change to limited contracts. And, employers cannot provide unlimited contracts to employees anymore.
Thus, all contracts in the UAE must know to have a fixed duration. Previously, the law requested that private sector contracts had a fixed duration of three years, but now the three-year cap on private sector contracts has been removed.
2. Understanding what the gratuity pay is
Gratuity pay is the payment the employer has to make to the employee for the services provided. Thus, it is an end-of-service benefit.
However, the total gratuity calculator uae will be based on the following factors:
- The type of contract.
- Years of service in the company.
- Basic salary.
- Reason for termination.
Thus, an employee must be well-informed about the differences between a limited and unlimited contract to be able to proceed with the gratuity calculator UAE.
Also, if you do not know your basic salary, you can request an employee salary certificate.
3. Is there an eligibility criterion for gratuity pay?
To receive the gratuity pay, the employee has to comply with the UAE Labour Law. However, this varies depending on the type of contract.
In the case of full-time employees, they get the gratuity pay if they have completed one year of continuous service.
Both Emirati nationals and foreign employees are entitled to gratuity pay. But, it is important to understand in which cases they cannot use the Dubai salary calculator because they are not entitled to the payment.
3.1 In which cases an employee is deprived of the gratuity pay?
When it comes to gratuity calculation UAE, it is important to understand in which cases it is not necessary.
According to the mol uae ae, an employee is not entitled to gratuity pay if the full-time employee has worked for less than a year in the company.
In the previous law, the employee did not receive the gratuity pay if the employee dismissed his or her under fair reasons. But with the new regulation, even if the employer has just reason to dismiss the employee, he or she has to receive the end-of-service benefits.
4. See how to calculate gratuity pay for a limited contract
To start with the gratuity calculator uae under a limited contract you need to know your basic salary and the number of years you have served in the company.
Here we have the information for each case:
- Less than a year of service: no gratuity payment.
- Between 1 and 5 years of service: 21 days of salary for each year of service.
- More than 5 years of service: 30 days of salary for each subsequent year of service.
In the case of those that have more than 5 years of service, gratuity pay cannot exceed two years’ wage.
4.1 Easy calculation of gratuity for a limited contract
According to mol gov.uae, an employee can calculate the gratuity pay easily. Here we have an example to illustrate it better.
If you are a full-time employee that has a basic salary of AED 10,000 you have to follow the next steps for calculating gratuity:
- Determine your daily wage: divide your basic salary by 30. In this case, AED 333,30 is your daily wage.
- Calculate the 21 days of salary: as stipulated by the law, your gratuity pay for the first five years of service is a wage of 21 days. So, multiply your daily wage by 21: AED 6,999.30
- Calculate your gratuity for the first five years: if you have been working for a year, you will receive AED 6,999.30 as we calculated before. And, you have to multiply this amount by the following years up to five.
- Determine your 30 days of salary: if you have been working for more than 5 years, your wage for 30 days will be AED 10,000. Then, you have to multiply this amount by the subsequent years of service.
As you can see, the gratuity calculator 2022 is very important for those that are under a limited contract.
5. Steps to calculate gratuity pay for unlimited contract
What happens after an unlimited contract work contract terminates? An employee or an employer may terminate the unlimited contract with a valid reason.
In this case, the employee may use a gratuity calculator uae to determine his or her end-of-service benefit.
According to the mol gov ae website, if the employee is under an unlimited contract that has been converted to a limited contract, the calculation will be based on the specifications for the end-of-service of a limited contract.
But, if the employee terminates the unlimited contract before it was converted to a limited contract, the calculation will be based on the old law, which states the following:
- Less than a year of service: no gratuity payment.
- Between 1 and 5 years of service: 1/3 of the 21 days of salary for each year of service.
- More than 5 years of service: 2/3 of the 30 days of salary for each subsequent year of service.
6.1 An example of how to calculate gratuity under an unlimited contract
If your Labour contract in the UAE is unlimited, and you resign or your employer terminates it before converting it to a limited contract, the calculation has to be as the following example if your basic salary is AED 10,000
- Calculate your daily wage by dividing it by 30: AED 333,30.
- Multiply your daily wage by 21: AED 6,999.30.
- Get 1/3 of the 21 days of salary: AED 2,333.10. This will be your end-of-service for the first year and multiply it by the subsequent years up to 5 years of service to obtain the total gratuity.
- Get 2/3 of the 30 days of salary: the result is AED 6,666.67. This is your gratuity for the subsequent years after having served 5 years in the company.
So, if you have been wondering if you can resign after 6 months in an unlimited contract, you should know you are not entitled to gratuity pay.
6. What about the gratuity pay under other types of employment?
Given that in the UAE there are several types of employment, people that work under part-time contracts or others may wonder how much they will receive for gratuity pay.
Although it is helpful to use a gratuity calculator uae, it is important to know what the law says about these other types of employment.
According to Article 30 of the Cabinet Resolution No. 1 of 2022, the gratuity calculation for employees under other types of work arrangements other than full-time basis is according to the following:
- Divide the number of working hours per year by the number of hours in the full-time contract per year.
- Multiply the result by 100. You will obtain a percentage.
- Multiply this percentage by the value of the end-of-service benefit that is due for a full-time employment contract.
This will help you obtain the gratuity pay for your particular employment contract. But, it is worth mentioning that gratuity pay does not apply for temporary employment if the employee has worked for less than a year for the company.
This is very helpful if you have been considering freelancing vs. a full-time job. This way you can know how much gratuity you can get in either case.
7. The basic information for your gratuity calculator UAE
As you can see, gratuity calculation in uae is very simple, you just need some basic information about your employment.
To sum up, you will need the following:
- Type of contract.
- Years of service.
- Basic salary.
With this information, you can estimate your gratuity pay. Nevertheless, keep in mind that this calculation may be approximated. The total gratuity may vary once you get it due for several reasons.
So, you can use the mol gov ae labour card and check your labour card online to see all the information about your employment.
If you want to learn more about several aspects of employment in the UAE, you have to visit our blog. Here we have several guides about how to cancel your UAE visa in easy steps or how to replace your lost or damaged Emirates ID card.