A Comprehensive Guide: End-of-Service Gratuity Laws in UAE

Gratuities are paid to the employee by the employer at the end of the service. Therefore, both must know how to calculate it. The gratuities are calculated using the local employment laws. Nevertheless, in the UAE it is calculated using the UAE labour and employment laws. It is calculated by considering various factors. Our lawyers in dubai can advise you all the factors.

It accounts for significant factors like tenure of employment, current salary, years of service, and much more. Gratuity is explained in detail in the UAE employment law and therefore, they guide us to calculate it. In the UAE, gratuity is declared as the severance pay. It is officially recognized as obligatory for employers to pay their workers. Nonetheless, it is calculated on the basis of mathematical calculations that consider variables.  

It considers the factors such as tenure of the service if employment, the employment contract, grounds for termination or resignations, salary or wage, UAE employment laws, and many other factors. There are recent amendments made to the UAE gratuity laws.  The UAE labor laws fully support the rights of the employees. The new development further supports the cause. The expert lawyers are called as, labour and employment lawyers. 

Some of the prominent reforms made to the UAE gratuity laws are discussed below:

• According to the recent amendments, the rules for the retirement of gratuity upon liquidation have changed. Now the gratuity will be availed to the employees even if the employer faces liquidation. These changes are made to UAE gratuity laws to facilitate the employees, especially expatriates. Gratuity calculations are also done by our lawyers.  

• It prevents the locals and expatriates from facing unforeseen financial constraints.  Furthermore, it allows greater flexibility in labor mobility which was never possible before. 

• Now under the new UAE gratuity laws, the employees can change their jobs in the UAE without fear of losing the gratuity rights in the workplace. However, there are certain conditions attached to it.  The alterations to the existing laws will allow the employee to sort out their careers. Besides, it will assist them in planning their future without any uncertainty. 

• Additionally, the amendments to the UAE gratuity laws provide better insight into the gratuity computation than ever before. It provides greater clarity and transparency to both the employer and their workers. As a result, it provides more level of confidence to the workers as better precision and estimates of gratuities are present. UAE Labour Law 2022 also puts effects on gratuity calculations.

Eligibility Criteria

There is an eligibility criterion for gratuity in the UAE that must be followed. In UAE, the gratuity Calculation is much more than a number game. The factors discussed above must be accounted for along with an eligibility criterion for it. The eligibility criteria consider the minimum service requirement in the UAE. Gratuity is only paid to those employees who have worked with an employer for more than 1 year.  

Therefore, the date of service will play a big role in getting the right to qualify for it.

In addition, another key eligibility criterion is the type of the agreement in employment. The full-time workers will receive a gratuity for limited as well as for unlimited contracts.  On the other hand, the part-time or temporary employees will not receive any gratuity. 

Final Discussion

Any misconduct that leads to the termination of the employee will be waived, and thus, no gratuity will be paid to such an employee. Another eligibility criterion is the employee’s behavior. An employee who is dismissed due to certain policies will directly impact the gratuity calculation. Moreover, compliance with corporate policies also affects it. End of the service gratuity shows the dedication of an employee towards the employer. Besides, it also reflects the commitment of an employer towards his workers. As we know, gratuity is calculated in different ways in the UAE. Therefore, it is essential for employees and employers to understand it. 

In the UAE, the employees are encouraged to disclose all the relevant details to the employer to facilitate gratuity calculation. Also, workers need to enter all information along with obtaining the ballpark figure. Both the employee and employer must be well aware of the main aspects of it. Moreover, both must be familiar with their rights and their obligations. They must also understand the whole process of gratuity.

Nonetheless, Gratuity pay is a crucial facet of UAE labor laws. All employers in the UAE must adhere to employment laws concerning gratuity calculations. It is calculated using the employee’s basic salary. It does not inculcate the employee’s allowance in it. Some of the key factors to consider while gratuity calculations are the following: basic salary is used to calculate it.  It excludes all the allowances. 

Any allowances in the form of housing, vehicle, transportation, or any other allowance are not accounted for. Furthermore, gratuity is directly affected by the basic salary and vice versa. The tenure of the service of the employee is another crucial factor to consider.  The length of the service is the main determinant for gratuity calculation.  The workers with a minimum service of 5 years or below it allocated the lowest amount of gratuity. 

On the other hand, those with a service of more than 5 years will receive more,  therefore, the longer the tenure of the service, the more gratuity the employee will get. Thirdly, the nature of the employment agreement is another determinant. In the Emirates, there are 2 different kinds of employment contracts. Limited and unlimited contracts both have different rules concerning gratuity calculation. Furthermore, both types of contracts calculate the gratuity entitlement in different ways in case of termination, resignation, and retirement. 

The adjustments are made to the gratuity depending upon the nature of the employment agreement.  The nature of the contract directly impacts the final amount of gratuity. Additionally, it is essential for employers and employees to understand the basics of gratuity calculation to avoid making mistakes or errors. In this, the employment lawyers in the UAE are quite helpful. 

The employment lawyers in the UAE have knowledge about the UAE labor laws, employment contracts, and UAE employment laws and much more that impacts the calculation. Our labour and employment lawyers are always available to help the clients and companies.

They will make all the gratuity calculations while considering the UAE employment laws, and the other considerations into account. The qualified employment lawyers in UAE will offer useful legal guidance to the employees and employers and ensure a just and fair gratuity settlement.