End of Service Benefits in UAE

end-of-service-blog

The most frequently asked questions raised about UAE labor law are, am I entitled to end of service pay or gratuity pay? According to UAE labor law, an employee becomes entitled to receiving end of service pay once they have completed 1 year of service.

The actual amount of end of service pay you may be entitled to varies greatly based on the length of service and whether you are employed in a free zone or by a mainland (non-freezone) company. Although Freezones are required to follow UAE labor law, some do have different (slightly more beneficial) calculations for this benefit.

Note: The employer may deduct from the gratuity any amount owed to them by an employee for advanced pay or loans. Expenses such as visa costs and recruitment costs should not be deducted.

The actual calculation can become quite complicated depending on individual circumstances as will include unused leave or holiday and can also include regular commissions. It is also based on your actual current salary rather than the starting salary that may be listed on your original employment contract.

The calculation is also different depending on whether you resign from your position or are terminated by the company (remember that there is also the possibility of compensation if you are terminated for any reason other than work related performance).

As a rule of thumb, the calculations are based on the criteria listed below and there is a useful calculator provided on the Ministry of labor web-site (http://www.mohre.gov.ae/en/end-of-service-calculator.aspx). Some freezones also provide their own calculator on their web-sites to guide you.

Generic Guidance for End of Service Calculations

Limited contract if terminated,
– Must serve at least one year for gratuity pay
– For service of more than 1 year but less than 5 year, the employee will get 21 days basic salary for each year
– For service of more than 5 year , the employee will get 30 days basic salary for each year

Unlimited contract if terminated,
– Must serve at least one year for gratuity pay
– For service of more than 1 year but less than 5 year, the employee will get 21 days basic salary for each year
– For service of more than 5 year , the employee will get 30 days basic salary for each additional year but must not exceed 2 years pay

Resigned under unlimited contract then,
– Must serve at least one year for gratuity pay
– For service of between 1 year to 3 year, the employee will get 1/3 of 21 days basic salary for each year
– For service of between 3 year to 5 year, the employee will get 2/3 of 21 days basic salary for each year
– For service of more than 5 year , the employee will get 21 days basic salary for each year