What are the Eligibility Criteria for Gratuity in the UAE According to MOHRE Guidelines?

Are you unsure about who qualifies for gratuity in the UAE? Do you wonder what the MOHRE guidelines say about eligibility and calculations? Understanding these details is essential to protect your rights as an employee or to ensure compliance as an employer.

This article looks into everything you need to know about gratuity eligibility under UAE laws.

What are the Eligibility Criteria for Gratuity in the UAE According to MOHRE Guidelines? (Quick Answer)

Gratuity in the UAE is governed by MOHRE, requiring a minimum of one year of continuous service. It is calculated based on the employee’s basic salary, the duration of service, and the type of employment contract. Employees under limited or unlimited contracts may have varying gratuity entitlements, with the total amount capped at two years of basic salary. Misconduct dismissals can result in forfeiture of gratuity rights.

What is Gratuity in the UAE?

Gratuity is a financial reward granted to employees at the end of their service. It’s an acknowledgment of their dedication and contributions over time. The UAE Ministry of Human Resources and Emiratisation (MOHRE) ensures that gratuity payments are regulated under Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, guaranteeing fairness and clarity for all parties.

Who is Eligible for Gratuity?

Gratuity eligibility is subject to specific criteria outlined by MOHRE. Here are the key requirements:

1. Completion of One Year of Service

Employees must complete at least one continuous year of employment with the same employer to qualify for gratuity.

2. Full-Time Employment

Gratuity applies to full-time employees. Part-time workers may also qualify for prorated gratuity based on their employment terms.

3. Lawful Termination or Resignation

Employees who leave their job lawfully, either through termination or resignation, retain their eligibility for gratuity, provided they meet the minimum service requirement.

4. No Misconduct Termination

Dismissal due to gross misconduct, as defined under Article 44 of the UAE Labour Law, disqualifies employees from receiving gratuity payments.

How is Gratuity Calculated?

The MOHRE has established a clear formula for gratuity calculations, based on an employee’s basic salary and service duration:

1. First Five Years of Service:

21 days of basic salary per year.

2. More than Five Years:

30 days of basic salary per year.

3. Maximum Limit:

The total gratuity cannot exceed the equivalent of two years’ basic salary.

For example, if an employee’s basic salary is AED 10,000 and they have served seven years, the gratuity would be:

(21 days × 5 years) + (30 days × 2 years) = Total gratuity in AED.

What are Common Scenarios That Affect Gratuity?

Resignation Before Completing One Year

Employees who resign before completing one year of continuous service are not entitled to gratuity under UAE Labour Law. The law explicitly requires a minimum of one year of uninterrupted service with the same employer to qualify for this end-of-service benefit. This ensures that gratuity rewards long-term commitment and loyalty.

Key Notes:

The one-year rule applies to both limited and unlimited contracts.

Any period of unpaid leave or unauthorized absence does not count towards continuous service.

Limited vs. Unlimited Contracts

Limited contract

In a limited contract, employees are eligible for full gratuity if they:

• Complete the duration of their contract.
• Resign after at least one year of service.

Employers cannot withhold gratuity unless the employee is terminated for gross misconduct. This type of contract provides more certainty for gratuity entitlement upon contract completion.

Unlimited Contract

In an unlimited contract, gratuity entitlement depends on the duration of service:

• Resignation after one year but less than five years results in prorated gratuity.

Typically, this is calculated as two-thirds of the full gratuity amount.

• Resignation after five years or more qualifies employees for full gratuity.

The prorated structure encourages employees to serve longer under unlimited contracts.

Part-Time Employment

Part-time employees are eligible for gratuity, but the amount is calculated on a prorated basis. The gratuity entitlement depends on:

• The number of hours worked as outlined in the employment contract.
• The employee’s basic hourly wage.

MOHRE allows part-time employees to benefit from gratuity payments proportionate to their contribution to the organization. However, clear documentation of the hours worked and employment terms is crucial.

Example:

If a part-time employee works half the hours of a full-time employee, their gratuity is calculated as 50% of the standard full-time gratuity entitlement.

Termination for Gross Misconduct

Under Article 44 of the UAE Labour Law, gross misconduct can disqualify an employee from receiving gratuity. Examples of gross misconduct include:

• Violations of workplace policies (e.g., harassment or theft).
• Serious breaches of confidentiality or trust.
• Engaging in fraud or damaging company property.

If an employer terminates an employee for such reasons, they are legally exempt from paying gratuity, regardless of the employee’s years of service.

Key Considerations:

Employers must have documented evidence of misconduct.

Misconduct dismissals should align with MOHRE regulations to avoid disputes.

Steps to Ensure Accurate Gratuity Payments

1. For Employers:
   • Maintain accurate records of employee service and salary details.
   • Ensure compliance with MOHRE guidelines.
   • Calculate gratuity using the correct formula and pay it promptly upon resignation or termination.
2. For Employees:
   • Confirm your basic salary details in your contract.
   • Keep track of your service duration.
   • File a complaint with MOHRE if your gratuity is delayed or miscalculated.

Frequently Asked Questions

Q. Can unpaid leave affect gratuity eligibility?

Yes, unpaid leave does not count as part of continuous service and can reduce gratuity.

Q. Is gratuity calculated on total salary or basic salary?

Gratuity is calculated only on the basic salary, excluding allowances and benefits.

Q. What happens if an employee resigns after completing one year?

The employee is entitled to gratuity, but the amount may vary based on the type of contract and years of service.

Q. Can an employer refuse to pay gratuity?

No, employers are legally required to pay gratuity if the employee meets the eligibility criteria. Non-payment can be reported to MOHRE.

Q. How can an employee file a complaint for unpaid gratuity?

Employees can lodge a complaint through the MOHRE portal or visit the nearest Tasheel service center.