Frequently Asked Questions Related to Gratuity Calculator

Have you ever wondered if you’re getting the correct end-of-service gratuity in the UAE? It can be confusing, especially when terms like “full salary,” “service length,” and “final settlement” are tossed around.

Whether you’re nearing the end of your contract or just curious about your rights as a worker, knowing how to calculate gratuity is essential.

In this article, I’ll answer some of the most common questions workers ask about gratuity in the UAE, explaining the key concepts and providing clear, straightforward answers.

What Is Gratuity, and Why Is It Important?

In simple terms, gratuity is a financial benefit provided by your employer at the end of your employment. It’s a form of severance pay for employees who have completed a certain period of service in the UAE. The UAE’s labor law mandates that workers who have completed at least one year of continuous service with an employer are entitled to gratuity.

The importance of gratuity lies in the fact that it helps employees secure a financial cushion when they leave a job, whether voluntarily or due to termination by the employer. This payment is calculated based on your length of service and your final salary, so understanding how it’s determined is crucial.

How Is Gratuity Calculated in the UAE?

Gratuity calculation in the UAE is straightforward but depends on several factors: your length of service, your final salary, and whether your employment was terminated by you or your employer.

For the First Five Years of Service:

If you have worked for the same employer for less than five years, your gratuity is calculated as 21 days of your basic salary for each year of service.

For More Than Five Years of Service:

If your employment exceeds five years, the gratuity is calculated as 30 days of basic salary for each year of service beyond the first five years.

Let’s look at an example: If you worked for four years and nine months, the gratuity would be calculated based on 21 days for each of the first four years, and the remainder of the months is pro-rated.

Formula for Gratuity Calculation:

Gratuity = (Basic Salary / 30) × 21 × Number of Years

If you worked more than five years, add 30 days for each year beyond the first five.

Is Gratuity Calculated on Basic Salary or Total Salary?

Many workers confuse basic salary with total salary, but the gratuity in the UAE is calculated based on the basic salary alone. Your basic salary does not include allowances such as housing, transportation, or bonuses. Only the base salary you receive monthly counts toward the gratuity calculation.

What Happens If You Leave Before Completing a Year?

In the case where you leave the job before completing one full year of service, you are not entitled to any gratuity. According to the UAE labor law, gratuity is only applicable if you complete at least one year of continuous service with the same employer.

However, if the termination is done by the employer and not by you, the law protects you, and you may still be entitled to receive gratuity even if you haven’t completed the year.

What If Your Employment Is Terminated Early by the Employer?

If your employer ends the contract before the completion of your agreed-upon term, you are still entitled to gratuity. The formula remains the same, but your service period would be calculated according to the actual number of months and years you worked. Keep in mind that if the employer ends the contract due to misconduct or violations on your part, they may be able to withhold part or all of the gratuity.

What Happens to Gratuity if You Resign?

If you decide to leave the job voluntarily before completing the full contract or service period, the following applies:

• If you leave before completing one year of service, you won’t receive any gratuity.
• If you’ve worked for more than one year but less than five years, you are entitled to gratuity, but it will be calculated on a pro-rata basis. This means you’ll receive gratuity based on the number of years you worked, even if you resign before completing the full five years.

If you have completed five years or more, your gratuity is calculated as mentioned above.

Are There Any Deductions from Gratuity?

The employer is allowed to deduct amounts from your gratuity for any unsettled debts or liabilities you have with them, such as unpaid loans, penalties, or damages caused due to misconduct. However, these deductions must be clearly documented, and the employer cannot deduct an amount arbitrarily.

Can You Transfer Your Gratuity to a New Employer?

The answer is no. Gratuity cannot be transferred to a new employer. It is only paid to you by the employer who you worked for when the contract ends. However, if you are leaving a job to join another employer in the UAE, you may still receive your gratuity from the current employer upon leaving, which you can use at your discretion.

Can Gratuity Be Withheld by the Employer?

Under normal circumstances, an employer cannot withhold your gratuity, provided you have served the minimum required period of service. However, if you violated the terms of your employment contract or engaged in misconduct (e.g., theft, fraud), your employer may be able to withhold the gratuity or part of it. Employers are required to provide valid reasons for this decision.

What If You Worked for More Than One Employer?

In cases where you’ve worked for multiple employers during your time in the UAE, gratuity is calculated for each employer separately. For each period you worked with a specific employer, you’re entitled to gratuity, which will be paid by that employer based on the time you spent with them. Gratuity cannot be combined from various employers.

What About Gratuity for UAE Nationals?

The gratuity calculation rules for UAE nationals may differ slightly from those for expatriates, especially in terms of eligibility for additional benefits or pensions. UAE nationals may be entitled to more extensive government support programs. However, for most expatriates, the gratuity rules remain the same, as outlined earlier.