Gratuity Calculator in UAE: Empowering Benefits

The primary purpose of a gratuity calculator in UAE has guidance, and it isn’t a legal basis.








What is Gratuity?

As per the Gratuity calculator in UAE Labour Law, a gratuity is a benefit to an employee provided by the company. It’s an end-of-service benefit offered when an employee works in the company for more than 1st year. At the end-of-service Gratuity, the total amount depends on an employee’s monthly basic salary. There will be no gratuity if an employee resigns or gets terminated before one year.

Gratuity calculator in UAE

Eligibility Criteria For Gratuity calculator in UAE:

  •  The employee must resign by himself.
  • An employee must have worked continuously for one year with an employer to receive a gratuity in UAE.
  • If an employee leaves the organization before the end of the Contract, then he isn’t eligible.
  • There should be a limited or unlimited labor contract in a company.
  • Both UAE nationals and outside are eligible.
  • Any employee terminated under Article 120 of the UAE’s Labour Law of termination without notice due to non-compliance with any matters under Article 120 can restrict your ability to receive end-of-service benefits.

How to Calculate Gratuity?

   As per the Gratuity calculator in UAE labor law, the employee can receive a gratuity after finishing his Contract. First, however, every employee needs to understand how a bonus is provided and on what basis. If you’re interested to know the Gratuity in India. There’re some steps following;

  • Your basic salary
  • your contract type
  • Resignation or termination?

There’re 2 Main Types of Contract

1-Limited Contract

If an employee is working in the company for a limited time, it is known as a fixed contract.

How is Gratuity calculated during a limited contract?

  • Total service period gratuity calculation
  • Less than one year no gratuity

Between 1 to 5 years

21 days of salary for each year of work between 1 to 5.More than 5 years. The employee is eligible to receive a gratuity of 30 days’ salary for each year of work after the first 5 years plus 21 days’ basic pay.

Upon Termination Procedure

  • If an employee has completed the Contract with less than 5 years of service, your Gratuity will consist of your basic salary for 21 days for every year of service.
  • If you have more than 5 years of service, your premium will consist of your basic pay for 21 days of your first 5 years. Every year after their 5th year, 30 days’ basic salary is counted.

Upon Resignation

  • If an employee has completed the Contract with less than 5 years of service, your Gratuity will consist of your basic salary for 21 days for every year of service.
  • If you have more than 5 years of service, your Gratuity will consist of your basic salary for 21 days of your first 5 years. Every year after their 5th year, 30 days’ basic salary is counted.

Less than 12th months of services

  Are you planning to resign from your job before the 12th month? Unfortunately, this means you aren’t eligible for Gratuity to pay.

Between 1 to 5 years of services

An employee is eligible to receive a gratuity based on 21 days of salary for each year of work between 1 to 5.

Formula between 1 to 5 years of service

gratuity=((basic salary+DA/30)*21)*Number of years

Example

  • Daily wages=AED 45,000/30=AED 15,00
  • Multiply it by 21(as a limited contract base)
  • AED 15,00*21=AED 31,500
  • Multiply by 4(total years worked in the company )
  • 31,500*4=AED 126,000

More than 5 years of service

Period of service of more than 5 years, the employee is eligible to receive a gratuity of 30 days’ salary for each year of work after the first 5 years plus 21 days’ basic pay for each year for the first 5 years.

The formula has more than 5 years of service

gratuity=((basic salary+DA/30)*21)*Number of years+extra on 5th years

For Example

Let’s assume the basic salary is AED 20,000, and you worked in the company for the 6th year.

  • daily wages=AED 20,000/30=AED 666.67
  • Multiply it by 21(as a limited contract 5 years base)
  • AED 666.67*21=AED 14,000
  • Multiply by 5(total years worked in the company+extra years)
  • AED 14,000*5=70,000+20,000=AED 90,000
  • Calculate an extra 1 year as 
  • (basic salary+DA/30)*30)*Number of years
  • AED 20,000/30=AED 666.67
  • AED 666.67*30=AED 20,000*1= AED 20,000
  • 6th years=AED 70,000+20,000=AED 90,000

2-Unlimited Contract

  Suppose an employee works in a company without any end date, known as an unlimited contract. There’re 4 types following.

Between 1 to 3 years

1/3 of the 21st day’s salary is considered for each year of service

Between 3 to 5 years of service

 2/3 of the 21 days’ salary is considered for each year of service. 

Complete 5 years or more

The 21st day’s salary for each year of work is between 1 to 5.

Less than 12th months of services

In this 1st example, an employee leaving his job before completing one-year service isn’t eligible to receive Gratuity.

Between 1 to 3 years of service

 An employee works in a company for 1 to 3 years; 1/3 of 21 days’ salary is considered for each year of service.  Formula=(Basic salary+DA/30*7*Number of the year)

Example

Let the basic salary of AED 10,000 and working in the company for 2 years.

  • Let the basic salary of AED 10,000 and working in the company for 2 years.
  • Basic=AED 10,000
  • Gratuity=AED 10,000/30=AED 333.33
  • AED 333.33*7=AED 2333.33*2=AED 4666.67

Between 3 to 5 years of services

 An employee works in a company for 3 to 5 years; 2/3 of 21 days’ salary is considered for each year of service. Formula=(Basic salary+DA/30*14*Number of the year)

Example

  • Let the basic salary of AED 10,000 and working in the company for 2 years.
  • Basic=AED 10,000
  • Gratuity=AED 10,000/30=AED 333.33
  • AED 333.33*14=AED 4666.62*4=AED 18,666.48
  • Complete 5 years or more
  • An employee is eligible to receive a gratuity based on 21 days of salary for each year of work between 1 to 5.
  • Formula=(Basic salary + DA/30*21*Number of the year)

Important points to be noted about Gratuity

  1. The gratuity calculator in UAE is calculated based on basic salary only
  2. Make sure the company doesn’t increase your salary by increasing your expenses.
  3. If an employee leaves his job before completing one-year service isn’t eligible to receive Gratuity.
  4. If an employee has to pay any money to the company, he can be compensated with a prize if he is eligible.
  5. If an employee can’t perform well, the company has the right to disqualify Gratuity.
  6. If an employee causes a bad image for the company, he will not be eligible for a dividend. 

FAQs

Employees are eligible for Gratuity at end-service benefits but not eligible for pension.

If an employee violates the rules of the company, then he is terminated from the company and will not be eligible for Gratuity.

Only UAE residents working for Gratuity in UAE.

Continuous work service for more than a year at a company is required to qualify for Gratuity.

Yes, in the case of the employee’s death, he will provide the beneficiary.

Yes. If an employee who worked for more than a year in an organization and’s dead or physically or mentally disabled is eligible for Gratuity.

If the days of leaves are without pay, they’ll not include in the relaxation.

Yes. If the employee needs to give money to the employer, then it can be compensated with the gratuity amount if he is eligible.

 Conclusion

As per the above-detailed discussion on the purpose of a gratuity calculator in UAE, the calculator has guidance and isn’t on a legal basis. Therefore, the outcome of its calculator has based on the most common employment circumstances in the UAE. Kindly note that the calculator covers only the gratuity part of the final agreement, and aspects such as new leaves salary, notice compensation, air ticket, etc., are not reflected here.