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Gratuity calculation as per UAE law 2016


  • We experienced that some employees have not given what they was estimated, and most of employees even do not know the calculation process.This Article will show you step by step guidance to calculate your Gratuity in case of Resignation or Termination.Before beginning to Article please note that the Gratuity calculation is based on Resignation and Termination and will only be calculate by BASIC SALARY.Resignation means if employee quit a job before completing contract while Termination means where company terminate an Employee or Worker.
  • GRATUITY FOR UNLIMITED CONTRACTS: Less than 1 Year: As per UAE LABOUR Law Article 132, Section 2, if worker Resigns with less than a year of service, he will not get any gratuity. Gratuity is only applicable when an employee completes one year of service with a company. More than 1 & Less than 3 Years: If worker Resigns and he worked between 1‐3 Years he should take 1/3rd of 21 days of basic salary for each year of employment. More than 3 & Less than 5 Years: If worker Resigns and he work more than 3 but less than 5 years, he should take 2/3rd 21 days for every year of worked. More than 5 Years: Resignation under Unlimited Contract after 5 years, worker should take 21 days basic salary for every year he/she worked and 30 days basic salary for additional years. (if work with same company above 5 years)
  • What if Company Terminates the Employee?


In case of Unlimited contract where the company terminates the worker, 21 days of wages from minimum 1 and maximum 5 years should be paid to Employee, If employee worked for more than 5 years, he/she will be eligible for 30 Days of Basic wage for each year of worked.

  • GRATUITY FOR LIMITED CONTRACTS: Gratuity for Limited Contracts are slightly different from Unlimited Contracts.1/3rd and 2/3rd system does not apply under limited contract. Without Completing Contract: It is clearly mentioned in UAE LABOUR Law Article 138 that If employee have not completed his/her Limited Contract period as signed in Agreement, he/she will not be eligible for any Gratuity. In simple words, if someone signed a contract for 2 years but resigned a⡎er 14 months, company will do not pay any gratuity to that worker. 1‐5 Years: If you have accomplished your limited contract and it is within 1 to 5 years,you are entitled for 21 day’s basic salary wage for every single year of work. More than 5 Years: If you have completed 5 years of continuous service with your company and have resigned contract, then for the first 5 years of work you are eligible for 21 day’s basic wage & for the service above 5 years, you will get paid 30 day’s basic wage for every year of service.
  • What if Company Terminates the Employee under Limited Contract?
  • In case you have been terminated by your Employer or Company and you have not completed your 1 year yet, you will not eligible for any gratuity, but if worked with the company for more than 1 year and less than 3 years, you will get 30 day’s of basic salary for No. of years your served before termination. FAQ’s: Q: What is the maximum Gratuity that we can get? As per UAE LABOUR LAW, Article 132, maximum gratuity amount for employee can not exceed 2 years’ gross salary. Q: Do I get 3 month salary in case of termination? Yes, if you are terminated for reason other than mentioned in UAE LABOUR LAW Article 120, you are eligible for 3 month’s compensation.

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Balaram Vuchidi

Managing Director
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