The gratuity calculator is only intended for guidance purposes and has no legal basis. The results generated from the above gratuity calculator are based on the most common employment circumstances under UAE Labour Laws. Kindly note only the gratuity part of final settlements is covered in the calculator and aspects such as unused leaves salary, notice compensation, air ticket, etc are not reflected here. For detailed interpretation and/or dispute regarding gratuity / end of service benefit (EOSB), please seek professional advice. Virtual Accountants LLC is not responsible for any errors or omissions.
As per UAE Labour Law, employees working in UAE are entitled to be paid by employer gratuity pay at the end of employment provided one year of service has been completed. No gratuity will be paid if employee resigns or gets terminated before one year of employment.
Important factors for calculating gratuity:
- Type of contract
In UAE, there are mainly two types of employment contract i.e. limited or unlimited. Rules about calculating gratuity under both type of contracts are different and are discussed below in details.
- Last basic salary
The last basic salary to be used as a basis for calculating gratuity but any other bonus and allowances such as housing, conveyance, overtime, children education etc. are not to be included in the gratuity Calculations.
- Duration of employment
At least one year of employment should have been completed to be entitled for gratuity.
Please also note Gratuity computation should be based on continuous employment. In other words, if the employee has been absent from work without pay during his/her period of service, that period should not be considered in calculating gratuity. However, please note that above gratuity calculator assumes that there is continuous service between the first and last working day. Therefore, in cases where employment is not continuous, the calculations done by gratuity calculator will need to be adjusted accordingly.
How Gratuity Calculator Works
There are two types of employment contracts in UAE i.e. Limited contract and Unlimited contract. The rule for calculation gratuity under both these types of contracts are explained below:
Calculating Gratuity For Unlimited Contract
An employee who has unlimited contract and resigns from his employment then the following rule shall apply for calculating gratuity:
- resignation before 1 year of service, not entitled to any gratuity.
- resignation between 1 and 3 years of service, employee is entitled to one third of 21 days' basic salary for each year as gratuity for the period of employment.
- resignation between 3 and 5 years of service, employee is entitled to two-thirds of 21 days' basic salary for each year as gratuity for the period of employment.
- resignation after 5 years of service, employee is entitled to 21 days’ basic salary for first 5 years of employment and 30 days' basic salary for each additional years.
An employee who has unlimited contract and his/her employment is terminated by the employer then the following rule shall apply for calculating gratuity:
- termination before 1 year of service, employee is not entitled to any gratuity.
- termination between more than 1 year but less than 5 years of service, gratuity calculation to be done as 21 days' basic salary for each year of service.
- termination after more than 5 years of service, gratuity calculation to be done as 30 days' basic salary for each year of service after first 5 years and 21 days’ basic salary for the first five years.
- Total gratuity should not exceed two-year basic salary.
Calculating Gratuity For Limited Contract
An employee who has limited contract, then the following rule shall apply for calculating gratuity:
- Period of employment less than 1 year, employee is not entitled to any gratuity.
- Period of employment between 1 year to 5 years, employee is entitled to gratuity based on 21 days' salary for each year of work.
- Period of service more than 5 years, employee is entitled to gratuity of 30 days' salary for each year of work after first 5 years plus 21 days’ basic salary for each year for first 5 years.
- Total gratuity should not exceed two-year of basic salary.
Above gratuity calculator assumes that employee has completed his limited term employment contract.