Easy way to calculate UAE gratuity manually

​Calculating your end-of-service gratuity is a vital task for it includes that hard earned sum of money you kept accumulating during your service tenure. So how do you compute the amount on your own? Here is a formula to calculate your correct gratuity pay entitlement as per the UAE labour law.

Calculating your end-of-service (gratuity) pay is important and knowing how the total sum is reached will help you identify any errors made by your company. But before you jump-start the calculation, it is important that you read the UAE Labour Law as set out by the Ministry of Labour in order to avoid any errors yourself.

The calculations for gratuity may not be same for all as a lot depends on whether you’re on a Limited (Fixed Term) contract or Unlimited (Undefined) contract, your length of service and last but not the least how your salary has been structured. Apart from these factors, your gratuity pay is worked out basis your most recent/ last salary.

In case you are terminated from your job, unless you break the rules as stated in Article 139 of the Labour Law, as an employee you are entitled to gratuity. However, if you as an employee resigns on his or her own free will before completing one year, than you aren’t entitled to any gratuity.

Here is how to do it:

• Less than 1 year of service: Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.
• Between 1 year and 5 years of service: Employee is entitled to full gratuity pay based on 21 days salary for each year of work.
• 5 or more years of service: Employee is entitled to full gratuity pay based on 30 days salary for each year of work.

Here is an example:
Basic salary example: Dh10,000
a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30
b. 330.30 x 21 = 6,936.30. So 21-days salary is Dh6,936.30 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to 5 years.
For 30 days calculation for those exceeding 5 years of service
c. 330.30 x 30 = Dh9,909. So 30-days salary is Dh9,909 in gratuity entitlement for each year of service – so long as the total figure does not exceed two years total salary figure.

Calculations for Unlimited Contract gratuity pay

• Less than 1 year of service: Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.
• Between 1 year and 3 years of service: Employee is entitled to one third (1/3) of the 21-days gratuity pay.
• Between 3 years and 5 years of service: Employee is entitled to two thirds (2/3) of the 21-days gratuity pay.