Gratuity Rules in UAE| Complete Guide for Employers and HR Professionals

If you’ve ever wondered about gratuity rules in UAE, you’re not alone. Whether you’re moving jobs, planning ahead or just checking your rights, when you know how the gratuity system works in the UAE will save you stress and money. In this article, we’ll walk through eligibility, calculation which includes using a gratuity calculator Dubai or UAE gratuity calculator 2024, the process, and the key changes under the UAE labour law gratuity framework since the new labour law in UAE 2022.

1. Introduction

Let’s break this down, you need to check your entitlements under the gratuity rules in UAE. Whether you’re an employee or an employer, you need to understand how this benefit works to prevent any surprises. This article covers the updated law, how to compute your end-of-service benefit, and what steps to take. I recommend you keep your employment contract and pay slips handy while reading.

2. What Are the Gratuity Rules in UAE?

The term gratuity refers to the lump-sum payment an employer must make to an employee when employment ends, under the gratuity rules in UAE, as a recognition of service. It is governed by the private-sector employment law system in the UAE, namely the rules under the UAE labour law gratuity framework.
Under the new labour law in UAE 2022, major revisions were introduced to how gratuity is calculated and managed.
Employees and employers should also know you can estimate this using tools like a gratuity calculator Dubai or an online UAE gratuity calculator 2024.

3. Who Is Eligible?

Here are the eligibility criteria under the gratuity rules in UAE:

• You must have completed at least one year of continuous service to your employer.
  
• Days of absence without pay are not counted towards the service period.
  
• The calculation and entitlement apply under most employment contracts, be it limited or unlimited, though the details might differ.
  
• The nature of contract termination is resignation or employer termination & it may affect the amount under older rules, though the new law aims to simplify that.

4. Types of Service and Eligibility Under the Gratuity Rules in UAE

• Less than one year: Employees completing under one year of continuous service are not entitled to any gratuity payment under UAE labour provisions.
  
• One year or more: Once an employee completes a full year of uninterrupted service, gratuity entitlement begins and is calculated based on basic salary.
  
• Contract type (limited vs unlimited): While the gratuity rules in UAE are now more uniform, earlier contract structures can still influence specific calculation details.

5. How to Calculate Under the Gratuity Rules in UAE

Here’s how it typically works, following the rules for the first five years and then beyond:

Steps to calculate:

• Step 1: Identify the employee’s basic monthly salary & exclude allowances like housing, transport, or bonuses when calculating gratuity eligibility.
  
• Step 2: Convert the monthly salary into a daily rate by dividing the basic salary by 30 days for accuracy and consistency.
  
• Step 3: For employees with up to five years of service, multiply the daily rate by 21 days for every completed year.
  
• Step 4: For those serving beyond five years, multiply the daily rate by 30 days for each additional year after the fifth.
  
• Step 5: Ensure the total gratuity amount that does not exceed two years of the employee’s basic salary as per UAE labour regulations.

Table of Gratuity Rules in UAE Calculation Summary

Example

If you earn AED 15,000 basic salary and worked for 4 years:

• Daily wage = 15,000 ÷ 30 = AED 500
  
• Service within first 5 years → 21 days × 500 = AED 10,500 per year
  
• Then total gratuity = 10,500 × 4 = AED 42,000 

6. Steps and Procedure Under the Gratuity Rules in UAE

Here’s what you and your employer should do when employment ends:

• Confirm termination date and service period
  
• Employer calculates gratuity using basic salary and years worked as per the formula above
  
• Employee reviews the calculation and ensures days of unpaid leave are excluded
  
• Employer pays gratuity within the period required by law which is commonly 14 days from end of service
  
• Use a settlement calculator if it’s available to ensure you receive the correct end-of-service settlement, which includes gratuity
  
• Retain all documentation like contract, salary slips & termination letter in case of dispute
  

7. Impact of the New Labour Law in UAE 2022 on Gratuity

With the new legislation (the new labour law in UAE 2022) in effect, the gratuity rules in UAE saw several key changes:

• The distinction between resignation vs termination has been reduced under many circumstances.
  
• A clearer standardisation of calculations for all employees.
  
• Employers are required to deposit end-of-service benefits which include gratuity, into regulated accounts in some cases.

8. Tips and Best Practices

• Always check your contract to see how the basic salary is defined and whether the allowances are excluded.
  
• Before leaving a job, run your own figure using an online UAE gratuity calculator 2024 or gratuity calculator Dubai to compare.
  
• Make sure any unpaid leave or disciplinary absences are correctly handled as they can affect service years.
  
• If you have more than five years of service, ensure the “30 days per year” part is applied.
  
• If your employer delays payment, know that you can raise a labour complaint with the Ministry of Human Resources and Emiratisation (MoHRE).

9. FAQs

Q1: Can I get gratuity if I resign after only 9 months of service?
A: No, you must complete at least one full year of continuous service under the gratuity rules in UAE.

Q2: Does the gratuity include housing or transport allowance?
A: No, it’s calculated only on your basic salary, allowances are excluded from the computation.

Q3: What if I have a limited contract versus an unlimited one?
A: The formula remains the same under new regulations, though older contracts may still influence entitlement details.

Q4: Is the total gratuity payment capped?
A: Yes, the gratuity amount cannot exceed two years of the employee’s basic salary.

10. Conclusion

Understanding the gratuity rules in UAE is essential if you’re working or hiring in the UAE. You now know what your rights are, how the calculation works, how the new labour law in UAE 2022 changed things and how to prepare ahead. If you’d like help with choosing the right contract terms, using a settlement calculator, or managing payroll and end-of-service benefits, reach out to us at Arnifi we provide full payroll, labour law compliance and end-of-service settlement services. Let us take the complexity off your plate.