Factors considered for calculation of gratuity in the UAE
- How the employee plans to leave his/her job
- The type of employment contract
- The free zone’s employment law
- Location of employment
When is the employee not entitled to gratuity in the UAE?
- The employee cannot avail gratuity if he hasn’t completed 1 year of full employment service
- If the employer dismisses the employee without notice
- When an employee under limited contract resigns, they will not receive gratuity unless their time of service exceeds 5 years.
As per UAE labor law, there are two types of different contracts:
- Limited contract
- Unlimited contract.
1. Limited Contract:Under the limited contract, the employee signs an agreement to stay in the firm for a particular time. Both parties can terminate or extend the contract through mutual understanding. If the employee resigns before the end period then it can result in labor ban, loss of employment or compensation or loss of payment
Calculation of gratuity for a limited contract under UAE Labor Law
If the employee has worked from 1-5 years
If the employee has worked for more than 5 years and above
2. Unlimited Contract:In an Unlimited contract, there is no time period provided. By mutual agreement, the employee can offer his services for the amount of time he wants to serve. However, 1 to 3 months of the notice period is required if the employer decides to resign.
Calculation of gratuity for Unlimited contract under UAE Labor Law:
If the employee resigns
If the employee is terminated
If the employee has worked 5 years and up – resigned
If the employee has worked 1-3 years – terminated and 3-5 years – terminated:
If the employee has worked 5 years and up – terminated
End of service benefits explained in simple words:If the employee resigns before 1 year of full employment service then he is not entitled to receive gratuity in the UAE. If he has served 1 full year then he is entitled to service benefits. The calculation is based on the last salary which the employee is entitled to but does not include any allowances such as accommodation, conveyance, utilities, furniture, etc. If the employee owes money to the company (loan) then the employer can deduct the amount from the employee’s gratuity. For further guidance and better understanding contact MSZ Consultancy. Our team of experts will provide you the perfect business solutions.
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