59A7D41EB44EABC4F2C2B68D88211BF4 U.A.E Visa Rules and Procedures-Law updates -free legal advice: UAE End-of-Service Benefits: Gratuity & Investment Options

Sunday, March 16, 2025

UAE End-of-Service Benefits: Gratuity & Investment Options

 Understanding UAE gratuity calculations involves navigating key aspects of the UAE Labour Law, particularly Federal Decree-Law No. 33 of 2021, and subsequent ministerial resolutions. Here's a breakdown of the essential points:

Key Points:


  • Basis of Calculation:
    • Gratuity is calculated based on the employee's basic salary, excluding allowances like housing, transportation, or other benefits.
  • Eligibility:
    • Generally, an employee must complete at least one year of continuous service to be eligible for gratuity.
  • Service Duration and Calculation:
    • The calculation varies based on the length of service. Key considerations include:
      • For service between 1 and 5 years: 21 days' basic salary for each year of service.
      • For service exceeding 5 years: 30 days' basic salary for each additional year of service beyond the initial five.
    • There is a maximum gratuity amount, that cannot exceed two years worth of the employees basic salary.
  • Calculation Formula:

    • For service of 1 to 5 years: Gratuity = (Basic Salary × 21 days × Years of Service) ÷ 30
    • For service exceeding 5 years: Gratuity = (Basic Salary × 30 days × Years of Service) ÷ 30
  • Contract Types:
    • While distinctions between limited and unlimited contracts existed, the new labour law has streamlined contracts, but the manner in which resignations affect the calculation can still vary.
  • Resignation vs. Termination:
    • How the employment relationship ends (resignation or termination) can affect the gratuity amount, particularly in cases of resignation with shorter service periods.
  • The Savings Scheme:
    • It is important to note that there is now an alternative end-of-service benefits system, called the savings scheme. This is an optional alternative. Where employers can subscribe to investment funds for their employee's end-of-service benefits. This is a new development within the UAE labor law.
  • Relevant Legislation:
    • Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Labour Relations.
    • Cabinet Resolution No. 96 of 2023 Regarding an Alternative End of Service Benefits System.
    • Cabinet Resolution No. 1 of 2022 on the Implementation of the Regulation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Labour Relations.  

Important Considerations:

  • It's crucial to refer to the latest official sources for the most accurate and up-to-date information, as labor laws can be subject to change.
  • Consulting with legal professionals or HR experts in the UAE is recommended for specific cases or complex calculations.

I hope this information is helpful.

new gratuvity payment system in dubai

It's important to understand that while the core principles of UAE gratuity remain, there's a significant development with the introduction of an alternative end-of-service benefits system, often referred to as the "savings scheme." Here's a breakdown:

Traditional Gratuity:

  • This system, based on the UAE Labour Law, calculates gratuity based on an employee's basic salary and years of service.
  • It involves lump-sum payments upon the end of an employee's service.
  • This system is still in place.

The New Savings Scheme:

  • This is an alternative end-of-service benefits system. It's not a complete replacement of the traditional gratuity, but an optional alternative.
  • It involves employers contributing to investment funds on behalf of their employees.
  • The employee's end-of-service benefits then depend on the performance of these investments.
  • Key aspects of this scheme include:
    • Employers make monthly contributions to investment funds.
    • Employees can also make voluntary contributions.
    • The final payout to the employee includes the employer's contributions and any investment returns.
    • This is regulated by Cabinet Resolution No. 96 of 2023.
  • This system is designed to provide greater financial security for employees.

Key Considerations:

  • The savings scheme is an optional alternative for employers.
  • The traditional gratuity system remains in place.
  • It is important to understand the details of each system to make informed decisions.
  • It is always best to refer to the official sources from the UAE government, such as the Ministry of Human Resources and Emiratisation (MoHRE), for the most accurate and up-to-date information.

In essence, Dubai, and the wider UAE, have introduced a new, investment-based option for end-of-service benefits, giving employers and employees more flexibility.

#UAELabourLaw #UAEGratuity #EndofServiceBenefits #UAEEOSB #UAESavingsScheme #GratuityCalculation #MoHRE #EmploymentRightsUAE #FederalDecreeLaw33 #UAESavingsPlan #EmployeeInvestmentUAE #CabinetResolution96 #AlternativeEOSB #UAEJobs #WorkingInUAE #DubaiJobs #UAEBusiness #UAELegal #UAERules #Dubai #UAE #UAEGuide #ExpatUAE #LearnUAE #UAEFinance" 

No comments: