I know that feeling. That mix
of excitement and maybe a little uncertainty that comes with leaving a job.
It's a significant transition, isn't it? And if you're navigating this in the
UAE, you've probably realized that understanding your end-of-service benefits –
especially that all-important gratuity – is crucial. While the core principles
of UAE labor law have always been there to guide us, staying aware of the
latest nuances and updates is key to ensuring you receive what you're
rightfully owed. As we step further into 2025, let's break down exactly what
you need to know about your end-of-service gratuity under the prevailing UAE
Labour Law.
UAE Gratuity Calculation
What is End-of-Service
Gratuity?
End-of-service gratuity, often
referred to as a "severance pay," is a lump-sum payment given to an
employee by an employer at the end of their employment period. It's a
recognition of the employee's service to the company and is mandated by Federal
Decree-Law No. 33 of 2021 regarding the Regulation of Labour Relations in the
Private Sector (the "Labour Law") and its Executive Regulations.
The calculation is primarily based on your last basic salary and the length of
your service.
Who is Eligible for Gratuity?
(Article 51 of the Labour Law)
Under Article 51 of the
Labour Law, a full-time foreign worker who has completed at least one year
of continuous service is entitled to end-of-service benefits at the end of
their employment. This applies universally across all emirates, including
Dubai, Abu Dhabi, Sharjah, and others.
- Key Criterion:
Completion of at least one year of continuous service.
- Employment Termination:
Gratuity entitlement applies whether your employment ends due to
resignation or dismissal, subject to specific conditions outlined in the
law (more on forfeiture below).
- Unpaid Absence:
Periods of unpaid leave are generally excluded from the calculation
of your service period for gratuity purposes.
Gratuity Calculation: The
Basics (Article 51 of the Labour Law)
The calculation of gratuity is
clearly defined in Article 51 of the UAE Labour Law. Here's a simplified
breakdown:
- Less than one year of service:
No gratuity entitlement.
- 1 to 5 years of service:
You are entitled to 21 calendar days of your last basic salary for each
year of service.
- More than 5 years of service:
You are entitled to 21 calendar days of your last basic salary for each of
the first five years, AND 30 calendar days of your last basic salary for
each additional year beyond the fifth year.
Important Considerations:
- Basic Salary:
The calculation is always based on your last basic salary, as
defined in your employment contract. This excludes allowances such as
housing, transport, or utilities.
- Fraction of a Year:
As per Article 51, you are entitled to gratuity for a fraction of a
year, provided you have completed at least one full year of continuous
service.
- Maximum Gratuity:
The total gratuity amount should not exceed two years' worth of your basic
salary.
- Deductions (Article 52 of the Labour Law):
Your employer can deduct any amounts legally due from you, such as
outstanding loans or advances, from your gratuity payment, as per Article
52 of the Labour Law.
Gratuity & Contract Types:
A Unified Approach
With the implementation of Federal
Decree-Law No. 33 of 2021, the distinction between limited and unlimited
contracts for new agreements has been abolished. All new contracts are
fixed-term, and existing unlimited contracts were converted to fixed-term
contracts by February 2, 2023.
This means that the previous
rules which reduced gratuity for resignations under "unlimited"
contracts are no longer generally applicable for current contracts. Under the
current law, if you complete at least one year of service, you are generally
entitled to your full accrued gratuity, regardless of whether you resign or
your contract is terminated by the employer (unless specific conditions for
forfeiture apply).
When Can Gratuity Be
Forfeited? (Article 44 of the Labour Law)
While generally entitled to
gratuity, an employee may lose their right to end-of-service gratuity if their
employment is terminated for specific serious violations outlined in Article
44 of the Labour Law. These include, but are not limited to:
- Assuming a false identity or submitting
forged documents.
- Committing a mistake resulting in
substantial material loss to the employer.
- Violating instructions related to the
safety of the workplace, provided these instructions are clear and the
employee was aware of them.
- Absenting themselves from work without
legitimate reason for more than 20 non-consecutive days or 7 consecutive
days in one year.
- Divulging secrets of the establishment.
- Being convicted by a competent court for a
crime involving honor, honesty, or public morals.
- Being found in a state of drunkenness or
under the influence of narcotics during working hours.
- Assaulting the employer, manager, or
colleagues during work.
- Failing to perform basic duties despite a
formal investigation and two warnings of dismissal.
It's crucial to understand
these provisions, as termination for such reasons can lead to forfeiture of
your gratuity.
Key Updates and Things to
Watch for in 2025
While the core gratuity law is
established, it's always wise to stay informed. Here are a few points to keep
in mind for 2025:
- Clarity on Remote Work:
As remote and hybrid work models become more prevalent, ensure your
employment contract clearly defines your working arrangements and how they
relate to your end-of-service benefits, especially if your primary
residence or work location isn't entirely within the UAE.
- Pension Schemes vs. Gratuity (Voluntary
Savings Scheme): The UAE has introduced a Voluntary
End-of-Service Benefits Scheme (also referred to as a savings scheme),
which allows employers to invest employee gratuities in approved
investment funds. This is an alternative to the traditional lump-sum
gratuity payment. While this is currently a voluntary scheme, it's worth
being aware of any potential future developments or if your company opts
into such a system, as it would alter your traditional gratuity
entitlement. You can learn more about this on the official MoHRE website.
- Digitalization of Services: The
Ministry of Human Resources and Emiratisation (MoHRE) continues to
digitalize its services. This means more streamlined processes for
checking your entitlements and resolving disputes, making it easier to
navigate your end-of-service process online.
What to Do When Leaving Your
Job
- Review Your Contract:
Understand the terms and conditions of your employment, particularly
regarding notice periods and termination clauses, in light of the current
Labour Law.
- Calculate Your Gratuity:
Use online calculators (often found on official UAE government or
reputable legal firm websites) or consult with a legal professional to get
an accurate estimate of your entitlement.
- Ensure All Dues are Settled:
Before your final settlement, ensure all your outstanding dues, including
any leave encashment and pending salaries, are calculated correctly.
- Seek Clarification:
If you have any doubts or discrepancies in your final settlement, do not
hesitate to seek clarification from your HR department or the Ministry of
Human Resources and Emiratisation (MoHRE). All end-of-service entitlements
must be paid within 14 days from the contract's end date.
In Conclusion
Navigating end-of-service
benefits in the UAE doesn't have to be complex. By understanding the core
principles of gratuity under Federal Decree-Law No. 33 of 2021, being
aware of your rights and any conditions for forfeiture, and staying informed
about new initiatives like the Voluntary Savings Scheme, you can ensure a
smooth and fair transition as you embark on your next chapter. Always remember
that the UAE Labour Law is designed to protect both employers and employees,
ensuring fair treatment for all.
#UAELabourLaw #GratuityUAE
#EndofServiceBenefits #UAEJobs #DubaiLabourLaw #AbuDhabiLabourLaw #MoHRE
#ExpatLifeUAE #UAE2025 #EmploymentLawUAE
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