The Basics of Gratuity in the UAE—What You Need to Know
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The Basics of Gratuity in the UAE—What You Need to Know
Gratuity—it’s one of those benefits we hear about a lot, but do we really know how it works?
Gratuity—it’s one of those benefits we hear about a lot, but do we really know how it works? If you’re employed in the UAE, understanding gratuity can be empowering. In short, gratuity is a lump-sum payment you get when you finish up with a company (provided you’ve worked there at least a year). Think of it as a thank-you for your years of service!
Here’s How Gratuity is Calculated
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Gratuity can vary depending on your contract type (limited or unlimited) and how long you’ve been with your employer. Here’s a simple breakdown:
For Limited Contracts:
● Less than 1 year: No gratuity.
● 1 to 5 years: You’ll get 21 days’ basic pay per year.
● More than 5 years: You receive 21 days for each of the first five years, then 30 days per year after that.
For Unlimited Contracts:
● Less than 1 year: No gratuity.
● 1 to 3 years: You get a third of the 21-day gratuity.
● 3 to 5 years: You’re entitled to two-thirds.
● More than 5 years: The full 21 days per year for five years, then 30 days annually.
Example—Let’s Do the Math
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Imagine you’ve been with your company for six years, earning a basic salary of AED 10,000 per month:
1. First five years: 21 days x 5 years = 105 days’ pay.
2. Sixth year: 30 days’ pay.
Your daily rate (AED 10,000 ÷ 30) is AED 333, so:
● First five years: 105 days x 333 AED = 34,965 AED.
● Sixth year: 30 days x 333 AED = 9,990 AED.
Total Gratuity: 44,955 AED
Quick Tips for Calculating Gratuity
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● Only your basic salary is used for gratuity calculations, so bonuses or allowances aren’t included.
● Keep in mind that dismissals under certain conditions can affect your gratuity—worth checking up on to protect your rights.
Want to avoid the math? There are easy online gratuity calculators tailored for the UAE. Just enter your contract type, salary, and time spent at the company to get an estimate.
Stay updated on the latest developments in Emiratisation, UAE labor laws, and industry trends! Sign up for our newsletter to learn how to attract and hire Emirati talent and make the most of government initiatives. Have any questions or need more details? Contact us today to discuss how People Partners can help your business succeed in the UAE.
Gratuity—it’s one of those benefits we hear about a lot, but do we really know how it works? If you’re employed in the UAE, understanding gratuity can be empowering. In short, gratuity is a lump-sum payment you get when you finish up with a company (provided you’ve worked there at least a year). Think of it as a thank-you for your years of service!
Here’s How Gratuity is Calculated
Gratuity can vary depending on your contract type (limited or unlimited) and how long you’ve been with your employer. Here’s a simple breakdown:
For Limited Contracts:
● Less than 1 year: No gratuity.
● 1 to 5 years: You’ll get 21 days’ basic pay per year.
● More than 5 years: You receive 21 days for each of the first five years, then 30 days per year after that.
For Unlimited Contracts:
● Less than 1 year: No gratuity.
● 1 to 3 years: You get a third of the 21-day gratuity.
● 3 to 5 years: You’re entitled to two-thirds.
● More than 5 years: The full 21 days per year for five years, then 30 days annually.
Example—Let’s Do the Math
Imagine you’ve been with your company for six years, earning a basic salary of AED 10,000 per month:
1. First five years: 21 days x 5 years = 105 days’ pay.
2. Sixth year: 30 days’ pay.
Your daily rate (AED 10,000 ÷ 30) is AED 333, so:
● First five years: 105 days x 333 AED = 34,965 AED.
● Sixth year: 30 days x 333 AED = 9,990 AED.
Total Gratuity: 44,955 AED
Quick Tips for Calculating Gratuity
● Only your basic salary is used for gratuity calculations, so bonuses or allowances aren’t included.
● Keep in mind that dismissals under certain conditions can affect your gratuity—worth checking up on to protect your rights.
Want to avoid the math? There are easy online gratuity calculators tailored for the UAE. Just enter your contract type, salary, and time spent at the company to get an estimate.
Stay updated on the latest developments in Emiratisation, UAE labor laws, and industry trends! Sign up for our newsletter to learn how to attract and hire Emirati talent and make the most of government initiatives. Have any questions or need more details? Contact us today to discuss how People Partners can help your business succeed in the UAE.
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