Calculating the gratuity is a paramount concern for all employees in the UAE since it ensures that all anticipated benefits are paid to them upon separation from work. Gratuity is the statutory end-of-service benefit that affords security to an employee after a tenure with an organization. The following guide collates the core considerations and calculations of gratuity in the UAE, including formula and determinants for its computed amounts.
What Is Gratuity?
Gratuity refers to the lumpsum payment made to an employee on the basis of the duration of his service as well as on the basis of the last drawn salary at the time leaving the company. In the UAE, this is a benefit governed by the UAE Labor Law, which stipulates that to be entitled to gratuity payment, an employee must have completed at least one year of continuous service.
Eligibility Criteria
As per the UAE Labour Law, employees will be eligible for gratuity only if they meet the following conditions:
Minimum service period: Employees should be in service for a minimum of a year.
Type of contract: Gratuity entitlements would differ depending on whether the employee is on a limited-contract or an unlimited-basis contract.
Reason for leaving: The reason for leaving the particular job may affect the amount of gratuity.
UAE Gratuity Calculation
Calculating gratuity involves various step show to compute the appointee days’ salary, which accrue depending on his length of service:
21 days’ salary for each year of service for the first five years of service; Then 30 days’ salary for each additional year served beyond those five years.
Example of gratuity calculation in UAE
Assuming the employee will be having a basic salary of AED 10,000 and will serve for 6 years:
For the first five years:
Gratuity = 21 days × 5 years
Daily wage = AED 10,000 ÷ 30 = AED 333.33 Total for first five years = AED 333.33 × 21 × 5 = AED 35,000.
For the sixth year:
Gratuity for the sixth year = 30 days;
Total for the sixth year = AED 333.33 × 30 = AED 10,000.
Total Gratuity:
Total= AED 35,000 + AED 10,000 = AED 45,000.
This is just a sample calculation that describes how gratuity is calculated based on periods of service and salary earned.
How to Use the Gratuity Calculator in the UAE
Many websites, online tools, and the UAE gratuity calculator were produced to ease this process. The online gratuity calculator aids the employees in calculating their gratuity amount with reference to their basic salary, length of service, and type of contract. Inputting the relevant details will give employees an instant gratuity estimate.
Steps for Proceeding with the Gratuity Calculator
Input the First Day of Employment: You have to enter your date of joining.
Input the Last Day of Employment: Enter exit date.
Enter Basic Salary: For your monthly basic salary.
Calculate: If you need to see the amount of gratuity, click the calculate button.
Important Considerations
Probationary Period: There is no gratuity during a probation period unless stated otherwise in a contract.
Misconduct Will Terminate An Employee: Thus, an employee is not entitled to gratuity for misconduct and gives instant termination.
Delayed Payments: The employer is liable to pay the gratuity within fourteen days after termination, failing which a penalty is prescribed.
Conclusion
It is essential for employees to know how to calculate gratuity in UAE so that they benefit themselves best. There are certain tools that will make it a piece of cake, like the UAE gratuity calculator. With this, you can easily clarify things to people when it comes to entitlements. Useful knowledge in gratuity calculations helps employees plan better financial strategies for job changes.
