UAE Gratuity Law: Everything You Need to Know

UAE Gratuity Law is so supportive of employment in the UAE, providing a financial safety net for workers when their job ends. Whether you’re an employee eyeing your next step or an employer ensuring compliance, this guide unpacks the essentials of UAE Gratuity Law eligibility, calculations, updates, payouts, and more.
Note: Check Your total Gratuity from UAE Gratuity Calculator.

What Is UAE Gratuity Law?

Definition and Purpose of Gratuity in the UAE

Gratuity, or end-of-service benefits, is a mandatory payment from employers to eligible employees when their employment wraps up. Rooted in UAE Labour Law, it’s designed to reward your time and effort, giving you a financial boost as you move on.

Importance of Understanding Gratuity for Employees and Employers

For workers, grasping gratuity rules means knowing what you’re entitled to, and securing your finances post-job. For employers, it’s about following the law, dodging disputes, and keeping operations smooth. Ignorance can spark costly misunderstandings.

Eligibility for Gratuity Under UAE Law

Who Qualifies for Gratuity in the UAE?

Private-sectors all over Dubai expatriates qualify for gratuity after one year of uninterrupted service with the same employer, whether they resign or are let go. UAE nationals don’t get it, they’re covered by pension plans.

Situations Where Gratuity Is Not Payable

You won’t see gratuity if you quit or get fired before a year’s up. Serious misconduct like stealing or fighting can allow your employer to legally withhold it. Unpaid absences might trim your service time, too.

Gratuity Rules for Different Types of Contracts

Mainly there are 2 types of contracts which are followed by the UAE.

Limited-Term Contracts

These fixed-term deals require you to finish the contract for full gratuity—or at least hit one year if terminated. Resigning early might mean zero unless you’ve crossed that 12-month mark.

Unlimited-Term Contracts

Once common, these open-ended contracts were phased out by 2023. Existing ones converted to limited-term, and now all get full gratuity after a year, no matter how the job ends.

How to Calculate Gratuity in the UAE

Gratuity Calculation Formula

It’s straightforward: for 1-5 years, you get 21 days of computation of basic salary per year;
over 5 years, it’s 30 days per year after the first five, plus the 21-day rate for those initial years.
Daily salary is your monthly basic pay divided by 30, capped at two years’ total salary.
it can be adjusted as it is in Excel format if you want to use it offline.

Factors Affecting Gratuity Calculation

Only basic salary counts, no extras like housing or bonuses. Unpaid leave shrinks your service period, and since 2022, contract type and exit method don’t tweak the rate anymore just the years you’ve served matter.

Gratuity Calculator: Simplifying the Process

Online indemnity calculators take the guesswork out. Enter your basic salary, start and end dates, and old contract type if relevant (pre-2023), and you’ll get a quick estimate of end-of-service benefits. It’s a time-saver to confirm what’s due.

New Updates and Changes in UAE Gratuity Law (2023)

Key Differences Between Old and New Gratuity Laws

Pre-2022, unlimited contracts slashed gratuity for early resignations down to a third or two-thirds based on years. The 2021 Decree-Law No. 33, effective 2022, scrapped that: now it’s full gratuity after a year, paid within 14 days, unlike the old law’s loose timeline.

Impact of New Amendments on Employers and Employees

Workers gain with quicker, complete payouts, easing financial transitions. Employers now face tight deadlines and no wiggle room on amounts, which could pinch smaller firms though a 2023 savings scheme option might grow funds over time.

Gratuity Payout: Process and Timelines

Steps to Claim Your Gratuity

When your job ends, write to your employer citing your service dates and contract. They’ll calculate it using your last basic salary. Keep pay slips or records ready to download to back your claim if there’s a mess for your final settlement calculation.

Timeline for Gratuity Payment After Employment Ends

Since 2022, employers have 14 days from your last day to pay up. No more vague delays if they stall, you’ve got a solid case to push forward.

Legal Procedures if Gratuity Is Not Paid

If they don’t pay, file a complaint with the Ministry of Human Resources and Emiratisation (MoHRE) they’ll step in fast. For bigger issues, labor courts are an option, but MoHRE usually resolves it quicker.

Frequently Asked Questions (FAQs)

Nope, gratuity tax-free here. With no personal income tax in the UAE, you pocket the full amount, no deductions, just cash in hand.

They can, but only for legit debts like loans or damages you owe them, backed by proof. Random cuts aren’t allowed, the law guards your payout.

Resign after a year, and you get full gratuity based on the formula—no reductions since the 2022 update. The old days of cuts for early exits on unlimited contracts are over.

Yes, since the 2022 Decree-Law No. 9, domestic workers like cooks or nannies qualify after a year. It’s calculated like other private-sector jobs, though contract specifics might tweak the details.