How To Calculate the End of Service Benefits in UAE?

End of service benefits (EoB) have been historically given to employees. People who worked for the same company for years were given a huge sum of money when they leave. The law provides for the payment of this benefit after completing a year of service for up to 24 years. But many companies removed this 24 year cap and offered this as a cash bonus as many employees change companies every 4, 3 or even 2 years.

In UAE, the calculation of the EoB for the first five years of service is based on 21 days for every year of service. For employees with more than five years of service, it becomes 30 days for every service year. The formula considers the basic salary plus the commission as the base and allowances are excluded. In recent instances, this commission is based on the employee’s primary role, for sales people it’s the sales commission.

This mechanism was designed to help people save when they leave a company. Since the amount is not too big for 2 to 3 years of service, workers should be responsible enough as adults not to spend this on consumer items and save it up for their future.

Calculations for Limited Contract gratuity pay

Less than 1 year of service

Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.

Between 1 year and 5 years of service

Employee is entitled to full gratuity pay based on 21 days salary for each year of work.

5 or more years of service

Employee is entitled to full gratuity pay based on 30 days salary for each year of work.

Calculation example

Basic salary example: Dh10,000

a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30

b. 330.30 x 21 = 6,936.30. So 21-days salary is Dh6,936.30 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to 5 years.

For 30 days calculation for those exceeding 5 years of service

c. 330.30 x 30 = Dh9,909. So 30-days salary is Dh9,909 in gratuity entitlement for each year of service – so long as the total figure does not exceed two years total salary figure.


Calculations for Unlimited Contract gratuity pay

Less than 1 year of service

Leaving work before completing one (1) year of service means that you are not entitled to any gratuity pay.

Between 1 year and 3 years of service

Employee is entitled to one third (1/3) of the 21-days gratuity pay.

Between 3 years and 5 years of service

Employee is entitled to two thirds (2/3) of the 21-days gratuity pay.

5 or more years of service

Employee is entitled to full 21-days gratuity pay.

Calculation example

Basic salary example: Dh10,000

a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30

b. 330.30 x 21 = 6,936.30. So 21-days salary is Dh6,936.30

Of this figure of Dh6,936,30, only 1/3 is payable if you have worked between 1 and 3 years, so the total gratuity pay would be Dh2,312.10.

Only 2/3 is payable if you have worked between 3 and 5 years, so the total gratuity pay would be Dh4,624.20.

The full Dh6,936.30 is payable if you have completed 5 years.

These calcultions are not to be treated as law, they are for your reference only. For any disputes or further clarification, contact the UAE Ministry of Labour.


Formula

1. Monthly salary ÷ 30 = Daily wage

2. Daily wage x 21 = 1 year gratuity figure (Or x30 if applicable)

3. 1 year gratuity figure x years of service Total gratuity owed

Only continue for Unlimited Contract calculation

4. Total gratuity owed ÷ 3 = One third (1/3) of total gratuity

5. Either take this figure or multiply it by two for final figure.


Gratuity Calculator UAE: Compute it here

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