Gratuity Calculator | How to calculate gratuity in UAE in 2024?

Understanding how to compute your UAE gratuity entitlement is important. The law ensures expat workers will have a safety net after their contract ends. Here is an easy guide to help you make sense of your UAE gratuity calculation in 2024.

UAE Gratuity Calculator

Total Gratuity: AED 0.00

Things you need to know

According to Article 51 of the UAE Labor Law, expat workers in the UAE private sector can receive gratuity pay. This is based on the period of service rendered and contract types, among other guidelines. The following are some essential provisions of the UAE labor law regarding gratuity pay:

Employees who have completed at least one year of continuous service can receive gratuity pay.
The last wage of the worker is the basis of the end-of-service gratuity calculation. Note that gratuity pay covers only the basic salary and does not include allowances, such as transportation and accommodation.
The employer may deduct from the gratuity pay any amount an employee legitimately owes the company.
Employers must settle all end-of-service entitlements payable within 14 days from the end date of the employment.

Important factors for calculating gratuity:

Type of contract

In UAE, there are mainly two types of employment contract i.e. limited or unlimited. Rules about calculating gratuity under both type of contracts are different and are discussed below in details.

Last basic salary

The last basic salary to be used as a basis for calculating gratuity but any other bonus and allowances such as housing, conveyance, overtime, children education etc. are not to be included in the gratuity Calculations.

Duration of employment

At least one year of employment should have been completed to be entitled for gratuity.

Please also note Gratuity computation should be based on continuous employment. In other words, if the employee has been absent from work without pay during his/her period of service, that period should not be considered in calculating gratuity. However, please note that above gratuity calculator assumes that there is continuous service between the first and last working day. Therefore, in cases where employment is not continuous, the calculations done by gratuity calculator will need to be adjusted accordingly.

Types of contract

The Dubai Development Authority has made it easier for expat workers to compute their gratuity pay using this calculator. However, it always helps to have a deeper understanding of your gratuity calculation, for your own peace of mind and protection.

Before knowing how to calculate gratuity in UAE, the employee must determine whether he or she has a limited or unlimited contract.

1. Limited contract (Part-Time)

A limited contract mentions the start and end dates of the employment period. This is automatically canceled upon expiration.

2. Unlimited contract(Full-Time)

An unlimited contract, on the other hand, is open-ended, more flexible and common in the UAE. This can be terminated with mutual consent or by serving a notice period of anywhere from one to three months.

Gratuity calculation for those with limited contracts

An expat employee who worked less than a year of their government-approved contract, whether he resigned or got terminated, will not receive any gratuity pay.

If an employee provided anywhere from 1 to 5 years of service, then he or she will receive full gratuity pay based on 21 days of basic salary for every year of service rendered.

If an employee has completed over 5 years of service, he will receive full gratuity based on 30 days of basic salary for each year of work.

Here’s how to compute:

Identify the daily rate by dividing the monthly wage by 30
Multiply the daily rate by 21 or 30
The result is the amount the employee will receive for each year of service

Example:

If the monthly wage is AED10,000 and the employee has rendered 4 years of service. Given the formula, “(Monthly wage ÷ 30) x 21,” the amount the employee will receive for each year of service is AED6,999.30.

Please note that in all scenarios previously mentioned, the total gratuity an employee will receive should not exceed 2 years of his or her total wages, based on the basic salary, regardless of length of service.

Gratuity calculation for those with unlimited contracts

As in the case of workers with limited contracts, those who have not completed a year of service are not eligible to receive gratuity.

Those who have completed anywhere from 1 to 3 years will receive total gratuity that is one-third (1/3) of 21 days’ worth of salary. The formula for total gratuity is “Daily rate x 21 days x 1/3”. The daily rate is the monthly wage divided by 30.

For those who completed employment of between 3 to 5 years, the calculation of gratuity pay is two-thirds (2/3) of 21 days’ salary. In this case, total gratuity pay’s formula is “Daily rate x 21 days x 2/3”.

For those whose service ended after five years, full gratuity pay will be based on a 21-day salary multiplied by the number of years of work. Hence, gratuity pay computation is “Daily rate x 21 days x service period.”

Example:

Assuming a monthly wage of AED10,000, an employee who rendered 4 years of employment can compute his gratuity using the formula, “(Monthly wage ÷ 30) x 21 days x 2/3”. His gratuity pay will be equivalent to AED4,666.20 for each year of his service

No gratuity payment

Article 139 of the UAE Labour Law states that an employee may not get gratuity payment if:

He or she gets dismissed from service for any of the reasons outlined in Article 120. Or, if the employee quits only to avoid being dismissed in accordance with the article.
He or she resigns without notice in cases other than the ones set in Article 121 (if an employer breaches contract or in case of assault), and such with regards to unlimited contracts; or before the completion of five years of continuous service in limited contracts.

Get your gratuity benefits

Make sure that you understand the benefits you are entitled to, whether you resign or lose your job under any other circumstances. Your gratuity pay can help during your job search or as a means to support you during retirement.

What is Gratuity? Meaning and Importance

The gratuity is an end-of-service benefit given to the employee by the employer in United Arab Emirates. The gratuity is a lump sum amount paid by the employer to all eligible employees when they resign or get terminated or their contract period is over.

As per UAE Labour Law Rules, every employer or company is required to pay gratuity to its employees/workers at the time of end-of-service. Both the permanent and contractual/temporary employees are entitled to receive gratuity from their employer if they meet the required eligibility criteria.

Who is Eligible to Get Gratuity in UAE?

Every employee, who has completed at least one year of service with the same employer, is eligible to get gratuity in UAE. The employer needs to calculate and pay gratuity to the eligible employee at the time of end of employment due to whatever reason.

To bring more clarity, here I provide types & categories of employees that are eligible for gratuity benefit in UAE.

Both the Emirati Citizens and Expat Employees
Both the Male Employees and Female Employees
Employees on Limited Contracts and Unlimited Contracts
Permanent Employees and Contractual Employees
Federal Government Employees
Private Sector Employees
Employees Who Resigned from the Job
Employees Who are Terminated by the Employer/Company
Employees Whose Contract Period is Over
Employees Who Took Retirement

In case an employee has worked for less than one year, s/he is NOT eligible to get gratuity and the employer is not liable to pay gratuity to such employees.

What is Gratuity Calculator UAE?

The Gratuity Calculator UAE is a special calculator designed for calculation of gratuity of the employee in United Arab Emirates.

The employees who are working in Dubai, Abu Dhabi, Sharjah, Ajman or any other Emirate, can use the UAE Gratuity Calculator to calculate gratuity amount that they are eligible to receive from the employer.

You can check the Live Gratuity Calculator UAE above. The UAE gratuity calculator is available for free for everyone who wants to calculate gratuity based on the basic salary and other factors.

The UAE gratuity calculator is applicable in entire country, so the employees of Dubai can use it as a gratuity calculator Dubai, while Abu Dhabi employees can use it as a gratuity calculator Abu Dhabi for quick calculation. If you work in Sharjah, you can consider the above calculator as the gratuity calculator Sharjah to calculate your gratuity benefit.

How to Use Gratuity Calculator UAE

To calculate gratuity without any confusion or manual formula, you must use the Gratuity Calculator UAE mentioned above. Kindly follow the step-by-step process given below.

Enter Last Basic Salary (without any allowances or perks).
Select Contract Type (Limited or Unlimited).
Select Employment End Type (Termination/End of Contract or Resignation).
Enter First Working Day as DD-MM-YYYY.
Enter Last Working Day as DD-MM-YYYY.
Click on Calculate/Go button to proceed.
The calculator will show your total gratuity amount as well as year-wise gratuity benefit details on screen.

So, this is how you can use the UAE Gratuity Calculator to calculate gratuity of any employee/worker in Dubai, Abu Dhabi or other parts of UAE.

Factors to Consider for Gratuity Calculation in UAE

To learn how to calculate gratuity and the gratuity calculation formula, it is necessary to know about the factors to consider for calculating gratuity in UAE. As per the Labour Law Guidelines, the employer should consider following factors to calculate gratuity of his employee(s).

[I] Last Basic Salary:

The first and most important factor for calculation of gratuity in UAE is last basic salary of the employee. Kindly note that additional allowances for dearness, transport, children’s education, overtime and other perks/benefits are not included in basic salary.

So, the basic salary considered for gratuity calculation in UAE does not include any additional allowances.

If you are an employee, you should consider your basic pay salary for gratuity calculation.
If you are an employer/company, you should consider your employee’s basic salary.

[II] Contract Type:

You must know the contract type to calculate gratuity. The employers/companies in UAE hire employees on two types of contracts i.e. Limited Contract or Unlimited Contract.

A Limited Contract is linked with the concerned employee’s Residency Visa. So, the contract expires together with the visa of the employee if not renewed by both the employer & employee.
An Unlimited Contract is an open-ended contract that can be terminated either by the employer or the employee or by the Law if needed.

[III] Employment End Type:

The gratuity calculation formula is different for resigned employees and terminated employees. So, you need to select the employment end type option as Termination/End of Contract or Resignation as applicable in the gratuity calculator UAE.

[IV] Number of Service Years:

The last yet very important detail for calculating gratuity amount is the number of service years. You must know how many years you (the employee) has completed with the current employer/company in UAE. The entire working period, including service years and months, is considered to find the accurate gratuity amount at the end of the service.

So, these are the four most important factors that you must consider to calculate gratuity as per the formula given by UAE Labour Law.

Important Points about Gratuity in UAE

There are some important points about Gratuity in UAE, every employee and employer should know about these points.

The gratuity must be calculated on the last basic salary without any additional allowances and without cutting-down any expense from the basic salary.
If an employee has not completed one year of service at current employer, s/he is not eligible for gratuity.
If an employee has caused loss or damage to employer/company’s materials or assets/equipment, s/he is not eligible to get gratuity.
The employer can disqualify an employee from gratuity benefit if the employee is not able to do the basic work covered in his/her job profile.
If an employee has an amount to pay to the employer/company, the employer can adjust that amount with gratuity and pay the remaining amount to the employee.
The Total Gratuity Benefit Amount must Not exceed the employee’s 2 years salary amount.

Gratuity Calculation Formula for Limited Contract

The UAE Labour Law Department has given a specific formula for gratuity calculation of the employees working under a Limited Contract in UAE.

Service Years – 1 to 5 Years

Gratuity = (Last Basic Salary x 21 Days x Service Years)/30

Service Years: More than 5 Years

Gratuity = (Last Basic Salary x 30 Days x Service Years)/30

Gratuity Calculation Formula for Unlimited Contract

The employment under an Unlimited Contract does not have a time limit or validity. So, the UAE Labour Law Department recommends to calculate gratuity of employees working under an Unlimited Contract by their employment end type i.e. Resignation or Termination/End of Contract.

For Resignation:

If the employment ended by resignation of the employee, consider following rules for gratuity calculation for an unlimited contract.

Service Period	Gratuity Calculation Rules
If an Employee Resigns in Less than 1 Year	No Gratuity will be Paid.
If an Employee Resigns in 1-3 Years of Service	1/3^rd of 21 Days Basic Salary for Each Service Year will be Paid as Gratuity.
If an Employee Resigns in 3-5 Years of Service	2/3^rd of 21 Days Basic Salary for Each Service Year will be Paid as Gratuity.
If an Employee Resigns after 5 Years of Service	For First 5 Years – 21 Days Basic Salary for Each Service Year will be Paid as Gratuity.From 6^th Year – 30 Days Basic Salary for Each Service Year will be Paid as Gratuity.

1 to 3 Years:

Gratuity = [Last Basic Salary x 21 Days x 1/3 x Completed Years of Service] ÷ 30

3 to 5 Years:

Gratuity = [Last Basic Salary x 21 Days x 2/3 x Completed Years of Service] ÷ 30

After 5 Years:

First 5 Years: Gratuity = [Last Basic Salary x 21 Days x Completed Years of Service] ÷ 30

After 5 Years: Gratuity = [Last Basic Salary x 30 Days x Completed Years of Service from 6th Year] ÷ 30

For Termination or End of Contract:

If the employment is ended by termination of the employee or end-of-contract, consider the following rules for gratuity calculation for an unlimited contract.

Service Period	Gratuity Calculation Rules
If an Employee is Terminated in Less than 1 Year	No Gratuity will be Paid.
If an Employee is Terminated in 1-5 Years of Service	21 Days Basic Salary for Each Service Year will be Paid as Gratuity.
If an Employee is Terminated after 5 Years of Service	For First 5 Years – 21 Days Basic Salary for Each Service Year will be Paid as Gratuity.From 6^th Year – 30 Days Basic Salary for Each Service Year will be Paid as Gratuity.

For First 5 Years:

Gratuity = [Last Basic Salary x 21 Days x Completed Years of Service] ÷ 30

After 5 Years:

Gratuity = [Last Basic Salary x 30 Days x Completed Years of Service from 6th Year] ÷ 30

In this way, all the employers or companies are required to pay gratuity to their employees when they retire or resign or get terminated or their contract period gets over.

The gratuity is payable only to the employees who have been working with the same company for one year or longer. The employers/companies must calculate gratuity as per the formula and calculation rules mentioned above.

Summary:

To make gratuity calculation easier, I have shared all necessary information about Gratuity Calculator UAE and its usage guide. You can use the calculator to find out any employee’s gratuity benefit amount in seconds.

Disclaimer:

The Gratuity Calculator UAE given above is made for calculating gratuity by an individual or company/organization. It is designed to calculate and show accurate gratuity amount but it does not claim any legality.

In case of any dispute in gratuity calculation, the concerned employer and employee(s) should contact UAE Labour Department, Ministry of Human Resources & Emiratisation (MOHRE).

FAQs about Gratuity Calculator UAE

Who can get gratuity benefit in UAE?

Any employee can get gratuity benefit in UAE if s/he has completed minimum one year of service at current/same employer.

What is the maximum gratuity limit?

The maximum gratuity limit is the employee’s 2 years salary. It means that the total gratuity of an employee cannot exceed last two years total salary of that employee.

When an employee can get gratuity?

An employee can get gratuity when s/he resigns or gets terminated from a job in UAE. An employee can get gratuity also when his/her contract period is over and it is one year & longer.

How do I calculate my gratuity amount?

You can use the Gratuity Calculator UAE above to calculate your gratuity amount easily.

What is the other name of Gratuity Calculator Dubai?

The gratuity is calculated at the time of end of employment service,. Therefore the Gratuity Calculator Dubai is also known as the End of Service Calculator Dubai that you can use for your gratuity computation after resignation or termination.

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