How to calculate gratuity in the UAE

How to calculate gratuity in the UAE

Gratuity is a monetary payment made to an employee in exchange for their services to the company. It is commonly characterized as a one-time payment made by a corporation to an employee who resigns or retires. At the end of service you must know how to calculate gratuity in UAE.

Perks of Gratuity

It is a monetary reward given to employees in exchange for their loyalty to the organization. This benefit is frequently seen as a valuable aid, has been considered to employees in their financial planning. It is necessary for every employee to understand gratuity pay and how to calculate it in order to minimize employer errors.

The gratuity calculator based on the type of contract. Let’s discuss the ways for gratuity calculator in the UAE.

1- Limited Contract Gratuity

A limited contract is self-explanatory; it is an employment contract that is designed to last for a set amount of time. These contracts have a start and end date, and after the end date, the contract will automatically terminate.
According to UAE labor law, if an employer wants to end a limited contract early, they must give the employee an ‘early termination compensation’ of at least three months’ payment.
According to UAE labor law, if an employee wants to end a limited contract prematurely, he or she must pay the employer a ‘early termination compensation,’ which is half of the three months’ wage. A labor ban will also be placed on the employee, preventing him from working elsewhere for a period of 6 to 12 months. The employee may be able to resume work elsewhere if the prohibition is lifted in certain situations.

GRATUITY ESTIMATION FOR A LIMITED CONTRACT

  • Service to the company for less than one year: If you leave your job within the first year, you will not be paid a gratuity
  • Between one and five years of service to the company: If you leave your job between 1 and 5 years, you will be paid a full gratuity of 21 days’ wages for every year you worked.
  • After 5 years of service to the company, termination of employment leads to a full gratuity payment of 30 days’ salary for each year of service.

2- Unlimited Contract Gratuity:

The existence of an unlimited contract is not confined to a specified time period or specific years. It merely provides the start date, and the expiration date is determined later by mutual agreement between the employer and the employee for contract termination.
According to UAE labor regulations, contract termination is acceptable if the employer is given a minimum of 30 days’ notice or if a longer period is mutually agreed upon. If the grounds for firing are gross misconduct, the termination is also possible. In the latter case, however, no warning is required, and no gratuity will be given. 

GRATUITY ESTIMATION FOR AN UNLIMITED CONTRACT

  • Service to the company for less than one year: If you leave your job within the first year, you will not be paid a gratuity
  • Between one and three years of service to the company: If you leave your job after 1-3 years, you will be paid 1/3 of your income for the next 21 days.
  • Between 3-5 years of service to the organization: When an employment is ended between the years of 3 and 5, the employee is entitled to 2/3 of the compensation for each year he/she worked.
  • After five years of service to the company, termination of employment leads to a full gratuity payment of 21 days’ compensation for each year of service.
  • Between 3-5 years of service to the organization: When an employment is ended between the years of 3 and 5, the employee is entitled to 2/3 of the compensation for each year he/she worked.
  • After five years of service to the company, termination of employment leads to a full gratuity payment of 21 days’ compensation for each year of service.

When a person decides to leave a job, the gratuity calculator might assist him realize how much he anticipates from the company. To acquire a better knowledge of gratuity pay, the employee should consult a lawyer for any further clarification or dispute resolution in the field of gratuity payment.

Frequently Asked Questions

Q1: Is it possible to receive gratuity if I resign?

Ans. According to the Gratuity Act, gratuity is only paid after 5 years of service. If you retire before completing five years of employment, you will not be eligible for gratuity.

Q2: What is the gratuity limit?

Ans. According to the Gratuity Act, gratuity is only paid after 5 years of service. If you retire before completing five years of employment, you will not be eligible for gratuity.

A maximum of Rs.20 lakh of gratuity can be awarded to a single employee. When an employee quits a company, he receives a gratuity as a sign of appreciation for his services.

Q3 How do I calculate gratuity in UAE?

Ans. According to the Gratuity Act, gratuity is only paid after 5 years of service. If you retire before completing five years of employment, you will not be eligible for gratuity.

If an employee has worked for three to five years, he is entitled to two-thirds (2/3) of the basic income as gratuity. If an employee has worked for more than 5 years, he is entitled to gratuity compensation equal to 21 days’ basic income.

Leave a Reply

Your email address will not be published. Required fields are marked *