Did you know that if you have worked in the United Arab Emirates (UAE) for at least 1 year, you are already entitled to “end of service” pay or gratuity?
If you plan on working in the UAE or are already working there and want to know how much you will receive after your contract ends, then here’s how you can get a rough estimate based on the contract type you have at your job and how many years you have been working at the company or for your employer.
What’s the Basis of Your “End of Service” Pay?
The amount of your final “end of service” pay depends on a number of factors but the computation will be based on your latest salary. However, this does not include bonuses or allowances; thus, if you’re trying to compute your gratuity, use only your most recent base pay.
Generally, there are two types of contracts in the UAE: limited contract and unlimited contract.
What You Can Get with Limited Contract
Obviously, limited contract is only for a fixed term. At the end of the term you will receive gratuity as follows:
- Less than 1 year of service – no gratuity
- 1 year to 5 years of service – full gratuity equivalent to a 21-day salary for each year of service
- More than 5 years of service – full gratuity equivalent to a 30-day salary for each year of service
For example, if you are receiving Dh15,000 per month as basic salary and had been working for 4 years under limited contract, here’s how you compute your gratuity:
- Dh15,000 / 30 days = Dh500 (daily wage)
- Dh500 x 21 days = Dh10,500 (21-day salary)
- Dh10,500 x 4 years = Dh42,000 (end of service pay)
What You Can Get with Unlimited Contract
Unlimited contract obviously means there’s no fixed term in the contract and no specific end date. The worker or the employer needs to give notice at least 1 month or up to 3 months before ending the contract.
Here’s what you will receive if you fall under this category:
- Less than 1 year of service – no gratuity
- 1 year to 3 years of service – One third (1/3) of your 21-day gratuity pay
- 3 year to 5 years of service – Two thirds (2/3) of your 21-day gratuity pay
- More than 5 years of service – full 21-day gratuity pay
For example, if you are receiving Dh15,000 per month as basic salary and had been working for 4 years under unlimited contract, here’s how you compute your gratuity:
- Dh15,000 / 30 days = Dh500 (daily wage)
- Dh500 x 21 days = Dh10,500 (21-day salary)
- Dh10,500 x 0.66 = Dh6,930 (end of service pay)
It would surely be nice if all workers were under a limited contract but get to work many years, if that would be the gratuity computation, right?
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