Please be informed that you have to verifiy whether your contract is Unlimited or Limited. then go through the following rules and regulations.
PAYMENT OF GRATUITY
What is the employee entitled to on the termination of his employment contract?
On the termination of the employment contract, an employee is entitled to the following:
1. A notice period, or any amount due in lieu of the notice period in the case of an unlimited contract.
2. In the case of an unlimited contract, compensation for unreasonable dismissal if the contract was terminated by the employer for unreasonable cause.
3. In the case of a limited contract, compensation equivalent to the period until the end of the contract, or three month’s
wages, whichever is shorter.
4. Payments equivalent to the balance of unutilised leave or any part thereof.
5. Payments for overtime or any balance of wages due and not yet paid.
6. End of service gratuity calculated on the duration of the employment.
7. Repatriation expenses as per the Law or the employment contact, subject to the employee not being in violation or in breach of either the Law or the employment contract.
What does the term end of service gratuity mean in terms of compensation?
In the case of an employment agreement for a unilimited term, an employee who completes one year or more in continuous service shall be entitled to gratuity at the end of their service. The gratuity shall be calculated as follows:
(1) 21 days wages for each year of the first five years.
(2) 30 days wages for each additional year on condition that the total of the gratuity does not exceed the wages of two years.
How is gratuity calculated?
Gratuity is calculated on an annual basis or part thereof provided that the employee has actually completed one year of employment with the employer or more. Days of absence from work without pay are not included in calculating the length of service. However, he will be entitled to end of service gratuity for fractions of a year he spent in service provided that he has completed at least one year in continuous employment.
On what basis is gratuity calculated?
Without prejudice to what is stipulated by the policies of some establishments in the granting of pensions or retirement benefits to employees, gratuity for those who are paid monthly, weekly or daily wages is calculated according to the employee’s last received basic wage before the employment was terminated. This wage is the basis for calculating the gratuity for the whole period of an employee’s employment.
Would a commission or payment by percentage be considered a basic wage?
According to a court ruling delivered by the UAE court, except for allowances and bonuses, any amount payable to an employee as wages including wages paid by percentage basis, commissions, or for performance will be considered as wage and will be taken into consideration in calculating gratuity.
Would an employee who was employed prior to the Law coming into force be entitled to gratuity?
According to the UAE law, employees who were working prior to the date the Law came into force will not be entitled to gratuity for the period preceding the Law. This is without prejudice to any entitlements or payments they were entitled to under other laws or regulations applicable. However, gratuity for those employees under the Law is calculated thereafter on the date ~22~ the Law came into force.
Can the employer deduct any payment from the gratuity payable to the employee?
The employer may deduct any amount owed to him by the employee such as outstanding loans from the employees end of the service gratuity. If there is any dispute over the payment of gratuity or the amount of gratuity payable, the matter should be referred to the Ministry for mediation.
Is the amount calculated for gratuity affected if the employee resigns from employment?
An employee employed under a contract for an unlimited period who resigns after a continuous service of not less than one year and not more than three years is entitled to one third of the end of service gratuity provided above. If the period of continuous service is more than three years and less than five years he is entitled to two thirds of the gratuity.
If his continuous service is more than five years, he is entitled to the full gratuity.
If an employee who is employed under a contract for a limited period on the other hand chooses to resign before the end of
the contract, he is not entitled to end of service gratuity unless his continuous service exceeds five years.
Under what circumstances can an employee be deprived of his end of service gratuity?
An employee may be deprived of his end of service gratuity if he has been dismissed for one of the reasons stated in Article 120 of the Law, or if he terminated his employment to avoid such dismissal.
Under what circumstances will an employee be entitled to gratuity if he terminates his employment contract without notice?
Under Article 121 of the Law, an employee will be entitled to gratuity on termination without notice in either of the following circumstances:
(1) The employer has failed to comply with his obligations towards the employee, as provided for in the employment contract or in the Law.
(2) The employee was assaulted by his employer or his legal representative.
The above applies to employees who have been continuously employed for a minimum period of one year, regardless of whether the contract of employment is for a fixed or unlimited term.
If the establishment or company has a pension scheme, which is beneficial to the employee, is this a substitution for the payment of gratuity?
If the employer has a pension scheme applicable to all the employees of the business, such a scheme must be published and known to all employees, and must specify that it will be a substitute to the gratuity rules outlined in the Law. It must also be more beneficial to the employees than the gratuity provision of the Law. Otherwise the employee may benefit from both unlessthe employee agreed or consented to the scheme in question.
Hope the above guidelines would help you to clarify your doubts on gratuity payment.
Thanks and regards,
K Saravana Kumar
27th July 2008 From United Arab Emirates , Abu Dhabi
1st September 2008 From United Kingdom , London
meaning - if i terminate an employee who has 45 days of notice period but did not make him work it shal i pay him his gratuity until his actual worked day or until the last day of his notice period?!
6th September 2009 From Kuwait , Kuwait
I just want to ask regarding for limited contract What is the computation of the gratuity? is it the same with unlimited contract?
If the employee transferred to other employer except the one and one half days penalty is there other fees that he would pay. and what would be the process if the employee is willing to pay the penalties?
I he have ban also even he paid the penalties?
10th May 2010 From United Arab Emirates , Dubai
I'm on an unlimited contract in the UAE. I'll be completing 5 years of service mid-Jul-11. If I resign after completion of the 5th year; will I get -
a) (21 x 5) days gratuity; or,
b) (30 x 5) days gratuity; or,
c) (21 x 5 + 30 x Y/12) days of gratuity - where 'Y' is the total amount of months worked beyond 5 years?
Greatly appreciate you responses.
12th March 2011 From Saudi Arabia , Riyadh