When it comes to calculating gratuity in the UAE, there are several factors that come into play. For employees on unlimited contracts, gratuity is calculated based on the length of continuous service with the company and the employee’s basic salary.

According to Emirati labour law, employees on unlimited contracts are entitled to gratuity after completing one year of continuous service with their employer. The amount of gratuity is calculated based on the employee’s basic salary and the length of their service with the company.

The formula for calculating gratuity for employees on unlimited contracts is as follows:

Gratuity = (Number of years of service x Basic Salary x 21 days) / 365

Let’s break down this formula:

Number of years of service: This is the total number of years the employee has worked with the company. Partial years are calculated on a pro-rata basis.

Basic Salary: This is the employee’s basic salary and does not include any allowances or bonuses.

21 days: This is the amount of days per year of service that an employee is entitled to for gratuity.

365: This is the number of days in a year.

To illustrate this formula, consider an employee who has worked for a company for five years on an unlimited contract with a basic salary of AED 5,000. Their gratuity calculation would be as follows:

Gratuity = (5 x 5,000 x 21) / 365

Gratuity = AED 7,260

In addition to calculating gratuity based on length of service and basic salary, there are a few other important factors to note. If an employee resigns within the first year of their employment, they are not entitled to any gratuity. However, if they resign after completing one year of continuous service, they are entitled to gratuity calculated based on the formula above. If an employee is terminated for misconduct, they are not entitled to gratuity.

It’s important to note that while gratuity is a legal entitlement for employees on unlimited contracts in the UAE, some companies may offer additional benefits such as end-of-service allowances or bonuses. It’s always a good idea for employees to consult with their HR department or refer to their employment contract to understand their entitlements.

In conclusion, calculating gratuity in the UAE for employees on unlimited contracts involves taking into account the length of the employee’s service and their basic salary. By following the formula outlined above, both employers and employees can ensure that gratuity is calculated accurately and in accordance with Emirati labour law.