7 January 2013| Last updated on 7 July 2015
Dubai End of Service Benefit or Gratuity Pay Regulations
Generally expatriates working for local Dubai based companies or the Dubai Government are not entitled to a pension but they are eligible for end-of-service benefit commonly known as a gratuity or severance pay.
If you are working for an international company and are being paid out of your home country you will probably retain your home country pension – this is something you should certainly check in your contract before being expatriated.
Calculation of Gratuity/Severance Pay
According to Article 132 of the UAE Labour Law, a worker who has completed one or more years of continuous service shall be entitled to severance pay at the end of his employment.
The severance pay shall be calculated as follows:
a. 21 days’ wage for each of the first five years of service
b. 30 days’ wage for each additional year of service provided always that the aggregate amount of severance pay should not exceed two year’s wage.
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Deductions in Severance Pay
Where a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay. Such a worker shall be entitled to two-thirds of the said severance pay, if his continuous service exceeds three years up to five years and to the full severance pay if it exceeds five years. (Article 137)
Where a worker under a definite term contract abandons his employment at his own initiative before the expiry of his contract period, he shall not be entitled to severance pay, unless his continuous period of service exceeds five years. (Article 138)
Provident /Pension Fund
Where the firm has a provident fund for the workers and the rules of the fund stipulate that whatever the employer pays into the fund for the worker’s account is in discharge of his legal obligation in respect of severance pay, the worker shall be paid the savings balance in his account or the severance pay due the Law, whichever is greater. Where the rules of the fund do not stipulate that the amounts paid by the employer are in discharge of his legal obligation towards the severance pay, the worker shall receive whatever is due to him in the provident fund in addition to the statutory severance pay. (Article 140)
Where a firm has a retirement fund, insurance or similar scheme, a worker who is entitled to a retirement pension may opt for treatment under the said pension or severance pay or under the pension or insurance scheme, whichever is more advantageous to him. (Article 141)
You can read the whole UAE Labour Law in PDF format here>> and here is the full excerpt from the UAE Labour Law...
END OF SERVICE REMUNERATION
The employee who has completed one year or more in the continuous service, is entitled to the end of service remuneration at the end of his service. Days of absence from work without pay are not included in computing the period of service, and the remuneration is to be calculated as follows :-
1. Twenty one day's pay for each year of the first five years of service.
2. Thirty days pay for each additional year.
Provided that the entire total remuneration shall not exceed two year's pay.
The employee shall be entitled to end of service remuneration in respect of fractions of the year payable pro rata to the time actually worked provided that he has completed one year of continuous service.
"Without prejudice to the provisions of some laws regarding the granting of pensions and gratuities to employees of some establishments, the end of service gratuity shall be computed on the basis of last wage which the employee was entitled to, in respect of those drawing their salary per month, week or day, and on the basis of average daily wage stipulated in Article (57) in respect of those drawing their wages on piece work basis. The wage which is considered as basis for computation of the end of service gratuity shall not include anything given to the labourer in kind, housing allowance, transport allowance, travel allowance, overtime allowance, representation allowance, cashier's allowance, children education allowance, recreation and social services allowance or any other allowances".
The employer may deduct any amounts due to him from the employee's end of service remuneration.
In fulfillment of the provisions of Article (132), cases of employment preceding the effective date of this Law shall not be considered as cases entitling the employee to end of service gratuity. Without prejudice to rights acquired by the employee under any repealed labour law or contracts of employment, agreements, by-laws or regulations of the establishment. In the event of his death, the employee's gratuity shall be paid to his legal heirs.
If an employee under a contract with unlimited period has left his work at his own option after a continuous service of not less than one year and not more than three years, he shall be entitled to one third of the end of service gratuity provided for in the previous Article. If the period of his continued service is more than 3 years and less than 5 years he becomes entitled to 2/3 of the said gratuity, but if his continued service exceeds 5 years, he becomes entitled to the entire gratuity.
If an employee under a contract with limited period leaves his work at his own option before the end of the contract period he shall not be entitled to end of service gratuity unless the period of his continuous service exceeds five years.
The employee shall be fully deprived of the end of service gratuity in any of the following cases:
a. if he is dismissed from service for any reason in accordance with Article (120) of this Law or if he leaves his work to avoid dismissal in accordance with the provisions of this Article.
b. If he leaves his work willingly and without notice in cases other than those enumerated in Article (121) under this law with respect to unlimited period contracts or before he completes five years of continuous service with respect to limited period contracts.
In any establishment where a saving fund is raised for employees and if the regulations of such fund provide that payments made by the employer to the fund for the account of employee is a legal commitment against the end of service gratuity, the amount of savings or benefits due hereunder shall be paid whichever is greater. If the fund regulations have no provisions that amounts paid by employers is a legal commitment for the end of service gratuity, the employee shall collect amount due to him from the saving fund in addition to the legal gratuity.
In any establishment where a pension or security schemes or similar schemes are maintained, the employee who is entitled to retirement pension may select either this latter or the prescribed gratuity or whichever from both thus is more favourable to him.
EW Page last updated May 2012. Please visit www.mol.gov.ae for updates and more information