Calculate your end of service benefit and gratuity pay easily with our guide
7 January 2013| Last updated on 28 February 2019
Most, if not all expats, working for companies in Dubai are not entitled to a pension - but are eligible for an end-of-service benefit.
This benefit is more commonly referred to as gratuity or severance pay. It's a payment that most expats will use for their retirement plans, but how exactly can you work out how much you'll receive?
According to Article 132 of the UAE's Labour Law, any employee who has completed one or more years of continuous service shall be entitled to severance pay at the end of their employment. This law applies to ALL UAE employees.
Your UAE gratuity pay is calculated as follows:
- 21 days' wage for each of the first five years of service
- 30 days' wage for each additional year of service, provided that the aggregate amount of severance pay should not exceed two year's wage
Article 132 also states that the days of absence from work without pay shall not be included in the calculation of the period of service.
To add, Article 133 stipulates that "the worker shall be entitled to a gratuity for the served fraction of a year, provided that he completes one year of continuous service."
Your UAE severance pay is also calculated on the basis of your last wage; but this does not include whatever is given in kind - like housing allowance, transport allowance, travel allowance, overtime pay, representation allowance, cashier's allowance, children's education allowance, allowance for recreational and social facilities and any other bonus or allowance as per Article 134 of the same law.
Deductions in your UAE severance pay
Indefinite term contracts in UAE
As per Article 137, 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.
Definite term contracts in UAE
According to Article 138, ahere 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.
Provident and pension funds in UAE
As stipulated by Article 140, 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.
Artie 141 states that 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.