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Gratuity in UAE: Will leave without pay impact final settlement calculations?

How is end-of-service gratuity calculated and paid? A KT reader asks

Question: I had to take some leaves without pay due to an emergency back home. Could you advise if this will impact my end-of-service gratuity? Also, please explain how it is calculated and paid.

Response: Pursuant to your queries, it is assumed that you are an expatriate employed by a mainland company in the UAE on a full-time basis. Therefore, the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of the Employment Relations (the ‘Employment Law’) are applicable.

In the UAE, an employee is entitled for severance pay (gratuity) if he or she has completed one year of continuous service with an employer. This is in accordance with Article 51(2) of the Employment Law, which states: "A foreign full-time employee who completes one or more year in the continuous service is entitled to a severance pay, which is calculated on the basis of the basic salary as follows:

a. 21 working days salary for each of the first five years of service.

b. 30 working days salary for each subsequent year of service.”

Further, period of absence from work without pay may not be included while calculating the severance pay (gratuity). This is in accordance with Article 51(4) of the Employment Law, which states: “Days of absence from work without pay shall not be counted within the period of service.”

An employer may deduct certain amount from the gratuity of an employee which is due to it either by law or on an order of the court. This is in accordance with Article 51 (7) of the Employment Law, which states: ”The employer may deduct from the severance pay, any amounts due by law or court order, in accordance with the conditions and procedures set by the Executive Regulations of this Decree-Law.”

The gratuity is usually paid along with other end of service benefits within 14 days of termination or expiry of an employee’s employment contract. This is in accordance with Article 53 of the Employment Law, which states: “The employer shall pay the employee within 14 days after the expiry of the contract al his salary and other entitlements provided for in this Decree-Law and its implementing resolutions, the contract or the Establishment by laws.”

Based on the aforementioned provisions of law, you as an employee is entitled for severance pay (gratuity) if you have completed more than one year of continuous service with your current employer. By practice, it is paid at the end of service of an employee along with other entitlements in the registered bank account. The said amount is paid through the Wages Protection System (WPS) of the Ministry of Human Resources and Emiratisation (the ‘MOHRE’).

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.

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