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UAE: How is gratuity calculated if salary changes during course of service?

A KT reader wants to estimate the earned amount for a period of 10 years

Question: I have been working in a Dubai-based company for the last 10 years. I drew a (basic) monthly salary of Dh6,000 for nine years. I was given a promotion, and have been drawing a basic salary of Dh9,000 over the last one year. How will my gratuity be calculated?

Response: Pursuant to your queries, it is assumed that you are employed by a private mainland company based in Dubai. Therefore, the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the ‘Employment Law’) are applicable to you.

In the UAE, an employee is entitled for gratuity if he or she has completed one year of continuous service with the same private mainland company. For the first five years of continuous service, an employee is entitled to receive 21 days’ basic salary for each year of service as gratuity. For each subsequent year of service with the same employer, an employee is entitled to 30 days’ basic salary as his or her gratuity. These are in accordance with Article 51(2) of the Employment Law, which states: “A foreign full-time employee who completes one or more years in the continuous service is entitled to a severance pay, which is calculated on the basis of the basic salary as follows:

a. (21) twenty-one working days' of salary for each of the first years of service.

b. (30) thirty working days' of salary for each subsequent year of service.”

Further, the gratuity of an employee is calculated on the last basic salary drawn by the employee. This is in accordance with Article 51 (5) of the Employment Law, which states: “Without prejudice to the legislation for pensions or retirement benefits to employees in certain establishments, the severance pay shall be calculated on the basis of the last basic salary received by the foreign employee, for monthly, weekly, daily paid employees and on the basis of the average daily salary for piecemeal paid employees.”

Based on the aforementioned provisions of law, as your current basic salary is Dh9,000, your gratuity will be calculated on the same. Further, you are entitled for 21 days of basic salary as gratuity payment for the first five years of service with your employer, and thereafter, 30 days for another five years of service.

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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