Saturday, June 4, 2011

GRATUITY / SEVERANCE PAY CALCULATION AS PER UAE LABOUR LAW


The UAE labour law covers many of your rights as an employee including employment contracts, records of employees, salaries, working hours, national holidays, annual leave, health and safety of employees, disciplinary codes of conduct, termination of appointment, repatriation and gratuity or end of service benefits.  The Ministry of Labour has introduced a compulsory electronic salary transfer system, to guarantee prompt salaries of all employees.




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:

21 days’ wage for each of the first five years of service

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.



Severance pay shall be calculated on the basis of the wage last due, but shall not include whatever is given in kind, 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 allowances (Article 134)




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)


For more queries / clarifications about Severance / End of Benefits Pay as per UAE Labour Law, please contact Ma'am Isabel Saguinsin II at +971 50 752 8573 any day after 9pm or send your comment and will respond accordingly.

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