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Under UAE labor laws, employees are entitled to receive end-of-service benefits, commonly referred to as Gratuity, if they have worked for a minimum of one year. The calculation of the service period excludes days of unpaid leave, and employers can subtract any outstanding amounts owed by the employee from the Gratuity payment. The UAE Gratuity is determined by granting 21 days' worth of wages for each year of the first five years of service, and 30 days' worth of wages for each additional year beyond that.
Calculating gratuity in the UAE involves a step-by-step process. Here's a breakdown of how it's calculated:
To be eligible for gratuity, an employee must have completed a minimum of one year of continuous service with the same employer.
Determine the employee's basic salary. This should not include any additional allowances, bonuses, or other benefits. The basic salary is what is used for the gratuity calculation.
Divide the annual basic salary by 365 to find the daily wage. This is the rate at which daily gratuity is calculated.
For the first five years of service, the employee is entitled to 21 days of basic salary for each year. Multiply the daily wage by 21 to get the gratuity for each year in the first five years.
Beyond the initial five years of service, the employee is entitled to 30 days of basic salary for each additional year. Multiply the daily wage by 30 to get the gratuity for each year beyond the first five years.
Add up the gratuity amounts calculated in steps 4 and 5 to get the total gratuity.
Total Gratuity = (Basic Daily Wage x 21 x Number of Years for the first five years) + (Basic Daily Wage x 30 x Number of Additional Years)
It's important to note that any days of absence without pay during the employment period are excluded from the calculation, and employers may deduct any outstanding amounts owed by the employee from the gratuity payment. This step-by-step process provides an overview of how gratuity is calculated in the UAE, ensuring that employees receive their end-of-service benefits as per the prevailing labor laws. Please consult with your HR department or a legal expert for specific calculations based on your employment situation.
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