How to Calculate Gratuity in UAE Manually?

Here is a step-by-step guide to Calculate Gratuity in UAE

Calculating your end-of-service (gratuity) pay is an important task. Before attempting the calculation, it is advised that you read the UAE Labor Law by the Ministry of Labor.

Gratuity Calculation is based on various factors like::

• 1. Contract Type (Limited / Unlimited) Now all are Limited.
• 2. Termination or Resignation.
• 3. Service period of employee.
• 4. Most Recent Paid Salary (Basic Salary).

Note: Calculations for gratuity pay may differ depending on whether you’re on a Limited (Fixed Term) contract of Unlimited (Undefined) contract.
If an employee is terminated from his/her job, unless he/she violates the rules as stated in Article 139 of the Labor Law, the employee is still entitled to gratuity pay. If the employee resigns by himself before completing one year, then they will not be entitled to any gratuity pay.

Calculations for Limited Contract Gratuity Pay:

Less than 1 year of service

Leaving job before completing one year of service means the employee is not entitled to any gratuity pay.

Less than 1 year of service

Leaving job before completing one year of service means the employee is not entitled to any gratuity pay.

Between 1 year and 5 years of service

Employee is entitled to full gratuity pay based on 21 days salary for each year of work.

5 or more years of service

Employee is entitled to full gratuity pay based on 30 days salary for each year of work.

Gratuity Calculation Example:

Basic salary: AED 10,000/-
a. 10,000 ÷ 30 days = 333.30. Your daily wage is AED 330.30-
b. 330.30 x 21 days = 6,936.30. So 21 days salary is AED 6,936.30 in gratuity entitlement for each year of service.
Multiply this amount to number of years of service up to 5 years.
Another 30 days calculation for those exceeding 5 years of service
c. 330.30 x 30 days = AED 9,909. So 30-days salary is AED 9,909 in gratuity entitlement for each year of service. As long as the total figure does not exceed two years total salary amount.

Read Gratuity Calculation article on Wikipedia

Here is the HR Software to calculate gratuity for you.

HR software UAE to manage employee records, track leaves, calculate gratuity, payroll calculation and create wps sif file.