How to Calculate Gratuity in UAE for Unlimited Contract

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Gratuity is one of the many end-of-service benefits that employees in the UAE are entitled to receive upon completing their employment contract. However, calculating gratuity can be complicated, especially for those on unlimited contracts. In this article, we’ll provide you with a step-by-step guide on how to calculate your gratuity if you’re on an unlimited contract.

Employees who have been with the company for at least 5 years are eligible to receive gratuity. A gratuity is a type of pay that an employee would get once his or her service ends.

Workers who have been employed for less than one year do not receive gratuity.

If an employee was resigned or terminated, their retirement plan is different from if they were

Limited Contract

In a limited contract, the employee has to stay for fixed years or days as per the agreement signed between employee and employer.

The contract can be terminated or extended through mutual understanding by both parties. If an employee quits before the end of their contract, it can result in a labor ban.

Unlimited Contract

There’s no time period in an unlimited contract. The employee can give his services for as long as he wants. If the employer decides to resign, there are 1 to 3 months of the notice period.

The formula for Unlimited Contract

  • 1 to 3 years of service
    Gratuity = (Basic salary x 7 days x service years)/30
  • 3 to 5 years of service
    Gratuity = (Basic salary x 14 days x service years)/30
  • 5 or more years of service
    Gratuity = (Basic salary x 21 days x service years)/30

How to Calculate Gratuity in UAE for Unlimited Contract:

A Step-by-Step Guide

Understanding Unlimited Contracts in the UAE

Before delving into the mechanics of calculating gratuity for unlimited contracts, it’s important to understand what an unlimited contract is. Unlike fixed-term contracts, unlimited contracts have no set end date and can be terminated by either party with notice. Knowing the specifics of your contract will help you determine your entitled gratuity amount.

Gratuity Calculation Formula for Unlimited Contracts

Calculating gratuity for unlimited contracts involves multiplying your basic salary by a factor based on your length of service. For those who have worked less than a year, the factor is 21 days’ worth of pay. For those who have worked between one to three years, the factor is 30 days’ worth of pay. And for those who have worked more than three years, the factor increases to 45 days’ worth of pay.

Additional Benefits That Contribute to Gratuity

In addition to basic salary, there are other benefits that contribute to your gratuity calculation. These include housing allowances, transportation allowances, and any other regular payments made by your employer on your behalf. To calculate your total gratuity, make sure to include all such benefits in your calculation.

Read about How to Calculate Gratuity in Dubai

How to Calculate for Partial Years

If you’ve worked for a partial year, calculating gratuity can be a little more complicated. In such cases, gratuity is calculated on a pro-rata basis, meaning your gratuity entitlement will be determined based on the number of days you worked as a proportion of the full year.

Tips for Maximizing Your Gratuity Entitlement

To maximize your gratuity entitlement, it’s important to negotiate better terms when signing your employment contract. Negotiating a higher basic salary, for example, will result in a higher gratuity payout at the end of your service period. Additionally, staying with a company for longer periods of time will result in a higher gratuity factor, so consider the long-term benefits of staying put.

Conclusion:

Calculating gratuity for unlimited contracts in the UAE can seem daunting, but by understanding your contract and following the formula outlined above, you can determine your entitled gratuity amount. Remember to include all benefits in your calculation, and negotiate better terms when possible to maximize your entitlement.