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uae gratuity law

Overview the Gratuity Law in UAE

If you want to understand the employment realm in UAE, you will definitely go through the Gratuity Law in UAE which falls under the country’s labour regulations. Through this law, the financial well-being of employees is safeguarded, which significantly impacts the relationship of employer and employee. The UAE Gratuity Law ensures end-of-service benefits clearly through a definite framework that outlines the employer’s obligations that are mandatory to fulfil.

It is essential to learn the new Gratuity Law in UAE because it is a crucial piece of the UAE labour framework to foster fair employment practices. In this article, we’ll dissect the UAE Gratuity Law, highlight its key provisions, learn its eligibility criteria, and the methods to calculate it. You’ll get valuable insights into how gratuity benefits are mutually agreed upon by employers and employees in the light of the legal landscape. 

What is the New Gratuity Law in UAE, 2024

uae gratuity law

The UAE’s employment regulations in the year 2023 introduced a new gratuity law in UAE which shifted the dynamics of the relationship of the company and the employee and fostered the workforce’s financial well-being.

The recalculation of gratuity benefits is the real essence of the gratuity law in UAE. It heavily relies on the employee’s time of service and the basic salary. Not only does it ensure a transparent and equitable approach to gratuity payouts, but also fosters fair treatment and compliance with the evolving legal regulations.

Furthermore, the UAE government is committed to continuously enhancing the conditions of working and financial security for employees and workers through this new UAE gratuity law.

Additionally, this legal development showcases the progressive vision of the UAE government to become a global talent hub innovative future. This law helps the UAE government to align employment regulations and evolving workforce needs and expectations.

A fair and robust employee gratuity system is now prevalent in UAE which establishes it as a country where the well-being of workers is prioritized and their rights are safeguarded. This approach is already forward-thinking and aligns well with international labor standards to adopt a work environment that is supportive and inclusive as well.

Eligible Criteria for Gratuity in UAE Law

Within the dynamic landscape of the UAE Gratuity Law, comprehending the criteria for eligibility is pivotal. It helps shed light on who is not eligible for gratuity in UAE. Individuals falling under these exclusions encompass those dismissed for gross misconduct, resigning voluntarily without notice, or engaged in temporary employment.

Moreover, employees on unlimited-term contracts with less than one year of continuous service find themselves ineligible for UAE gratuity law. The scope extends to part-time and temporary employees, along with those within the domain of government services.

Furthermore, this intricate framework ensures that gratuity benefits are accorded to individuals showcasing dedication and commitment over a substantial timeframe. Navigating these eligibility criteria becomes imperative for both employers and employees, fostering transparency and adherence to the established legal provisions. Such diligence contributes to cultivating a work environment characterized by fairness and security. It aligns with the evolving landscape of employment regulations in the UAE.

Service Requirement Years

Years required for service is the pivotal factor that heavily influences the UAE Gratuity Law and decides employee eligibility for gratuity benefits. This legal framework lets UAE-based company employees avail of gratuity payouts and benefits upon the continuous service of one year with the same employer. This one-year benchmark is mandatory for all employees for gratuity benefits.

Moreover, the law highlights the cumulative years of service summing up the totality of an employee’s tenure with a specific company. The cumulative approach emphasizes that with each additional service year, the entitlement of the accrual of gratuity spikes up. This nurtures a culture of healthy and long-term stability and commitment between employer and employee.

It is of utmost necessity for both employer and employees to understand the Years of Service Requirement to make informed decisions, contribute to overall transparency, and ensure fairness. This also reflects the future goals of UAE Gratuity Law to promote mutual understanding, compliance with the legal framework, and a scalable business and work environment in the UAE.

Types of Employment Contracts

Navigating the intricacies of the UAE Gratuity Law involves delving into the diverse landscape of employment contracts. These contracts play a pivotal role in shaping the gratuity entitlements for employees. Let’s explore the nuances of different employment contract types:

Limited (Fixed-Term) Contracts: 

Firstly, these contracts have a predetermined duration agreed upon by both parties. Employees under limited contracts can avail of gratuity payouts upon full-term completion successfully. It means that the contract term must be fulfilled to secure the benefits of gratuity.

Indefinite or Unlimited Contracts: 

These employment contracts that lack a specified end date provide a lot of flexibility for employers and employees and their gratuity benefits rely heavily upon one year of continuous service completion.

Employers and employees must learn these distinctions to fulfill legal obligations and ensure fair employee treatment, long-term commitment, and fulfillment of contractual obligations.

Legal Exceptions and Exclusions

To go thoroughly through the UAE Gratuity Law, you have to pick up the nuances of legal exceptions and exclusions that can impact entitlements of gratuity. These exceptions may delineate situations where gratuity may not be valid. Let’s explore these exceptions to ensure clarity and compliance:

  • Termination In Case Of Misconduct:

Employees ‘gratuity may get canceled due to termination on proven misconduct. Therefore, one should have clear documentation and observance of legal procedures to prove a dismissal due to misconduct.

  • Resignation Without Notice: 

Gratuity payouts may be seized if an employee resigns without notifying the employer and without serving the required notice period. That is why respecting the notice period policy mentioned in the employment contract is necessary to dodge gratuity cancellation.

  • Limited Contract Completion: 

Employees may not be eligible if they are under limited or fixed-term contracts and they fail to complete the duration of the full contract. Contractual commitments should be understood and honored for successful gratuity entitlement.

  • Employment for Less Than One Year: 

Employees with less than of continuous service in the organization are not eligible for the gratuity pay put as it is by law the policy that gratuity benefits will typically start after one year of completion of continuous service. 

  • Government Employees: 

There are various gratuity schemes for certain government employees governed by specific regulations. It is vital for accurate gratuity assessment to understand the government employees’ gratuity eligibility.

Termination Scenarios

There are specified provisions in the UAE Gratuity Law for gratuity entitlements in various cases of termination. It ensures a transparent and justified resolution of outstanding dues for employers and employees. Following are termination scenarios to understand for you that are provided in the law:

  • Resignation by Employee: When an employee resigns after completing one continuous year of service, they are generally entitled to gratuity. Employers should calculate the gratuity amount based on the employee’s last drawn basic salary.
  • Termination by Employer Without Cause: If an employer terminates an employee without valid cause, the employee is entitled to gratuity. The gratuity calculation considers the length of service and the last basic salary.
  • Employee Termination Due to Serious Misconduct: In cases of proven serious misconduct, an employer may terminate an employee without gratuity entitlement. Employers should follow due process, including proper documentation and adherence to legal procedures.
  • Limited Contract Expiry: Employees under limited (fixed-term) contracts are entitled to gratuity upon the completion of the contract term. The gratuity calculation is based on the total years of service under the fixed-term contract.
  • Death or Total Disability of Employee: In unfortunate situations where an employee passes away or becomes totally disabled, gratuity is payable to the legal beneficiaries. Employers need to handle such cases with compassion and adhere to legal requirements for gratuity disbursement.
  • Retirement: Upon reaching retirement age, employees are eligible for gratuity based on the years of service. Employers should facilitate a smooth retirement process, including accurate gratuity calculations.

How is Gratuity Calculated in UAE Federal Law?

uae gratuity law

Gratuity calculation in the UAE, governed by federal law, is a nuanced process vital for fair compensation. The key elements include considering the employee’s basic salary, excluding allowances like housing or transportation. This basic salary serves as the foundation for determining the gratuity amount.

The calculation of gratuity is heavily influenced by years of service. A worker is granted a specific percentage of their basic salary for each service year. The calculation formula relies on the daily wage of the employee multiplied by 21 working days of a month and then by the total years of service.

In case the employee is promoted to get a salary increment, the higher figure will be utilized. 

How to Stay Compliant with the New Gratuity Law in UAE

Both employers and employees must stay compliant with the Gratuity Law UAE to practice the regulations and maintain a harmonious work environment. Furthermore, transparency can be achieved by reviewing and updating the employment contracts regularly according to the changes in law to ensure there is no dispute.

Employees should understand and learn UAE gratuity law to know all of their rights to help them keep track of record of service periods in their company, and attend regular workshops/ training sessions conducted by employers. Not only will it promote compliance, but also contributes to a healthy positive work environment.

Conclusion

In conclusion, understanding the UAE Gratuity Law and its nuances is beneficial for employers and employees both to practice transparency and law compliance. As UAE is committed to enhancing the employee’s financial security in the country, employers are also encouraged to stay informed about the criteria for gratuity eligibility, scenarios for termination, and methods of calculating it. 

So keep yourself informed, openly communicate about these laws, and adapt to the changes for more transparent and smoother employment practices.Read more interesting and informative articles by checking our insights regularly and to avail of our services regarding these, visit our contact section.

If you want to read more interesting articles about this and other topics, we recommend you to check our insights. In there, you will encounter many articles made to improve your understanding. On the other hand, if you are interested in our services, visit our contact section.

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