# How to calculate End of Service Gratuity ?



## Lenochka

Dear experienced Forum Users,
I have a question in relation to End of Service Gratuity.

Situation as follows

MultiNational big Company
employee worked 5 years abroad
then moved here and worked here for 1 year.

Now he resigns/gets fired. 

Is the entitlement for the End of Service Gratuity really 6 years ?? Seems to be very very unfair...should be for 1 year as this is the only time worked in the UAE.

Can somebody clarify this.

Many thanks in advance
Lenochka


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## Andy Capp

I guess it depends on what his contract says, he might have got an agreement that his previous 5 years were counted?

Surprising mind you but fair play to the guy if he did.


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## Lenochka

Hi AndyCapp,
cheers fo the feedback.
Although I slightly disagree and would say it is unfair, at least very unfair to the company. Especially given that the end of service gratuity is a component of the UAE Labour Law, hence I do not really see the point why it would be applicable for the years worked abroad.

However, if so, I might recommend to anybody I know within the company abroad who worked for 15+ years to move here to prop up the pension fund, i.e. move here, resign after 1 year and get the "full shebang" )

Cheers 
L.


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## mojoboy7

Lenochka said:


> Dear experienced Forum Users,
> I have a question in relation to End of Service Gratuity.
> 
> Situation as follows
> 
> MultiNational big Company
> employee worked 5 years abroad
> then moved here and worked here for 1 year.
> 
> Now he resigns/gets fired.
> 
> Is the entitlement for the End of Service Gratuity really 6 years ?? Seems to be very very unfair...should be for 1 year as this is the only time worked in the UAE.
> 
> Can somebody clarify this.
> 
> Many thanks in advance
> Lenochka


Hi, there. I only know about UAE don't know about the other countries. So here it is:
As per Article (132) of the UAE Federal Labour Law, and in respect to the end-of-service gratuity, we quote the following: A worker who has completed a period of one or more years of continuous service shall be entitled to severance pay on termination of his employment. The days of absence from work without pay shall not be included in calculating the period of service. Severance pay shall be calculated as follows:

Twenty-one days' remuneration for each year of the first five years of service. Thirty days' remuneration for each additional year of service provided that the aggregate amount of severance pay does not exceed two years' remuneration.


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## Lenochka

Hi,
many thanks. That's what I can read. However, I am being told that this would aslo apply for years worked abroad for the same company. Hence my query - this does not seem fair to the company given that it is an UAE Law. 

Can somebody clarify this ?

Thanks
L.


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## cadas

I don't know if this helps, but when I joined this company in Dubai, I was due to be posted immediately to west africa for 12-24months.

The advice I was given by my own HR department, was to insist on a Dubai based contract, and not to accept a contract stating I was to be based outside Dubai. The reason given was for long term benefits.

In the end I wasn't posted and so moved directly to Dubai

If you work for a multinational then overseas for five years a lot will depend on the wording of the original contract and where (in anywhere) tax was paid.

For our workers posted abroad, they are subject to local employment law of the country they are based in, although all costs associated with that are paid by the parent company in Dubai.

So all in all, I think it will depend on where the original contract was based.


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## Sumair

Yes Cadas is right.
End of service gratuity depends on the labour contract , if executed & validated in UAE then the end of service benefit will accrue according to UAE Labour Law.

The departure/posting from the UAE will be treated as temporary one and will count towards the working days as same as working in UAE.

To keep this relationship intact , the employee can not reside abroad for more than six months in a straight length. By giving this opportunity of in/out to the employee after every six months shows that company also willing to continue this relationship.

It also depends on various conditions like the status of employee in another company permanent / temporary , job position , status etc. Salary paying company/ Taxation effect etc etc..


If employee prove that his status was temporary when reside outside the country , he did not receive any compensation from there , his salary was not taxed there, he remained UAE resident for the full period and salary was drawn from UAE Company he will get the End of service benefit from UAE Company.

If company proves that any one of the given condition is not valid OR the employee keeps the UAE residency at his own without any pre-agreement with Company, employee will not get the Service Benefit for the period reside aboard.






cadas said:


> I don't know if this helps, but when I joined this company in Dubai, I was due to be posted immediately to west africa for 12-24months.
> 
> The advice I was given by my own HR department, was to insist on a Dubai based contract, and not to accept a contract stating I was to be based outside Dubai. The reason given was for long term benefits.
> 
> In the end I wasn't posted and so moved directly to Dubai
> 
> If you work for a multinational then overseas for five years a lot will depend on the wording of the original contract and where (in anywhere) tax was paid.
> 
> For our workers posted abroad, they are subject to local employment law of the country they are based in, although all costs associated with that are paid by the parent company in Dubai.
> 
> So all in all, I think it will depend on where the original contract was based.


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## Elphaba

Lenochka said:


> Hi,
> many thanks. That's what I can read. However, I am being told that this would aslo apply for years worked abroad for the same company. Hence my query - this does not seem fair to the company given that it is an UAE Law.
> 
> Can somebody clarify this ?
> 
> Thanks
> L.



Fair? This is the UAE - what has fair got to do with it? And why on earth should it bother you? You sound rather bitter about it.

The company may pay a gratuity on total years of service if a) this is what is stated in the contract, as contract law takes precedence over labour law if terms more favourable, or b) they choose to do so.
-


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## Lenochka

Elphaba said:


> Fair? This is the UAE - what has fair got to do with it? And why on earth should it bother you? You sound rather bitter about it.
> 
> The company may pay a gratuity on total years of service if a) this is what is stated in the contract, as contract law takes precedence over labour law if terms more favourable, or b) they choose to do so.
> -


Sorry Elphaba,
I am not bitter, I just try to find out what the law is. And why it would be the case if somebody works for a company x-years abroad then then moves here. Works for 1 year and resigns....and would then be entitled for X+1 years gratuity (calculated under the UAE law which only applied for 1 year of the whole working period). Surely you can agree that this does sounds a bit awkward. 
So if one works for 20 odd years elsewhere.....move here for 1 year, resign and collect 21 years of End of gratuity service under UAE law....

As far as I can see it should be 20 years of beneftis from whereever the transfer from took place and 1 year of UAE gratuity. And at that point I am not taken into consideration that the company may choose to do so.....as this has nothing to do with the law. 

or am I missing something ?


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## Elphaba

I would say it is a private matter between the individual and their employer.

No law has been broken and for a change someone is receiving more than the basic entitlement.

-


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## RylandGray

Hi All,

This is my first post, so please forgive any breaks with normal forum convention.

I work for a company in Dubai who deal with employee benefits in the UAE for small businesses right up to bigger corporate clients and I'm pretty sure that unless an employee's contract says otherwise, if you're fired within the first 12 months you're not entitled to any gratuity.


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## flossie

My husband moved here with a company that he was previously employed by for 3 years. His gratuity (when he resigns) will only include the years he has worked in the UAE.


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## Boyssy

*It is all about love*

The local UAE Labor Contract has nothing to do with the previous agreement from some other country or multinational company. “You” have signed the labor contract with the local UAE labor department and your employer is obligate to respect this agreement since Employer accepts to sponsor your work permit (labor card / residence visa). So, each Multinational or any company must stay obligate in front of the local law with this agreement. And, Employer must pay the End of Service Gratuity benefits within 30 days when employee’s residence visa is canceled. If not,”the internal agreement” between Employer and Employee says something else as part of repatriation packet. 

In case that you move from Dubai and do not receive this money then you should know that you have only 365 days to submit this claim to the local labor department. – It does not cost anything.

:clap2: :clap2: :clap2: :clap2: :clap2: :clap2: :clap2: :clap2: :clap2: :boxing:


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## Toot

The law says that you get 21 days salary for every 1 complete year. Anyone know if your 1 month notice is taken into account? ie if you resign after 11 months and work a month notice, do you qualify for the gratuity?


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## Queenslander

Our company moves any gratuity or pension from the former country to the new country when you move so if this happens you get all 6 years. I think we're unique but could easily be wrong.


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## Sean2008

Can you please clarify this... After 1 year:

If I resign then I get 21 days gratuity
If I get fired I also get 21 days gratuity

Correct?


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## Boyssy

That’s right. 

Only if you are involved in some criminal activity then you will get nothing because your employer may ask for compensation.

However, please keep in mind that after you complete the first year then the rest of uncompleted year will be counted by months and days as well. 

***first 5 year = 21 days and 

*** 6. and over = 30 days... and this coefficient will be used for calculation of months and days in any uncompleted year as well.

Best regards from UAE HR Expert


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## Boyssy

Sean2008 said:


> Can you please clarify this... After 1 year:
> 
> If I resign then I get 21 days gratuity
> If I get fired I also get 21 days gratuity
> 
> Correct?


If you resign during the first year or you get fired in the first year then you will get nothing…. You must complete the first year.


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## Boyssy

Toot said:


> The law says that you get 21 days salary for every 1 complete year. Anyone know if your 1 month notice is taken into account? ie if you resign after 11 months and work a month notice, do you qualify for the gratuity?


That’s right. 

Only if you are involved in some criminal activity then you will get nothing because your employer may ask for compensation.

However, please keep in mind that after you complete the first year then the rest of uncompleted year will be counted by months and days as well. 

***first 5 year = 21 days and 

*** 6. and over = 30 days... and this coefficient will be used for calculation of months and days in any uncompleted year as well.

If you resign during the first year or you get fired in the first year then you will get nothing…. You must complete the first year.

Best regards from UAE HR Expert


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## katiepotato

Sean2008 said:


> Can you please clarify this... After 1 year:
> 
> If I resign then I get 21 days gratuity
> If I get fired I also get 21 days gratuity
> 
> Correct?


Actually, it's not quite that straightforward..... 

If your contract is terminated after one year - yes, you will get 21 days plus pro-rata for any additional months worked

Circumstances if you resign are slightly different. To quoite directly from reliable translation of the labour law:

_"An employee employed under a contract for an unlimited period who resigns after a continuous service of not less than one year and not more than three years is entitled to one third of the end of service gratuity provided above. If the period of continuous service is more than three years and less than five years he is entitled to two thirds of the gratuity. If his continuous service is more than five years, he is entitled to the full gratuity. If an employee who is employed under a contract for a limited period on the other hand chooses to resign before the end of the contract, he is not entitled to end of service gratuity unless his continuous service exceeds five years."_

Hope this helps


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## Toot

Thanks katiepotato and boyssy....but you haven't answered the question....does your notice period accrue towards your years service?


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## katiepotato

I was actually addressing Sean2008's question regarding termination vs. resignation.... 

The clue is in the name - it is your end of service gratuity, so is accrued up to your final date of service - which should include your notice period. However, I'm not sure how this would work in practise if you gave a month's notice after completing 11 months of service! 

Don't forget that the original labour law is written in Arabic, and the translations available vary depending on their source. For any in-depth question about interpretation of labour law it's always best to get advice from an employment lawyer who can go back to the original - as this is what MOL will use when making any decisions in a labour dispute.


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## katiepotato

Just to add to the above:

If an employee handed in their notice at 11 months, the employer could choose to proceed with pay in lieu of notice and end employment immediately. As such you wouldn't be entitled to gratuity.

If your employer allowed you to work out your notice and paid gratuity, at 12 months and 1 day of service the maximum they are legally obliged to pay is one-third of 21 days i.e. a week's remuneration.


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## Sean2008

a week's remuneration only? Are you sure??



katiepotato said:


> at 12 months and 1 day of service the maximum they are legally obliged to pay is one-third of 21 days i.e. a week's remuneration.


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## Toot

Thanks Katie...appreciate the advice.


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## Boyssy

katiepotato said:


> Actually, it's not quite that straightforward.....
> 
> If your contract is terminated after one year - yes, you will get 21 days plus pro-rata for any additional months worked
> 
> Circumstances if you resign are slightly different. To quoite directly from reliable translation of the labour law:
> 
> _"An employee employed under a contract for an unlimited period who resigns after a continuous service of not less than one year and not more than three years is entitled to one third of the end of service gratuity provided above. If the period of continuous service is more than three years and less than five years he is entitled to two thirds of the gratuity. If his continuous service is more than five years, he is entitled to the full gratuity. If an employee who is employed under a contract for a limited period on the other hand chooses to resign before the end of the contract, he is not entitled to end of service gratuity unless his continuous service exceeds five years."_
> 
> Hope this helps


That's correct.


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## katiepotato

Sean2008 said:


> a week's remuneration only? Are you sure??


Yes I'm sure - the minimum gratuity payment for employees resigning between one and three years of service is one-third of maximum. If the maximum is 21 days - one-third = 7 days. Send me a PM if you want me to send you the translation for further confirmation. 

Your employer can choose to pay more than this if they want to, but this is the legal minimum. Given that it sounds like you're ticking off days on a calendar until you qualify for gratuity before quitting, I wouldn't blame them for paying the minimum!


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## Sean2008

And if you knew my situation you wouldn't blame me for ticking off the remaining days on the calendar... 



katiepotato said:


> Given that it sounds like you're ticking off days on a calendar until you qualify for gratuity before quitting, I wouldn't blame them for paying the minimum!


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