Gratuity Calculation Under the New UAE Labour Law

With the new Labour law coming into effect on February 2 2022, gratuity calculation is going to be different for employees under unlimited term contracts, as all employment contracts are to be changed from unlimited to limited.

An employee under an unlimited contract and His/Her contract is not changed to a limited-term contract, the old gratuity calculation scheme mentioned in the old Labour Law No. 8 of 1980 shall apply until your contract is renewed accordingly.

If the contract is changed to a limited-term contract, the provisions of the new Labour law no. 33 of 2021 shall apply to the new contract.

Article 51 of the new Labour law stipulates that an employee who has completed one year or more of continuous service is entitled to end of service gratuity of 21 calendar days’ basic pay for each year of the first five years of service; and 30 calendar days’ basic pay for each subsequent year of service, provided that the entire total remuneration does not exceed two years pay.

Article 137 of the old Labour law says that those who choose to resign before the end of the contract will be entitled to a 2/3 reduction of gratuity if the period of their service is between one to three years; 1/3 reduction if the period of service is between three to five years; and no reduction if the period of service exceeds five years.