Blog - HR Management Solution for UAE

A Simple Yet Powerful HR Management and Payroll System in Dubai UAE

How to Calculate Gratuity Manually?

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


Gratuity Calculation is based on various factors like:

* Contract Type (Limited / Unlimited)

* Termination or Resignation

* Service period of employee

* 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 employee is terminated from his/her job, unless he/she violates the rules as stated in Article 139 of the Labour 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 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.


Calculations for Unlimited Contract Gratuity Pay:

Less than 1 year of service

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


Between 1 year and 3 years of service

Employee is entitled to one third (1/3) of the 21-days gratuity pay.


Between 3 years and 5 years of service

Employee is entitled to two third (2/3) of the 21-days gratuity pay.


5 or more years of service

Employee is entitled to full 21-days gratuity pay.

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

* On this figure of AED 6,936,30, only 1/3 is payable if employee has worked between 1 and 3 years. So the total gratuity pay would be AED 2,312.10.

* Only 2/3 is payable if employee has worked between 3 and 5 years, so the total gratuity pay would be AED 4,624.20.

* The total AED 6,936.30 is payable if an employee has completed 5 years


Note: This article is shared as a general guideline, use or apply with your own understanding and accountability.



Other Topics on HR Management and Payroll in UAE:

* What is the best HR Software

* How to Calculate Payroll

* How to Create WPS Sif File

* Does Your Small Business Needs HR Software

* Features a Great Payroll System Should Have

* What is Employee Self-Service

* How to Choose Best HR Software

* Benefits of HR Software

* Employee Evaluation Management System

* How to Calculate Over Time Salary Payment

* Easy way to Calculate Salaries in Dubai




  • location
  •   299275, Dubai,
         United Arab Emirates
  •   +971-4-4216577
         +971-52-9957352
  •   +971-4-4216799
  • info@delicatesoft.com

EasyHR Introduction

A simple HR and Payroll Software in UAE to manage employee records, get document expiry reminders, employee document management, calculate payroll, email payslips, calculate gratuity and final settlement. Flexible HR Software to change gratuity, overtime and vacation formulas...