UAE Gratuity Calculator

Key Points

• Research suggests that gratuity calculators in the UAE typically follow the new labor law, Federal Decree Law No. 33 of 2021, calculating 21 days of basic salary for the first five years and 30 days for each year beyond, with no distinction for contract type or resignation/termination.
• It seems likely that some calculators may still use the old law, leading to different calculations based on contract type and leaving method, potentially underestimating gratuity.
• An unexpected detail is that some calculators might ask for irrelevant information like contract type, which is no longer a factor under the new law.

What is Gratuity in the UAE?

Gratuity, or end-of-service benefits, is a payment UAE employees receive after at least one year of service, calculated based on basic salary and service length. The new labor law, effective since 2022, simplifies this to 21 days of basic salary per year for the first five years and 30 days per year thereafter, with no distinction for resignation or termination.

How to Calculate Gratuity

To calculate gratuity under the new law:

• Determine your basic salary (exclude bonuses, allowances).
• Calculate daily wage: Basic salary / 30.
• For first 5 years: Each year, 21 days * daily wage, total 5 * (21/30 * basic salary).
• For years beyond 5: Each year, 30 days * daily wage, equating to full monthly salary per year.
• Sum totals, noting no cap for full-time workers under new law.

For example, with AED 10,000 basic salary and 6 years:

• First 5 years: 5 * (21/30 * 10,000) = AED 35,000
• 6th year: 1 * 10,000 = AED 10,000
• Total: AED 45,000

Using Online Calculators

Online gratuity calculators can simplify this process, but ensure they align with the new law. Some may ask for contract type or leaving method, which are no longer relevant, potentially leading to inaccurate results.

Comprehensive Analysis of UAE Gratuity Calculators

Introduction and Context

Gratuity, known as end-of-service benefits in the UAE, is a crucial financial entitlement for employees upon leaving their job after at least one year of continuous service. The calculation, governed by UAE labor laws, has seen significant changes with the introduction of Federal Decree Law No. 33 of 2021, effective from February 2, 2022, replacing the previous Federal Law No. 8 of 1980. This new law standardizes gratuity calculation to 21 days of basic salary for each of the first five years and 30 days for each year beyond, with no distinction based on contract type (limited or unlimited) or termination reason (resignation or termination).

This report analyzes various online gratuity calculators to provide a detailed comparison of their features, methodologies, and alignment with current laws, ensuring employees and employers can make informed decisions. The analysis is based on research into how these calculators operate, their inputs, and their alignment with the new law.

Detailed Breakdown of Calculator Features

Based on research, gratuity calculators typically require inputs like basic salary and years of service, but some may include additional fields such as contract type and leaving method, which are no longer relevant under the new law. Here’s a breakdown of common features and calculation methods observed:

• Standard Inputs: Most calculators ask for basic salary and length of service, aligning with the new law’s requirement of at least one year of service for eligibility.
• Additional Inputs: Some calculators include contract type (limited or unlimited) and the manner of job departure (resignation or termination), which may indicate use of the old law’s calculation method.
• Calculation Method: Research suggests that calculators following the new law calculate gratuity as 21 days’ wage for each of the first five years and 30 days’ wage for each additional year, with no cap for full-time workers. However, calculators using the old law may differentiate based on contract type and leaving method, potentially leading to lower gratuity for resignation cases under unlimited contracts.

Comparative Analysis and Example

To illustrate the differences, consider an employee with AED 10,000 basic salary and 6 years of service under an unlimited contract, resigning:

• New Law Calculation:
  • First 5 years: 5 * (21/30 * 10,000) = 5 * 7,000 = AED 35,000
  • 6th year: 1 * 10,000 = AED 10,000
  • Total: AED 45,000
• Old Law Calculation (Potential for Unlimited Contract, Resignation):
  • Under the old law, for unlimited contracts and resignation before 5 years, no gratuity was paid. For after 5 years, it might calculate similarly to the new law, but research indicates some calculators might still use reduced rates, such as 1/3 or 2/3 of 21 days for early years, potentially resulting in lower amounts like AED 17,000 for 6 years in some cases.

This example highlights the importance of using calculators aligned with the new law for accuracy, as old law methods may undercalculate, especially for resignation cases.

Manual Calculation Guide

For those preferring manual calculation under the new law:

1. Determine basic salary (exclude bonuses, allowances).
2. Calculate daily wage: Basic salary / 30 (calendar days).
3. For first 5 years: Each year, 21 days * daily wage, total 5 * (21/30 * basic salary).
4. For years beyond 5: Each year, 30 days * daily wage, equating to full monthly salary per year.
5. Sum totals, noting no cap for full-time workers under new law.

Example as above yields AED 45,000 for 6 years, ensuring compliance.

Potential Inaccuracies and User Tips

Research suggests that while many calculators are updated, some may still use the old law, asking for contract type and leaving method. This can lead to inaccuracies, such as:

• For unlimited contracts and resignation, old law calculators might not pay gratuity for less than 5 years or use reduced rates, unlike the new law’s uniform calculation.
• An unexpected detail is that some calculators might ask for irrelevant information like contract type, which is no longer a factor, potentially confusing users.

Employees should ensure calculators reflect the new law for accuracy, always verify updates, and seek professional advice for disputes. Employers should also ensure compliance to avoid legal issues, with fines up to AED 1 million for non-compliance.

Conclusion and Recommendations

Employees should prioritize calculators aligned with Federal Decree Law No. 33 of 2021 for accuracy, focusing on those that do not differentiate based on contract type or leaving method. Always verify calculator updates and legal basis, especially given potential discrepancies, to ensure rights are protected in 2025’s labor landscape.