22 September 2021
The UAE Labour Law No. 8 of 1980 (as amended) (the UAE Labour Law) is applicable to all employers in the UAE, except those based in the Dubai International Financial Centre and Abu Dhabi Global Market.
Under the UAE Labour Law, an expatriate employee who has completed at least one year of continuous service is entitled to an end of service gratuity payment on termination of employment.
Here, we run through the key information employers need to know about end of service gratuity entitlements.
End of service gratuity is calculated by reference to an employee's final basic salary at the time of termination of their employment (excluding any applicable allowances, if applicable) as follows:
For incomplete years of employment, end of service gratuity is pro-rated.
There is a sliding scale of entitlement to end of service gratuity depending on an employee's length of service when they resign:
|Service||Limited term contract||Unlimited term contract|
|One - three years||Not entitled to gratuity||Gratuity reduced by two thirds|
|Three - five years||Not entitled to gratuity||Gratuity reduced by one third|
|Five+ years||Full gratuity||Full gratuity|
An employee is not entitled to end of service gratuity if:
End of service gratuity is a statutory entitlement which employers must pay on termination of an employee’s employment. On termination, the employer must also cancel the departing employee’s UAE visa within 30 days of the termination date.
As part of the visa cancellation process, the employee is required to sign a visa cancellation form acknowledging that they have received all termination dues (including end of service gratuity entitlement) from their employer. Accordingly, employers must make end of service gratuity payments within 30 days of the employment termination date. This helps to ensure that the employee co-operates with the cancellation of their work permit, residence visa and any other official documents procured for them by the employer as part of their employment.
To discuss any of the issues raised in this article in more detail, please reach out to a member of our Employment, Pensions & Mobility team.