Law Blog Categories


Overview: End of Service Benefits in the UAE

Published on : 21 Sep 2021

End of Service Benefits in the UAE

Employees in the UAE are entitled to a specified set of end-of-service benefits (EoS) under UAE law, including gratuity. These rewards are provided as a mark of appreciation for the employee's devotion and hard work. After the employment contract is terminated, EoS is paid on a cumulative basis for the time spent.

Understanding End of Service Benefits 

When an employee's employment contract in the UAE expires, he or she is entitled to the following gratuity benefits. Depending on the type of contract under which the individual is employed, these features may differ. The amount of 'End of Service' paid depends on the type of contract the employee has. Under UAE labor law, there are two types of employment contracts:

  • The Limited Contract: These work contracts are time-limited and end when the time period stated expires.
  • The Unlimited Contract has no expiration date. Employees with unlimited contracts can terminate or resign from their jobs with a one-month written notice.

End of Service Provisions Applicable to Private Institutions 

  • In the case of an unlimited contract, a notice period may be substituted for any unpaid dues.
  • Any outstanding salaries or overtime payments that are owed to the employee.
  • Pending days of leave are to be reimbursed.
  • Any repatriation fees for end-of-service rewards are required under the employment contract and/or the UAE Labor Law.
  • Gratuity at the end of the service.

Modes of Legal Recourse for Employee 

Employees seeking the end of service benefits can approach the local courts, if: 

  • Unless the contract specifies otherwise, the compensation amount for limited contracts shall not exceed the entire three-month salary or the amount payable for the remaining contractual time, whichever is shorter.
  • Employees who fulfill the eligibility requirements may be paid for up to three months' wages.

Gratuity Remuneration and How to Calculate it? 

The gratuity pay is the most crucial portion of the end-of-service rewards in the UAE. Gratuity is a monetary recompense paid by the employer to the employee at the conclusion of the service period. 

Likewise, the amount of gratuity is determined by the kind of contract (unlimited with respect to unlimited contracts) and the cause for contract termination. Similarly, the number of days used to compute gratuity in the UAE might vary if the reason for leaving the organization is resignation rather than termination.

Calculation Under a Limited Contract 

Employees in the UAE are eligible for gratuity compensation at the end of a limited contract. On the contrary, if an employee voluntarily resigns, they will only be entitled to a gratuity if they have worked for the company for five years in a row. More specifically, this is assessed on the following factors, whereby: 

  • If the term of service is shorter than one year, there is no eligibility for gratuity compensation.
  • Employees who have worked for more than five years will get a gratuity of 30 days salary for each year worked over the 5-year mark.
  • For service of more than one year but less than five years, the total gratuity compensation would be equivalent to 21 days of salary each year of service. For instance, if the employee has worked for a firm for four years, the said employee's gratuity would be equal to 21 days' pay multiplied by four.

Calculation Under an Unlimited Contract 

Employees in the UAE are eligible for gratuity compensation at the end of an unlimited contract. Likewise, in the UAE, an employee is entitled to gratuity compensation after completing 12 months of continuous employment with the company. More notably, when assessing the length of service, leave without pay is not taken into account.

Regardless of the form of employment contract, the total gratuity payout will not exceed the employee's two-year wage. On the contrary, if an employee voluntarily resigns, they will only be entitled based on the following: 

  • There is no gratuity required if an employee leaves before completing a full year of employment.
  • A gratuity equal to one-third of 21 days basic wage is available for service lasting more than one year but less than and up to three years.
  • If the employee works for more than three years but less than or equal to five years, the said employee shall receive two-thirds of the basic income as a gratuity.
  • If the employee has worked for more than five years, they are entitled to 30 days of basic pay every year.

Likewise, gratuity remunerations under an unlimited contract are calculated on the following factors whereby: 

  • An employee who has worked for less than a year is not entitled to a gratuity payment.
  • The gratuity is one-third of the base wage for each year of service of more than one year but less than three years.
  • For each year of service of more than three but less than five years, the gratuity equals two-thirds of the base wage.
  • For employees who have worked for less than five years, the gratuity equals 21 days of basic pay for each year worked.
  • Employees who have worked for more than five years are entitled to 30 days of basic pay for each year of service, with the maximum sum payable not surpassing the employee's two years' pay.

How to Protect the employee's Rights Under UAE Employment Law

When pursuing a claim to resolve a disagreement over the employee's end-of-service benefits, it is critical to have documentation to back up their claim. If the employee has recorded everything that led to their dismissal, the post-termination rights are more likely to be upheld.

Likewise, maintaining an employment diary that dates and documents all significant occurrences at work is the best method to go about it. This could include salary reductions or hikes, reprimands and commendations, performance reviews, informal remarks by the employer. Time, date, place, and the presence of witnesses should all be noted. Similarly, it is vital to keep track of any written items related to the job, such as notes, emails, and assessments.

The employee must have a valid work permit to work in the UAE. Although most employees already have one, it is still crucial to stay updated on the new UAE work permit charges for 2021. In addition, the UAE now permits males to work if their spouses sponsor them.

Refusal of End of Service Payment and How to Proceed

To this note, unless the employee is terminated for egregious misbehavior, the UAE gratuity law states that an employee is entitled to prompt payment of their end-of-service gratuity upon termination.

Moreover, Ex-employers refuse to pay the dismissed employee's anticipated end-of-service benefits, resulting in a dispute. Likewise, the easiest method to deal with the problem is registering a complaint with the Labor Office right away and then taking legal action at the local UAE Labor Court. Nonetheless, it is imperative to note that each scenario is unique in these situations, so a strategy that works for one person might not be the ideal one for all. 

Conclusively, it is evident that employees are legally entitled to end of service benefits in the UAE, provided they meet the qualifying requirement. 

Related Publication

  • Company Formation in Dubai and UAE