Legal Basis for Gratuity Calculation
The calculation of end-of-service gratuity in the UAE is primarily governed by Federal Decree-Law No. 33 of 2021. The 'Basic Salary' serves as the fundamental unit for this calculation, excluding allowances such as housing, transport, or utilities. It is imperative for both employers and employees to distinguish between total remuneration and basic salary to ensure accurate financial settlements.
Calculation Parameters and Caps
For full-time employees, the entitlement is calculated as follows: 21 days of basic salary for each year of service for the first five years, and 30 days for each year thereafter. The law stipulates a maximum cap, stating that the total gratuity amount shall not exceed the equivalent of two years' total salary. This ensures a balanced approach between protecting worker rights and maintaining business sustainability.
Judicial Interpretations and Final Settlements
UAE courts consistently emphasize that gratuity is a vested right that cannot be waived through contractual clauses that contradict the law. In cases of termination or resignation, the final settlement must include not only the accrued gratuity but also compensation for unused annual leave and any other contractual entitlements. Disputes regarding these calculations are typically mediated by MOHRE before escalating to the Labor Courts.