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Gratuity Calculation

Gratuity Calculation

Old Mar 19th 2011, 10:46 am
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Default Gratuity Calculation

I would like to know exactly how the end of service gratuity is calculated. Everything says you get 21 days per year of service. However, I cannot figure out how to calculate a day's pay. Do I take the monthly basic salary and divide by 30? Or, is it the number of working days per month? This will make a big difference. Has anyone any experience with this?
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Old Mar 19th 2011, 11:11 am
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Default Re: Gratuity Calculation

Originally Posted by tlh
I would like to know exactly how the end of service gratuity is calculated. Everything says you get 21 days per year of service. However, I cannot figure out how to calculate a day's pay. Do I take the monthly basic salary and divide by 30? Or, is it the number of working days per month? This will make a big difference. Has anyone any experience with this?
UAE Labour Law works on 30 Calendar Days Per Month, and 365 Calendar Days Per Annum! If you have a 'Pro-Rata Element' you use the 365 Divisor, and then a 30 Day Multiplier. This is based upon the day you walked through their door! - ALWAYS ask them for a 'Breakdown' of the Calculation! - The same applies for Annual Leave Entitlement. Emirates Airline and other large Companies do however, base calculations on 'Working Days.'

Some Companies have 'Weird and Wonderful Ways' of calculating your Leave Entitlement, but the calculation is quite straightforward! - They will always try to get away with less, but if you are paid more, DO NOT mention it to them!

Check on whether you have a 'Limited' or an 'Unlimited Contract!' With the former you could end-up paying them!
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Old Mar 19th 2011, 11:36 am
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Default Re: Gratuity Calculation

I appreciate the info, but still have a question. Let me give an example.

Employee's Basic Salary is 20,000 per month. Employee is dismissed at the end of 2 years service. Employee normally works 5 days per week. There is a one month holiday. Employee is paid 12 months per year.

The gratuity will be (20000 / 30) * 42 = 28,000 AED based on number of days in a month?

or

(20000 * 2) = 40,000 AED based on number of working days per month?

Note that the second calculation is simply the number of years times the monthly basic salary.
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Old Mar 19th 2011, 12:32 pm
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Default Re: Gratuity Calculation

my memory is a bit sketchy on this sort of stuff but I don't think you get gratuity for the first year of service. Someone else will confirm.
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Old Mar 19th 2011, 12:42 pm
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Default Re: Gratuity Calculation

Here in Saudi, and with my employer, you have to do TWO years before qualifying for any End of Service Benefit, so if you do complete two years, then you will be paid for two, and not just the second year.

So Basic salary 20,000 per month
x 12 = 240,000

240,000 / 52 ( weeks ) = 4615. ( weekly rate )

AS months vary to the number of days, and each month also varies then in number of weeks, this is an easier method of calculating a daily rate.

Once you have the weekly rate, I then divide by 7, as when we go on leave, we count CALENDAR days, not working days. So the daily rate is 4615 / 7 = 659.

So that is the ESOB rate, multiply 659 by the number of days the ESOB your company pays, 21 days = 13,839

We wouldn't take into consideration employee is away for a month etc.

Last edited by nottmbantam; Mar 19th 2011 at 12:45 pm.
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Old Mar 19th 2011, 1:01 pm
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Default Re: Gratuity Calculation

Originally Posted by tlh
I appreciate the info, but still have a question. Let me give an example.

Employee's Basic Salary is 20,000 per month. Employee is dismissed at the end of 2 years service. Employee normally works 5 days per week. There is a one month holiday. Employee is paid 12 months per year.

The gratuity will be (20000 / 30) * 42 = 28,000 AED based on number of days in a month?

or

(20000 * 2) = 40,000 AED based on number of working days per month?

Note that the second calculation is simply the number of years times the monthly basic salary.
For UAE
It will be based on the Dhs 20,000/- Divided by 30, Multiply by 42 Giving Dhs 28,000/- Remember that Gratuity is only paid on 'The Basic Salary' and does not include allowances; so check your MOL Contract! Also check if your Contract is Limited, or Unlimited. If Unlimited you will get gratuity (as above), if you have a Limited Contract and have been dismissed (routinely) your Employer will have to pay up to 'Three Months Salary!' If the latter is the case, the Labour Office will give a Determination which your Employer will have to abide to! If you live in accommodation provided by the company, they have to give you an additional month's Tenancy beyond your termination (using the Visa Cancellation Period). They cannot force you out! - If you have your own accommodation - You are on your own!

Last edited by jackthehat; Mar 19th 2011 at 1:14 pm.
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Old Mar 19th 2011, 1:41 pm
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Default Re: Gratuity Calculation

You only get the 21 days if you've been with the company for five full years. Between 1 and 3 years you get one week's salary per year, 3 to 5 years you get two weeks salary per year.

I learned this the hard way when I left my first company. It was a good company, just that the HR department was incompetent and neglected to make clear that the 21 days would only apply after 5 years.
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Old Mar 19th 2011, 2:00 pm
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Default Re: Gratuity Calculation

Originally Posted by Ethos83
You only get the 21 days if you've been with the company for five full years. Between 1 and 3 years you get one week's salary per year, 3 to 5 years you get two weeks salary per year.

I learned this the hard way when I left my first company. It was a good company, just that the HR department was incompetent and neglected to make clear that the 21 days would only apply after 5 years.
I have just read the Labour Law PDF and there is no mention of that in there
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Old Mar 19th 2011, 2:17 pm
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Default Re: Gratuity Calculation

Originally Posted by Blue Cat
I have just read the Labour Law PDF and there is no mention of that in there
yeah, i don't think ethos is correct...i hadn't been with my company for 5 years and got the 21 days...the link here to the labour law http://www.lowtax.net/lowtax/html/dubai/jdblab.html supports this, and says:

The Ministry issues a model form of labour contract in Arabic which is widely used, but other forms of contract are enforceable, provided they comply with the Labour Law. End of contract gratuities are set at 21 days pay for every year of the first five years of service and 30 days for every year thereafter. Total gratuity should not exceed two years' wages. Employees are entitled to pro-rated amounts for service periods less than a full year, provided they have completed one year in continuous service.
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Old Mar 19th 2011, 3:04 pm
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Default Re: Gratuity Calculation

Originally Posted by Ethos83
You only get the 21 days if you've been with the company for five full years. Between 1 and 3 years you get one week's salary per year, 3 to 5 years you get two weeks salary per year.

I learned this the hard way when I left my first company. It was a good company, just that the HR department was incompetent and neglected to make clear that the 21 days would only apply after 5 years.
You get 21 days from 1 year to 5 i think , i got 21 days per year for 4 years and the rest pro rata from my last company in Dubai.
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Old Mar 19th 2011, 3:32 pm
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Default Re: Gratuity Calculation

Originally Posted by Ethos83
You only get the 21 days if you've been with the company for five full years. Between 1 and 3 years you get one week's salary per year, 3 to 5 years you get two weeks salary per year.

I learned this the hard way when I left my first company. It was a good company, just that the HR department was incompetent and neglected to make clear that the 21 days would only apply after 5 years.
I think the key phrase above is "when I left my first company". The labor law says that if the employee quits, the gratuity is 1/3 of what it would be otherwise. However, I am talking about the case where the company has made the employee redundant. Thus, I think, the employee is to receive 21 days pay per year served if there is at least one year.
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Old Mar 19th 2011, 3:37 pm
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Default Re: Gratuity Calculation

Originally Posted by tlh
I think the key phrase above is "when I left my first company". The labor law says that if the employee quits, the gratuity is 1/3 of what it would be otherwise. However, I am talking about the case where the company has made the employee redundant. Thus, I think, the employee is to receive 21 days pay per year served if there is at least one year.
Correct , if you spew it you get next to nothing
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Old Mar 19th 2011, 3:39 pm
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Default Re: Gratuity Calculation

Originally Posted by tlh
I think the key phrase above is "when I left my first company". The labor law says that if the employee quits, the gratuity is 1/3 of what it would be otherwise. However, I am talking about the case where the company has made the employee redundant. Thus, I think, the employee is to receive 21 days pay per year served if there is at least one year.
don't think that's correct...it wasn't for me for sure, i left and got the 21 days...

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Old Mar 19th 2011, 4:05 pm
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Default Re: Gratuity Calculation

Originally Posted by Madam Medusa
don't think that's correct...it wasn't for me for sure, i left and got the 21 days...

MM, xx
Were you there more than 3 years? Seems to me there is some magic that happens after 3 years.
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Old Mar 19th 2011, 4:06 pm
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Default Re: Gratuity Calculation

Originally Posted by tlh
Were you there more than 3 years? Seems to me there is some magic that happens after 3 years.
no, just two...

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