When a Direct Employee's contract ends in the UAE, they may be entitled to end-of-service benefits. The total compensation depends on factors such as contract type, tenure, nationality, and unused leave.
Components of End-of-Service Calculation
1. Final Salary
Calculated as:
Daily wage × Days worked in the final month
2. Gratuity Compensation
Gratuity applies only to non-GCC nationals or employees not enrolled in DEWS (DIFC jurisdiction).
For Limited-Term (definite) contracts:
Tenure | Gratuity Entitlement |
Less than 1 year | Not eligible |
1 to 5 years | 21 days' basic pay per year of service |
More than 5 years | 30 days' basic pay per year of service (for each year beyond 5 years) |
For Unlimited-Term (indefinite) contracts:
Tenure | Gratuity Entitlement |
Less than 1 year | Not eligible |
1 to 3 years | 1/3 of 21 days' basic pay per year of service |
More than 3 years to 5 years | 2/3 of 21 days' basic pay per year of service |
More than 5 years | 30 days' basic pay per year of service (for each year beyond 5 years) |
Example
Scenario
An unlimited-term employee contract is terminated after 7 years of service with a monthly salary of AED 10,000.
Calculate Gratuity
According to UAE labor law, gratuity is calculated as:
First 3 years: 1/3 of 21 days' basic pay per year of service
→1/3 x ( 3 × (10,000 x (21/30))) = AED 7000Years 4 to 5: 2/3 of 21 days' basic pay per year of service
→2/3 x ( 2 × (10,000 x (21/30))) = AED 14,000Next 2 years: One month’s salary per year
→ 2 × 10,000 = AED 20,000
Total gratuity: AED 41,000
3. Unused Vacation Leave
Calculated as:
Daily wage × Unused vacation days