End-of-service benefits in the UAE play a crucial role in protecting employee rights and ensuring fair compensation when a job contract ends. These benefits are governed by specific provisions under UAE Labour Law, and they apply to both local and expat workers employed in the private sector.
Understanding End-of-Service Benefits Under UAE Labour Law
End-of-service benefits in the UAE play a crucial role in protecting employee rights and ensuring fair compensation when a job contract ends. These benefits are governed by specific provisions under UAE Labour Law, and they apply to both local and expat workers employed in the private sector.
If you’re working in the UAE or managing employees, understanding how these benefits are structured is essential. Let’s break down the key elements you should know about.
What Are End-of-Service Benefits?
End-of-service benefits refer to the lump-sum payment an employee is entitled to receive from their employer upon the termination or resignation of their contract. This payment is designed to acknowledge the employee’s service and help them financially as they transition to the next phase of their career or return to their home country.
These benefits primarily include gratuity, but may also involve unused leave compensation, pending salaries, or other contractually agreed payouts.
Who Is Eligible?
According to UAE Labour Law, any employee who has completed at least one full year of continuous service with their employer is entitled to end-of-service benefits. This applies regardless of nationality, but only to those employed under the UAE’s private sector labor contracts.
Employees working in free zones or under special agreements may have slightly different rules, depending on the authority governing their employment zone.
Key Factors That Determine Your Benefits
Several variables impact how much an employee receives when their contract ends. These include:
- Type of contract: Limited or unlimited
- Reason for leaving: Resignation, mutual agreement, or termination
- Length of service: Total years worked
- Basic salary: Used as the basis for gratuity calculation
- Compliance with notice period: Leaving without proper notice may reduce entitlement
Understanding how these factors interact can help you calculate your potential benefits more accurately.
Gratuity: The Core Component
The main part of end-of-service benefits is the gratuity payment. This is based on your basic salary and years of service.
- For service between 1 to 5 years, the employee receives 21 days of basic salary per year
- For service beyond 5 years, they receive 30 days of basic salary per year for every year after the fifth
- The maximum gratuity payout is capped at two years’ basic salary
Other payments may include:
- Unused annual leave
- Unpaid overtime or commissions
- Pending salaries or final deductions
Each of these should be settled in your final dues.
How It Works in Real Scenarios
Let’s say you’ve been working under an unlimited contract for six years and your basic monthly salary is AED 10,000. Your gratuity would look like this:
- First 5 years: 21 days x 5 years = 105 days
- Year 6: 30 days
So total gratuity = 135 days of basic salary = approximately AED 45,000
For accurate breakdowns like this, check out this tool. It helps you compute your UAE gratuity in seconds and gives you a clear estimate based on your input.
Notice Period and Final Settlement
As per UAE law, employees are required to serve 30 calendar days’ notice unless otherwise stated in their contract. Failing to do so can lead to deductions from your final settlement, including your gratuity.
Employers are also obligated to process and pay end-of-service benefits within 14 days of the contract ending. Delays beyond this period can be reported to the Ministry of Human Resources and Emiratisation (MOHRE).
Final Words
End-of-service benefits are more than just a paycheck at the end of your job — they are a legal and financial safety net. Understanding how they work under UAE Labour Law empowers both employees and employers to handle terminations and resignations more responsibly.
Whether you’re planning to leave your current job or just want to stay informed, being aware of your entitlements ensures you get what you’re legally owed. Using a gratuity calculator and reviewing your contract terms can give you a clearer picture of what to expect when it’s time to move on.
