All about end of service benefits in the UAE

• What Are EoSB?
• Calculating Gratuity
• EoSB Disputes
• Rights Protection
• FAQs

The UAE Labour Law entitles employees in the country to a specific set of end of service benefits (EoSB). These benefits, which include gratuity in the UAE, are extended as a token of appreciation for the employee’s hard work and dedication to the company. EoSB is paid after the termination of the employment contract on an accumulated basis for the tenure served. Here is everything you need to know about the employee end of service benefits in the UAE. 

This post is applicable to employees working in private sector companies in the UAE. 

What Are End of Service Benefits In UAE?

End of service benefits are a statutory monetary entitlement that employees must receive from employers upon the termination of their employment contract, given they are eligible for it.

Once an employment contract in the UAE is terminated, the employee is eligible for the following gratuity benefits. Here are the leading provisions included towards the end of service benefits for private-sector employees in the UAE. 

• Any unpaid wages or overtime payments due
• Encashment of unutilised leaves 
• Any repatriation expenses applicable as per the employment contract and/or the UAE Labour Law for end of service benefits
• End of service gratuity

Additional Benefits in Case of Unfair Dismissal

Employees facing unfair dismissal can approach the legal authorities. 

• Eligible employees can be compensated for up to three months salary provided they meet the necessary criteria.
• For limited contracts, the compensation amount should not exceed the total three-month remuneration or the amount due for the remaining contractual period – whichever is shorter, unless specified otherwise in the contract. 

How to Calculate Gratuity in UAE

The most important part of the end of service benefits in the UAE is the gratuity pay. Gratuity is a monetary compensation given at the end of the service period to the employee by the employer.

Previously, the calculation of gratuity is based on the type of contract; limited vs unlimited contracts. However, with the recent changes in labour law, all employment contracts are now to be converted into limited contracts with a validity of up to 3 years.

After termination of a limited contract, employees are entitled to gratuity pay in the UAE. The amount is calculated as follows:

• There is no entitlement to gratuity pay if the length of service is less than 1 year
• For service of more than 1 year and less than 5 years, the full gratuity pay would amount to 21 days salary for every year of service. For example, if you have worked for 4 years in a company, your gratuity would be 21 days wage multiplied by 4
• For employees who serve longer than 5 years, the gratuity would amount to  30 days salary for each year worked over the 5-year threshold. 

Please Note:

• An employee is eligible for gratuity pay in UAE if they complete 12 consecutive months of service with the employer. 
• Absence without pay from work is not included when calculating the period of service
• The total gratuity payment, regardless of the type of employment contract, will not exceed the amount of the employee’s 2 years’ salary.
• Employees who have their unlimited contracts terminated before they are converted to limited contracts, will be entitled to gratuity pay calculated according to the old law.

What Happens If the Ex-Employer Refuses to Pay End of Service Benefits?

According to the UAE gratuity law, an employee is entitled to immediate payment of their end of service gratuity upon termination, even if the employee is terminated for gross misconduct as detailed in article 120.

The changes made to the gratuity rules under the new labour law have further secured this right. According to the updated law:

• All end of service benefits of an employee must be paid within 14 days of the end of employment.
• Employees cannot be terminated without end of service benefits (EOSB) payment.
• Where employment is terminated due to the death of an employee, the entitlements must be paid to the deceased’s family after deduction of body repatriation costs (where applicable).
• Unless granted by the law, the employer must not reduce or deduct the gratuity amount based on the employee’s contract type and/or resignation date.

Disputes arise when the ex-employers refuse to pay the due end of service benefits to the employee. The best way to deal with the issue is to file an immediate complaint at the Labour Office and then pursue legal proceedings in the Labour Court. 

In such matters, each case is different from the other and so, a resolution that worked for another employee might not be the best one for you. You will need to consult an advocate for legal counsel and dispute resolution. 

How to Protect Your Rights before Leaving the Job

When you take to the Labour Court for dispute resolution of your end of service benefits, it is important to have proof that reinforces your position. Your post-termination rights are more likely to be upheld if have documented everything leading to your dismissal. 

The best way to go about it is to maintain an employment diary that dates and records all significant events at work. These may include, but aren’t limited to:

• Salary bumps or slashes
• Reprimands and commendations
• Performance reviews
• Informal remarks by the employer

It’s best to note everything with time, date, location and the presence of witnesses (if any). Also keep track of the written materials including memos, emails and evaluations pertaining to your work.

FREQUENTLY ASKED QUESTIONS

WHAT IS THE NEW RULE FOR GRATUITY IN THE UAE?

The rules related to the calculation of gratuity in the UAE remain unchanged even under the new labour law. Employees who are eligible for gratuity are entitled to 21 days of basic pay per year for each of the first five years of their service and 30 days of calendar pay for every year after that.

WHO IS ELIGIBLE FOR GRATUITY IN THE UAE?

An employee becomes eligible for gratuity in the UAE after completing 12 months of consecutive service with an employer. When calculating the service period, any absence without pay is not included.

WHAT HAPPENS IN CASE AN UNLIMITED CONTRACT IS TERMINATED BEFORE ITS RENEWAL?

As per the new UAE Labour Law, all existing unlimited employment contracts must be converted into limited contracts with a validity of up to 3 years.

If someone on an unlimited contract resigns or is terminated by the employer before their contract is converted to a limited one, their gratuity (if eligible) will be calculated as per the old law.

Under the old law, when the employer terminates the employee’s unlimited contract, the gratuity to be paid as the end of service benefits is calculated using the following guidelines. 

• On service of less than 1 year, the employee is not entitled to a gratuity payment
• On service of more than 1 year and less than 3 years, the gratuity amounts to one/third of the basic salary for each year served
• On service of more than 3 years and less than 5 years, the gratuity amounts to two/third of the basic salary for each year served
• For employees who serve up to 5 years, the gratuity amounts to 21 days of the basic salary for each year served
• Employees who serve more than 5 years are entitled to 30 days basic salary for every additional year served with the maximum amount payable not exceeding the employee’s two years’ pay.

In case an unlimited contract is not terminated by the employee the gratuity calculation as part of EoSB in UAE is done as follows:

• If the employee ends the contract before 1 complete year of service, there is no gratuity due
• A service that lasts more than 1 year but less than and up to 3 years is eligible for a gratuity tantamount to one-third of 21 days basic salary
• The gratuity pay amounts to two-thirds of 21 days basic salary if the service lasts more than 3 years but less than and up to 5 years. 
• If the employee serves more than 5 years, their gratuity entitlement amounts to 30 days basic salary for each year.

That’s a wrap to this post on end of service benefits in UAE. We hope you find this information useful. To be able to work in the UAE, you need a valid work permit. Most of you would already have one, but it’s still important to keep up with the new list of UAE work permit fees. Also, the UAE now allows work permits for men sponsored by their wives. 

If you wish to work, study or live in the UAE, you also need a police clearance certificate. You can obtain a police clearance certificate via a simple procedure.  The process is mostly hassle-free as long as you know what you need and how to go about it. 

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