I have a question about the calculation of gratuity on an unlimited contract. My employer calculates gratuity differently for employees who resign and for employees who are terminated. If the employee resigns, gratuity is calculated as seven days per year for the first three years, and 21 days per year after that. If the employer terminates, gratuity is calculated as between two and 21 days of each completed year.
Is this a legal practice?
Pursuant to your questions, your employer should calculate gratuity payable to the employees in accordance with the Federal Law No.8 of 1980 regulating Employment Relations in the UAE (the ‘Employment Law’). If an employee is entitled to gratuity as per the Employment Law, then the employer should follow the provision of Employment Law. Employees are entitled to gratuity once they complete one year of continuous service, provided they fulfill the criteria laid down in Article 132 of the Employment Law, which states: “An employee who has completed a period of one or more years of continuous service shall be entitled to severance pay on the termination of his employment. The days of absence from work without pay shall not be included in calculating the period of service. The severance pay shall be calculated as follows:
(1)21 days’ remuneration for each year of the first five years of service.
(2)30 days’ remuneration for each additional year of service provided that the aggregate amount of severance pay shall not exceed two year’s remuneration.”
Source Credit: Khaleej Times
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