Labour Law: There is a useful news for overseas workers. For individuals employed in the UAE, gratuity serves as a form of savings that is provided upon leaving a job and can be beneficial for future use. Many believe that gratuity is calculated on the entire salary; however, it is actually based solely on the basic salary. It’s important to note that there is a maximum limit to this amount, ensuring that accounts remain clear and precise.
Therefore, employees should familiarize themselves with the rules regarding their final settlement to avoid losing any of their entitlements. If you are working in the UAE, understanding these final settlement rules is crucial to ensure that you receive every penny of your rights.
What is the law?
According to UAE labor law, the basic salary is the fixed amount specified in your employment contract. This does not include housing, travel, or other allowances. In contrast, the gross salary encompasses all allowances in addition to the basic salary. Generally, gratuity is calculated based solely on the basic salary, not the total salary.
Key rules for gratuity calculation
The law stipulates that an employee must have completed at least one year of service to qualify for gratuity:
1 to 5 years of service: 21 days of basic salary for each year worked.
More than 5 years of service: 21 days of basic salary for the first 5 years and 30 days for each additional year.
Employees can verify their basic salary using the MOHRE app or UAE Pass.
Two-year salary capping rule
One crucial point is that the gratuity amount cannot surpass a specific limit. Even if the calculation based on your basic salary yields a substantial figure, the company will only compensate you with a maximum of two years’ full salary. This means you will not receive gratuity exceeding this cap. This rule is particularly relevant for employees with higher salaries.
The Saudi Arabian Ministry of Human Resources and Social Development’s Kiva platform now allows a 60-day grace period before an employee can be declared absent from work. This means that employers can no longer mark employees absent from work immediately after their contract expires. They must wait at least 60 days, provided the employee’s residence permit (Iqama) remains valid. During this period, unrelated employees can re-enter their current employer. He can move to a new employer or leave Saudi Arabia. Failure to do so within 60 days will result in his name being automatically removed from the employer’s records.
