Please note that, free zones are not governed by the UAE Labour Law. Generally, each free zone has its own employment laws and regulations that can result in a different end-of-service gratuity calculation. For instance, under DIFC Employment Law, the issue of whether the employee resigned or was terminated is irrelevant when computing the end-of-service gratuity.
Criteria for Calculating the End of Service Gratuity
An Employee is eligible to obtain the End of Service Gratuity after completing a minimum term of one (1) year in employment. The Employee is entitled to an End of Service Gratuity consisting of 21 days for each of the first five (5) years of service. When the employment is more than 5 years, the employee is entitled to 30 days’ salary for each additional year, provided the aggregate amount of End of Service shall not exceed 2 years’ remuneration. The End of Service Gratuity for the fraction of a year will be calculated on a pro rata basis.
If the employee terminates his employment during the first five years of service, certain deductions apply.
Days of absence from work without pay are not included in computing the End of Service Gratuity.
The basic wage, stipulated in the contract, is used as a basis for calculating the End of Service Gratuity. This End of Service Gratuity does not include anything given to the Employee in the form of housing, transportation, travel, overtime, representation and cashiers allowances.
The Employer may deduct any amount from the End of Service Gratuity outstanding to him/her.
Limited Term Contracts
A Limited Term Contract is governed by specific provisions of the UAE Labour Law and its Resolutions. A termination of a Limited Term Contract may cause claims for damages. Thus, Employers as well as Employees should seek legal advice prior to terminating a Limited Term Contract. For further details please see our brochure UAE Labour Law.