Gratuity calculation in Abu Dhabi, Dubai, UAE

Guide to how to calculate final gratuity salary payment in Abu Dhabi, Dubai, UAE when your job is terminated, based on federal UAE Labour Law information. This should not be read as any sort of legal document or interpretation, it is only our opinion of what we understand of the UAE Labour Law and should not be assumed to be accurate or correct. Consult the UAE Labour Department or a lawyer in the UAE to get authoritative or professional information.

In the UAE, the federal labour law says that workers are entitled to severance pay (more commonly known as the "gratuity") upon termination of their employment, whether by completing a fixed period contract, or resigning from a job with an unlimited contract. This is intended to compensate for the lack of a government pension scheme for expatriate workers resident in the UAE. How much you get will depend first of all on whether you had a limited or unlimited contract. Check carefully what sort of contract you have. If your contract specifies how much gratuity you are entitled to, check the calculation according to the labour law anyway. Usually, such contracts provide greater benefits, but if they do not, then you should have a case for claiming your entitlement according to the labour law, even if you signed such a contract. Unlimited contract holders receive substantially less than limited contract holders. Usually. To calculate your gratuity entitlement, follow the following steps.

Limited contract holders (or fixed term contracts) longer than 1 year

1. Did you complete your contract? If yes, you are entitled to 21 days salary for every year of employment less than 5 years, and 30 days salary for each year of employment over 5 years, up to a maximum of 2 years salary. 2. If no, then you get nothing if you were employed less than 5 years, otherwise the full amount according to the calculation in step 1.
Limited contract holders shorter than 1 year

No gratuity entitlement.

Unlimited or indefinite contract holders

1. Did you give the correct notice period (usually 30 days)? If yes, then the amount is according to the following: o Employed for less than 1 year - no gratuity o Employed between 1-3 years - 7 days for each year of employment (1/3 of the limited contract amount)

Employed between 3-5 years - 14 days for each year of employment (2/3 of the limited contract amount) o Employed longer than 5 years - 21 days for each year up to 5 years, and 30 days for each year after 5 years (same as for limited contract holders). Maximum limit of 2 years worth of salary. 2. If no, then no gratuity entitlement unless the employer has not fulfilled their obligations according to the UAE Labour Law, or the employer has assaulted the employee (Article 121 conditions for permission to leave employment without notice). You might have to file a case with the Ministry of Labour in the UAE to claim your gratuity in this case, and they might not agree with your claim.
o Additional notes on calculating severance pay

Gratuity is calculated on base salary only, any additional allowances are ignored. Employees who are entitled to a gratuity will have it calculated pro-rata for partyears of employment.

Confusion and differences between limited and unlimited contracts

It is common for employees in the UAE to be on a limited contract which is renewed repeatedly after completion of the fixed term. The gratuity applicable in this case should be that for a limited contract. But check carefully what your contract says. If a contract specifies a possible notice period for terminating before completion, then it is still a limited contract and you might not be entitled to any gratuity if you do not complete the contract, even if you give the correct notice as specified in the contract. However, such contracts do usually include a clause to detail what gratuity will be paid in those circumstances, and those clauses should have legal validity. Being required to give a period of notice of renewal or non-renewal of a fixed term contract does not make it an unlimited contract. It is still a limited contract, and the gratuity calculations for a limited contract should still apply. If an employer claims otherwise, contact the Ministry of Labour to at least ask for clarification, and possibly file a complaint.

UAE Labour Law on gratuity and severance pay

Below is the original text of the UAE Federal Labour Law with the section on gratuity payments. Articles 132, 137, and 138 refer specifically to the calculation of gratuity. Federal Law No 8, For 1980, On Regulation of Labour Relations
Chapter VII: Termination and Severance Pay

Section II: Severance Pay Article 132

A worker who has completed one or more years of continuous service shall be entitled to severance pay at the end 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' wage for each of the first five years of service. 2. 30 days wage for each additional year of service provided always that the aggregate amount of severance pay should not exceed two year's wage. Article 133 A worker shall be entitled to severance pay for any fraction of a year he actually served, provided that he has completed one year of continuous service. Article 134 Without prejudice to the provisions of laws that grant pensions or retirement benefits to employees in certain firms, severance pay shall be calculated on the basis of the wage last due for monthly, weekly and daily paid workers, and on the basis of the average daily wage referred to in Article 57 hereof for those paid on piecemeal. The wage used as a basis for calculating severance pay shall not include whatever is given to the worker in kind, housing allowance, transport allowance, travel allowance, overtime pay, representation allowance, cashiers allowances, children education allowance, allowances for recreational and social facilities, and any other bonuses or allowances. Article 135 An employer may deduct any amounts owed to him by a worker from the latter's severance pay. Article 136 For the purposes of Article 132, no severance pay shall accrue for the employment cases that preceded the enforcement of this Law except where the worker is a National. This, however, shall be without prejudice to any rights acquired by the worker under the repealed labour laws, the employment contract, or under any agreement, regulations or work rules of the firm. In the event of the worker's death, his severance pay shall be paid to his legal heirs. Article 137 Where a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article. Such a worker shall be entitled to two thirds of the said severance pay

if his continuous service exceeds three years up to five years, and to the full severance pay if it exceeds five years. Article 138 Where a worker under a definite term contract abandons his employment at his own initiative before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years. Article 139 A worker shall forfeit entitlement to his entire severance pay in any of the following two cases: 1. If he is dismissed from service for any of the reasons specified in Article 120 hereof or if he abandons his employment in order to avoid being dismissed in accordance with that Article. 2. If he abandons his employment of his own accord, otherwise than in either of the two cases specified in Article 121 hereof, without notice (in the case of indefinite term contracts) or before completing five years of continuous service (in case of definite term contracts). Article 140 Where a firm has a provident fund for the workers and the rules of the fund stipulate that whatever the employer pays into the fund for the worker's account is in discharge of his legal obligation in respect of severance pay, the worker shall be paid the savings balance in his account or the severance pay due under the Law, whichever is the greater. Where the rules of the fund do not stipulate that the amounts paid by the employer are in discharge of his legal obligation toward the severance pay, the worker shall receive whatever is due to him in the provident fund in addition to the statutory severance pay. Article 141 Where a firm has a retirement, insurance or a similar scheme, a worker who is entitled to a retirement pension may opt for treatment under the said pension or severance pay or under the pension or insurance scheme, whichever is more advantageous to him.

Visa and Labour bans Dubai UAE

Except for UAE national citizens (and GCC nationals for the most part), all residents need permission from the UAE government (the Ministry of Immigration or equivalent) to live in Dubai and the UAE or visit the UAE. Each emirate has their own immigration department so it is possible the rules vary slightly but for the most part they are consistent in each emirate. What is more likely is that the same rules are interpreted differently, and/or applied differently by different emirates and to different nationalities. Keep this in mind if encountering difficulties with visa and work permit processing. As well as permission to visit or live in the UAE, all non-Emirati workers also need permission to work, and the UAE Ministry of Labour is in charge of issuing work permits (or labour cards) to working expats, except for maids who have their work permits processed at the Immigration Department. This is all covered in more detail in the pages about Dubai maid visas, working in the UAE, and UAE visas but the above summary is repeated here as an introduction. Expats and visitors may be subject to an entry ban and/or a work ban depending on who they are and/or what they've done while they've been in the UAE. There are two types of bans.
Lifting UAE Labour Ban and new company classification system - update 08 August 2011 (Gulf News report)

Workers in the UAE who receive a 6 month labour ban for breaking contract within 2 years can have the ban lifted under the following conditions according to reported comments from the UAE Ministry of Labour:

Minimum qualification held is a high school diploma. Minimum salary in new job is AED 5,000 for HS Diploma holders, AED 7,000 for diploma holders, and AED 12,000 for Bachelor degree holders. Ali Al Shehi, Senior Administrator at the UAE MOL was quoted as saying "We are still imposing the six-month labour ban on employees who quit their jobs before completing two years of service, but the ban can be lifted if the new employer offers the candidate a good position and an appropriate salary,"

From January 2012, a new fee scale will apply for Labour Permit applications.

There will be four categories of companies depending on activity, number of employees and nationalities, and qualifications. Labour Permit fees will be AED 600 for B1 companies, AED 1,500 for B2, AED 2,000 for B3. There is also a category C but permit fee information not supplied. New companies will be put in category B2 when first registering with the MOL.

UAE Labour Law new labour ban rules in Dubai and UAE - January 2011

From Saturday 01 January 2011, the minimum period of employment for which a labour ban is not imposed is 2 years (previously was 3 years apparently). This only applies to employees on unlimited contracts, or possibly workers on a limited contract who complete their contracts or terminate contracts before expiry with the agreement of their employer. See new UAE labour law update for more details.

Applying for new work permit while banned

Khaleej Times reported 29 September 2010 that someone from the Ministry of Labour (MOL) said that employers can start processing work permits for banned employees before the ban period is over to facilitate quicker issue of labour cards. Which sounded a bit strange since our understanding was that the MOL automatically blocked any new applications until after the ban period had expired. Unknown how long before end of ban period an application can be made. Jassim Jamil, acting Director General, Work Relations Department at the MOL was quoted as saying "This system demonstrates the MoLs commitment to grant the blacklisted worker the opportunity to search for another job. Likewise, the employer wishing to hire him can initiate a transaction for issuing a new work permit before the end of the ban duration to save time, Mr Jamil also reminded us that "The UAE is keen to give workers and companies all the necessary facilities to ensure the continuity of work relations for the best interest of the employer and the employee in compliance with the spirit of the law," leaving blacklisted workers scratching their heads and wondering why there was even a ban on them in the first place.

1. Immigration Ban An immigration ban means you cannot enter the UAE, whether as a visitor or for residency. Israeli citizens for example are banned (except for Israeli tennis players ... sometimes) due to their nationality, but just having a stamp from a visit to Israel shouldn't result in denied entry to the UAE (unless immigration is looking for an excuse to turn you away). Other bans can arise if you have been convicted of a criminal offence while in the UAE. Common offences that many expats get into trouble with are bad debts, bounced checks, drinking and driving, drunk in public, inappropriate relationships (having sex on the beach while drunk with someone you're not married to, for example). Of course, more severe offences such as theft, violence, rape, murder etc will also result in an immigration ban but not so many expats indulge in these activities, and those that do are not usually so surprised to receive a ban. An immigration ban can also arise if you have broken the rules related to immigration for example entering the country illegally, working without a work permit, absconding (leaving your job without informing your sponsor / employer), overstaying (this last one is not so likely to be a problem, just expensive when you get your overstaying fine).

Criminal offences usually result in a permanent ban and this is monitored via eyescanning equipment at airports, so losing your passport and getting a new one won't get you back in to the country. In the past, there was a 6 month or 1 year temporary entry ban for expat residents (not visitors) after they had left the country but this is no longer in existence (which doesn't mean it can't change in the future). Now, if you get a 6-month employment ban, you can still re-enter the UAE for a visit (but if you use that as a way to come back and work, and get caught, expect a lifetime immigration ban as a result). If you get a 1 year employment ban, there are conflicting reports about whether you can visit the UAE or not. Assume no unless you can confirm otherwise with the UAE immigration department. 2. Employment Ban An employment ban, labour ban, work permit ban are all different terms for the same thing i.e. you are not allowed to work in the UAE for a certain period of time.

An employment ban is usually for 6 months, 1 year, or permanent (see additional explanations further down). A 6 month ban is normally automatically imposed when leaving a job unless there is a reason not to, or a longer ban is imposed. The ban is on providing a work permit or labour card, imposed by the Ministry of Labour (MOL). A 1 year ban is often imposed if a worker resigns before completion of a limited period contract. A permanent ban is usually imposed on absconding employees, or those that break the labour law in some way that does not result in a 1 year ban. Nothing is stamped in your passport but when a new employer hands in an application to the MOL, it will automatically be rejected if a ban is on your computer file. A 6 month labour ban does not affect permission to visit the UAE - you can still enter on a visit visa or tourist visa. If you have a 1 year or permanent labor ban you might also be restricted from visiting the UAE - check with the immigration department first. A report in the Khaleej Times on 26 August 2010 offered some clarification, saying that those with a permanent work ban in the UAE could still enter on a visit visa - An expat worker who has a permanent ban from working in the country is eligible only for a visit visa, an official at the Ministry of Labour (MoL) said on Monday, at the weekly Open Day at the ministry in Abu Dhabi. A permanent ban is permanent according to a 21 August 2011 report in Emirates Business 24-7 of comments by Humaid Dimas, the Assistant Undersecretary for Labour Affairs at the MOL, who was quoted as saying "As for workers who get a permanent ban on jobs in the UAE because of absconding and other offences, they can not work again in the countrythe ban will not be lifted at any time as it is irreversible."

Ban lifting fee

There are some reports (in 2008-2009) that you may be able to pay a ban lifting fee of about 5000-6000 dhs. Other reports and comments indicate it is possible to lift a ban on payment of AED 500 per month of remaining contract duration if leaving before the end of a limited period contract. Official confirmation of a ban lifting fee not found so it could be variable depending on profession, nationality, company, mood of the official you're dealing with, wasta, which emirate you're in, what zone your DVD player is set to, and any other variables you can think of. Although the MOL website does still have a document from 2007 outlining the fees and categories of qualifications that are exempt from a ban or can get a ban lifted. It seems to be related to previous ban information but might still apply. Don't count on it but if you have no other choice, it's worth trying.
No ban on sponsor transfer

It may be possible to avoid a ban, or lift a ban by paying a fee, if you transfer from one sponsor to another. This is different from cancelling your residence visa and work permit, then applying for a new visa and labour card. A transfer of your sponsorship will at least need a No Objection Certificate (NOC), possibly payment of a ban lifting fee, and might be restricted to certain occupations. Check with the labour department in the emirate you are working in.
1 year ban

A one year labour ban for Dubai, Abu Dhabi, and the rest of the UAE will usually be imposed under the following conditions

expatriate workers leaving government jobs expatriate workers who break the terms of their labour contract and/or the labour law expats who lose a case with the UAE labour department against their employer, if they were on a temporary work permit because they had filed a complaint with the labour department (according to a Gulf News report 02 August 2009 and other follow-up media reports) possibly against workers who leave their job within one year of starting (at employer's request)?

6 month ban

A six month ban will be imposed on everyone automatically, unless they cop a one year ban, or fit into one of the exceptions below
No labour ban

No labour ban will be imposed on anyone in one of the following categories

UAE citizens are not subject to any labour ban (or immigration ban for that matter)

Expatriate workers moving to a government job will not receive a ban (don't confuse this with workers leaving a government job - they get a double whammy) Oil company employees Expat workers moving to another employer within the same free trade zone (not to a different free trade zone) Expats who have completed a fixed term contract and have given proper notice of not renewing it Expats who have completed 1 year of an unlimited contract AND get a No Objection Certificate (NOC) from the current employer. It may be a requirement that the new job has the same job title as the old job. Expats who are sponsored by their spouse for a residence visa (unless they breach the labour law in some way that brings down a ban). Expats who have worked for a company for more than 3 years on an unlimited contract? Unconfirmed. A Gulf News report 01 March 2009 stated that "The ban does not apply if the person has been working in the company for more than three years." Another Gulf News report ("Ask The Law" 12 February 2010) had a reply from Advocate Mohammad Ebrahim Al Shaiba of Al Bahar Advocates and Legal Consultants who said "... if his contract is for an unlimited period, he shall work with the employer for three years, then he may transfer to a new sponsor without the need to obtain a No Objection Certificate from the existing sponsor. This is the current applicable law in the Ministry of Labour..."

Where many expats get tripped up is when they work for more than a year but do not complete the full period of a fixed term contract. They can expect to get a ban even if the company provides them with an NOC. Exceptions can be made but require a trip to the Ministry of Labour (MOL) to explain your situation and give them a good reason why the ban should not be imposed. A company going bankrupt, or the owner of the company doing a runner or dying are examples of what might prompt some leeway from the MOL. An employee getting into a fight with his or her boss, or not performing satisfactorily, is unlikely to be viewed with any sympathy, even if they claim their boss was being unfair. If your boss really is being unfair or you have a legitimate complaint, your first step should be to file a complaint with the UAE Labour Department so that there is a documented record.
Other exemptions from employment ban

According to Article 63 of the "General Provision for the Entry Permits and Visas" legal document (as seen on DNRD website), "no new Entry Permit or Visa may be issued for employment except after the elapse of six months from the date of the last departure from the territories of the State", but the following categories of workers are exempted:

Engineers Doctors, Pharmacists and Male Nurses Agricultural Guides

Qualified Accountants and Auditors Administrative Employees holding university degrees Technicians operating on scientific, electronic instruments and laboratories Drivers licensed to drive heavy vehicles and buses, in case the transfer of sponsorship is to a similar party Workers in private oil companies when the transfer is between such companies

Unknown if this is current information (DNRD document is undated). Last checked 01 March 2009 but document appears to be more than a year old, so may have been superseded by changes to UAE visa rules in 2008.
Ban lifting fees in UAE

The UAE MOL website (as of September 2010) lists "Transfer of Sponsorship" fees information, with additional fees payable for workers who have not completed their contracts but wish to change jobs (of about AED 3,000-5,000). It's not clear if these fees are applicable only if the worker obtains a No Objection Certificate (NOC) from employer. Fees are the same those that were implemented during 2006-2008 when workers were permitted to transfer to another employer. As usual in the UAE, nothing is clear. If you want to know about getting a ban, and whether or not you can pay a ban lifting fee, ask the UAE Ministry of Labour helpline. Then ask again the next day to see if you get the same answer.

Financial and Economic Crisis 2008-2009 During the economic downturn that started in late 2008, large numbers of expats were losing jobs due to the "financial crisis". It is possible that the Ministry of Labour will be less enthusiastic about imposing a labour ban on expats who lose their job for such a reason and want to transfer their sponsorship, since it could be argued that they have left through no fault of their own. Some companies may also keep employees on their sponsorship to give them more time to find a new job (expats must normally leave the UAE within a fixed period of time after residence and work permit cancellation). There's no definitive rule in these cases, you will need to negotiate with your employer and/or the Ministry of Labour.
No more labour ban?

Reports in February said that the UAE Ministry of Labour was reviewing the 6 month labour ban rule. A Gulf News report 01 March 2009 quoted Abdul Razzaq Qambar, a training officer at the ministry, as saying "The ministry is studying different means to facilitate labour movement within the country and the reviewing of the ban is part of this". That could mean that a change is announced tomorrow, or next year, or never. In other words, don't get too excited. Previous ban information

June 2008 - present: automatic 6 month ban unless exceptions apply (Xpress report 04 June 2008 said "Labour ministry officials have confirmed that six-month and one-year labour bans have been reinstated.") July 2007? - June 2008: sponsorship transfer relatively straightforward without ban if NOC provided, minimum 1 year employment, possible fee payment March 2006 - July 2007?: transfer possible with payment of fees and minimum 1 year employment

For the curious, and the archives, this was older information about residence and labour bans (expired in 2005 / 2006 when an automatic 6 month labour ban was introduced?)

Maids and other domestic workers had an automatic one year ban imposed on them but as of January 2006 this rule has been cancelled Some professions and/or those holding a Master's Degree or higher were exempt.

In March 2006 it was announced that under certain conditions and payment of fees (between 1500 and 9000 dhs), the labour ban could be waived for those wanting to change jobs. The conditions are (according to the Gulf News 08 March 2006):

Labour permit and residence visa cancelled, without ban Worker has not signed a no-competition agreement Worker has been with company for at least one year New company applies for a new labour permit Transaction fees need to be paid according to the following categories of company which the employee is moving to (not from) and depending on the type of degree or qualification held: Category A Category B Category C PhD or MA Dh1,500 Dh2,500 Dh3,500 Dh3,500 Dh4,000 BA or equivalent Dh3,000

All others Dh5,000 Dh5,500 Dh6,000 If expatriate has not completed three years in the same company, an extra Dh3,000 is charged.

The first condition appeared to introduce a stumbling block right off the bat - to waive the ban, the permit has to be cancelled without a ban in the first place. Getting up to date details from a reliable source (even official government sources appear to contradict each other - website vs spokesperson vs press release for example) is not always easy.