Employees are eligible for Gratuity at the end of completing a full year of service. This gratuity is calculated as 21 days of salary. Salary in this case excludes any allowances for housing or car etc. and considers the basic salary of the employee.
Both the DIFC Law and the UAE Labour Law No. 8 of 1980 take an almost identical position on the issue of severance pay. The DIFC laws also calculate the gratuity as 21 days of basic salary. The basic salary shall not include any housing or other allowances.
Recently, the UAE government as well as the DIFC have enacted new laws regarding employment and labour, which are strikingly similar in terms of end-of-service payments.
Both the DIFC Law and the UAE Labour Law No. 33 of 2021 take an almost identical position on the issue of severance pay.
As per UAE Labour Law, a foreign worker will be entitled to gratuity if he has completed one year of service.
Under the UAE Labour Law, gratuity will be calculated for 21 days for each year of the first five years of service, and for every succeeding year, it will be calculated for 30 days. Under the DIFC Employment Law as well, gratuity will be paid for 21 days for each year of the first five years, before the commencement date of the Qualifying Scheme. For every subsequent year, it will be calculated for 30 days before the commencement date of the Qualifying Scheme.
Under the UAE labour law as well as the DIFC employment law, the gratuity should not exceed two years’ remuneration.
Under the DIFC Law, Article 63(1), “An employer or an employee may terminate an employee’s employment for cause in circumstances where the conduct of one party warrants termination and where a reasonable employer or employee would have terminated the employment.”
Where employment is terminated by the employer, the gratuity will be calculated up to the termination date, and where the employee terminates the employment, gratuity will be calculated up to the notice period that the employee would have been required to give.
Both the UAE Labour Law and the DIFC law state that gratuity should not exceed the annual wage for two years.
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