Gratuity amount is calculated as follows: No gratuity until one year of service. 21 days of basic salary for each year of service for the first five years of employment; 30 days of basic salary for each subsequent year of service.

As an employee in the Dubai International Financial Centre (DIFC), it is crucial to be aware of the various benefits and rights available to you. One significant aspect that deserves attention is the end-of-service gratuity, a financial entitlement provided to employees upon the completion of their employment. In this article, we will explore the details of end-of-service gratuity for DIFC employees, its calculation methodology, and other essential considerations.

Disambiguation: This article discusses DIFC employment laws. For ADGM labour laws, please refer to ADGM Employment Laws. For UAE Federal labour laws, please refer to UAE Federal Employment Laws.

What is End-of-Service Gratuity?

End-of-service gratuity is a lump sum payment made to employees in recognition of their service and commitment to an organization. It serves as a financial cushion and reward for the completion of employment, providing employees with financial stability during transitional periods, such as retirement or job changes.

Calculation Methodology

The DIFC end-of-service gratuity is calculated based on two main factors such as length of service and basic salary. The DIFC Employment Law provides a formula to determine the gratuity amount:

• For employees with less than a year of service, no gratuity is payable.
• For employees with one year or more of continuous service, the gratuity amount is calculated as follows:
• 21 days of basic salary for each year of service for the first five years of employment.
• 30 days of basic salary for each subsequent year of service prior to the Qualifying Scheme Commencement Date.

The basic salary used in the calculation excludes any allowances, commissions, bonuses, or other benefits provided by the employer. The total payment of gratuity shall not exceed an amount which is equivalent to two times the employee’s annual wage.

Provisions for Early Termination or Resignation

In cases of termination or resignation before completing one year of service, employees are not eligible for end-of-service gratuity unless otherwise specified in their employment contract. However, if an employee completes one year of service and voluntarily resigns, they may still be entitled to a pro-rata gratuity amount based on their period of service.

Accumulation and Payment

End-of-service gratuity accumulates throughout an employee’s tenure and becomes payable upon termination of employment, regardless of whether it ends due to retirement, resignation, or termination by the employer.

Gratuity Calculation Example:

To illustrate the calculation, let’s consider an employee who worked for seven years with a basic salary of AED 10,000:

For the first five years: (21 days of basic salary) x (5 years) = AED 10,5000

For the subsequent two years: (30 days of basic salary) x (2 years) = AED 6,0000

Total gratuity amount: AED 16,5000

Provisions for calculating gratuity payment

• The employee’s basic wage shall not be less than 50% of the employee’s annual wage.
• The daily rate of the employee’s basic wage shall be calculated by dividing the employee’s basic wage by 365.
• All references to the employee’s basic wage and annual wage shall be to those applicable to the employee on the employee’s termination date.
• In cases where an employee is employed by an employer by way of multiple fixed term contracts, the aggregate of all fixed terms of employment served by the employee shall determine the years of service of the employee, provided that the fixed term contracts are in succession of each other, or an offer in respect of a new fixed term contract has already been made to the employee at the expiry of the existing one.

An Employer may deduct from the payment of Gratuity of an employee, any amounts due and owing to the Employer by an Employee pursuant to any deductions as mentioned the DIFC Employment Law. In case if the employee has taken more vacation leave than has accrued at the termination date, employer shall be entitled to deduct an amount calculated from any payments due to the employee on the termination date and therefore they can reduce the same amount from the gratuity to be paid.

DIFC Employee Benefits and Pension Scheme

In addition to the end-of-service gratuity, DIFC employees may also be eligible for other benefits, such as health insurance, annual leave, sick leave, and access to the DIFC Employee Workplace Savings (DEWS) scheme. The DEWS scheme provides a regulated savings plan, ensuring that employees have a secure retirement fund.

Important Considerations

While end of service gratuity is a valuable benefit for DIFC employees, there are some considerations to keep in mind:

• Early Termination: If an employee’s contract is terminated before completing five years of service, the gratuity calculation may be affected. In such cases, the employee may be entitled to a reduced gratuity amount.
• Pension Schemes: DIFC employees should also familiarize themselves with the available pension schemes within the DIFC, such as the DIFC Employee Workplace Savings (DEWS) scheme. These schemes complement the end of service gratuity, providing additional retirement benefits.
• Seek Professional Advice: Given the complexity of employment benefits and regulations, it is advisable for DIFC employees to consult with financial advisors or legal professionals who specialize in labor laws and employee benefits. They can provide personalized guidance based on specific circumstances.

Understanding the intricacies of end-of-service gratuity is essential for all DIFC employees. It serves as a financial safeguard, rewarding their commitment and loyalty. By being aware of the calculation methodology, provisions for early termination or resignation, and additional benefits, employees can plan their finances and make informed decisions for their future. Remember, seeking advice from legal experts well-versed in DIFC regulations is recommended to ensure a thorough understanding of your rights and entitlements.