The End-of-Service Benefits (EOSB) signify a key aspect of employment legislation in the UAE, ensuring that employees receive a fair financial settlement upon the completion of their employment. This contains gratuity payments along with other entitlements that may be due to the employee.
In the UAE, EOSB refers to the financial compensation owed to employees upon their employment contract’s termination, provided they have completed at least one year of continuous service. Gratuity is the primary component of EOSB, but it may also include additional benefits such as unpaid leave, bonuses, or other allowances specified in the employment contract or by the UAE Labor Laws.
Disambiguation: This article discusses UAE Federal employment laws. For ADGM labour laws, please refer to ADGM Employment Laws. For DIFC labour laws, please refer to DIFC Employment Laws.
For the process of the EOSB to be done efficiently, employees can follow certain measures that will help ease their requirements:
- Revising the Employment Contract: It is recommended that employees review and know the contract carefully and thoroughly also keeping in mind certain terms and conditions which mentions the calculation method, notice periods, and if any other additional information given. They can always approach and seek legal advice if they need further clarification.
- Specifying Notice: If an employee wishes to resign, they should be able to do it in the contracted notice period, according to the employment contract and as stated in the Labor Law. If a condition arises wherein the employee does not provide the notice period, it could affect their end of service benefits.
- Maintenance of Documentation: During the tenure of employment with a company, the employee needs to make sure to keep track of all the documents such as employment contract, salary, and other documents which may be relevant.
- Employees may have doubts about their EOSB, and for this matter, they could contact their employer and discuss the calculation and when the payment could be expected.
- Legal Advice aid & help: For any further information, or if any doubt surfaces/ queries and if one requires detailed advice the best person an employee could reach out to would be a legal expert.
Gratuity Payment: The Foundation of EOSB
Gratuity Calculation: The calculation of gratuity is based on the employee’s basic salary and duration of service. The following are the fundamental guidelines for determining gratuity payments:
- If the service period of an employee is less than one year, he won’t be able to claim any gratuity pay.
- If the service period of an employee is between one and five years, his full gratuity calculation will be based on the salary of 21 days for every year of service.
- If the service period of an employee is above five years, his full gratuity calculation will be based on the salary of 30 days for every year of service after the initial five years.
- Gratuity payments are given to employees who have served the employer/company for 12 months continuously.
- The gratuity payment given at the end of the course will not go beyond the employee’s two-year salary.
- For up to 5 years of service: The employee shall get 21 days of basic salary for every year worked.
- Over 5 years: The worker will be paid 30 days’ basic salary for each additional year of service after the initial 5 years, in addition to 21 days’ salary for the first 5 years of services.
Other End-of-Service Benefits
Leave Encashment
Leave encashment indicates the payment for unused annual leave days.
Carry-Forward Annual Leave
Carry-forward leave is annual leave that the employee did not use in previous years and is carried forward to the next year.
Notice Period Salary
The notice period salary is the payment for the duration of the notice period if the employee works during this period or the payment in lieu of notice if the employee is not required to work.
Other Benefits
This may include gratuity, bonuses, or any other benefits as per the employment contract or company policy.
Example Gratuity Illustration
Employee earns a basic salary of AED 10,000, a total monthly salary of AED 15,000, 15 unused leave days, 5 carried forward leaves, and a 30-day notice period:
Leave Encashment: (10,000/30) X 15 = 5,000 AED
Carry – Forward Annual Leave: (10,000/30) X 5 = 1,667.67 AED
Notice Period Salary: (15,000/30) X 30 = 15,000 AED
In the scenario of an employee having 8 years of service, it would be as follows:
- Gratuity for the first 5 years would be = (10,000/30) X 21 x 5 = 35,000 AED.
- Gratuity for remaining 3 years would be = (10,000/30) X 30 X 3 = 30,000AED.
- Total Gratuity would be: 35,000 + 30,000 = 65,000 AED.
Employees during the EOSB need to understand all the labor law provisions and the proper claims they will benefit from. For further clearance, and a hassle-free process, it is advisable for the employees to reach out to legal support and clarify their queries.
