Limited Contract Gratuity Calculation in UAE
When it comes to working in the United Arab Emirates (UAE), there are a few things that every employee should understand. One of these is the concept of gratuity, which is a mandatory payment made by an employer to an employee on the completion of their service with the company. While gratuity is a common concept, there are different rules for calculating it based on the type of contract that an employee has signed. In this article, we will discuss the rules for calculating gratuity for employees with limited contracts in the UAE.
What is a Limited Contract?
A limited contract is a type of employment contract that has a fixed term. This means that the employee is contracted to work for a specific duration, ranging from six months to five years. Once the contract expires, the employer is not obligated to renew it, and the employee may need to search for a new job.
Calculating Gratuity for Limited Contracts
Under the UAE Labor Law, employees with limited contracts are entitled to receive gratuity payments on the completion of their service. The amount of gratuity that an employee is entitled to receive is calculated based on the length of their service with the company. The formula for calculating gratuity for employees with limited contracts is as follows:
Gratuity = (Total Monthly Salary ÷ 30) × 21 × (Number of Years Worked)
Total Monthly Salary: This includes the employee`s basic salary, housing allowance, and any other allowances that are included in their salary package.
30: This represents the number of days in a month.
21: This represents the number of days of gratuity that an employee is entitled to for each year of service with the company.
Number of Years Worked: This represents the number of years that the employee has worked with the company.
For example, if an employee with a limited contract has worked with a company for three years and their total monthly salary is AED 10,000, their gratuity calculation would be as follows:
Gratuity = (10,000 ÷ 30) × 21 × 3 = AED 21,000
Therefore, the employee would be entitled to a gratuity payment of AED 21,000 on the completion of their service.
Conclusion
In conclusion, employees with limited contracts in the UAE are entitled to receive gratuity payments on the completion of their service. This payment is calculated based on the length of their service with the company and is mandatory under the UAE Labor Law. Employers are required to pay this amount to employees at the end of their service, and failure to do so can result in legal action. As an employee, it is essential to understand your rights regarding gratuity payments to ensure that you receive the correct amount that you are entitled to.