How to Calculate Gratuity Salary in the UAE
Gratuity is an end-of-service benefit paid to employees in the UAE. The calculation depends on the employee’s length of service and basic salary. Below is a detailed explanation of the calculation process:
1. Determine the Length of Service
Less than 1 year: No gratuity is payable.
1-5 years: Gratuity is based on 21 days of basic salary for each year of service.
More than 5 years: Gratuity is based on: - 21 days of basic salary for the first 5 years, and - 30 days of basic salary for each additional year of service.
2. Calculate Daily Wage
To calculate the daily wage, divide the employee’s monthly basic salary by 30:
3. Calculate Gratuity Amount
1-5 years of service:
\[Gratuity = \frac{\text{Daily Wage} \times 21 \times \text{Years of Service}}{30}\]More than 5 years of service: - Gratuity for the first 5 years:
\[Gratuity_{5\ years} = \frac{\text{Daily Wage} \times 21 \times 5}{30}\]Gratuity for the additional years:
\[Gratuity_{additional} = \frac{\text{Daily Wage} \times 30 \times \text{Additional Years}}{30}\]Total Gratuity:
\[Total\ Gratuity = Gratuity_{5\ years} + Gratuity_{additional}\]
Numerical Simulation
Example 1:
Basic monthly salary: AED 10,000
Years of service: 3 years
Steps: - Daily Wage: \(10,000 / 30 = 333.33\) - Gratuity: \((333.33 \times 21 \times 3) / 30 = 7,000\)
Result: Gratuity amount is AED 7,000.
Example 2:
Basic monthly salary: AED 15,000
Years of service: 7 years
Steps: - Daily Wage: \(15,000 / 30 = 500\) - Gratuity for first 5 years: \((500 \times 21 \times 5) / 30 = 17,500\) - Gratuity for remaining 2 years: \((500 \times 30 \times 2) / 30 = 10,000\) - Total Gratuity: \(17,500 + 10,000 = 27,500\)
Result: Gratuity amount is AED 27,500.
Important Notes
The maximum gratuity payable is equivalent to two years of the employee’s basic salary.
This information is for general guidance only. Consult with an HR professional or legal expert for specific advice.
Salary Simulation