“Gratuity will be affected” with the implementation of the “New Labor Law” in UAE, Federal Decree-Law No. 33 of 2021, which took effect in February of this year. Several amendments were made to this new labor law as compared to the old. These amendments, implement upon the laws dealing with the private sector’s employer-employee relations. As of this new labor law, we have explained adjustments to the gratuity that an employee receives, below in detail.
Amendments according to “New labor law about Gratuity”
If you work with the company for a year or longer, you should get a severance package when you leave. Check below, “How Gratuity will be Affected in UAE as per New Labor Law”?
- No employee with less than a year’s service will be eligible for a gratuity.
- With a cap of five years of service, the gratuity payout formula counts as 21 days’ pay for each year of service.
- An employee who worked for the firm for more than five years gets eligible for a full gratuity equal to 30 days’ salary for each year of service, which is more than the first five years of employment with the company.
- An employee may deduct any due payment, as per Executive Regulations of this Decree-Law, but with rules and procedures defined by law or a court.
Note: Gratuity payments to employees should never total more than two years’ wages.
New gratuity-related legislation for flexible work patterns
The “New Labor Law of Gratuity” has allowed for more temporary, part-time, and flexible contract options as compared to the old labor law. All of this contributes to a better work-life balance. You may choose the type of job contract that suits you most, and at, you become eligible to receive gratuity.
The incentive calculation is the same as for regular workers, following their contracts. When you put in eight hours a day, five days a week, it adds up to forty-eight hours a week. This is more than enough to qualify as full-time. When calculating gratuity, this formula uniformly implies for all employees, regardless of more or less than 40 hours a week.
Gratuity for foreign employees in the federal government of UAE.
Gratuity for foreign national working for the federal government who resigns before the contract renewal or entitle to an end-of-service:
- one month’s basic salary for the first five years of service
- one and a half months’ basic salary for the next five years of service
- two months’ basic salary for many years thereafter
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