Update to UAE’s End-of-Service Gratuity Calculation

UAE's End of Service Gratuity CalculationA new labor law will change the UAE’s end-of-service gratuity calculation beginning February 2022. The law presents no dramatic legislative changes but is seen to benefit employees through additional major provisions and stipulations such as the prohibition of sexual harassment, enforcement of equal pay for men and women, and the definition of rest days.

Major Provisions Under the UAE’s New Labor Law 2022

UAE’s end-of-service gratuity calculation

The amendments include a provision, according to which, a worker is entitled to an end-of-service gratuity, in accordance with the legislation regulating pensions and social security in the country.

It also stresses that eligibility of a foreign worker who has worked full-time and who has completed one year or more of continuous service with an establishment shall be paid end-of-service benefits calculated according to the basic wage, with a wage of 21 days for each of the first five years of service and a wage of 30 days for each subsequent year (calculated on a working days basis, not calendar days).

Prohibition of all forms of coercion at the workplace

Article 74 of the decree-law stipulates that the employer may not use any means that would force the worker or threaten him or her with any penalty or force him or her to work for the employer or force him or her to provide a service against his or her will.

Prohibition of sexual harassment

The new decree prohibits sexual harassment, bullying, or any form of verbal, physical, or psychological violence against a worker by the employer, his or her superiors at work, or colleagues.

Prohibition of discrimination and prejudice

The law prohibits all forms of discrimination based on race, color, sex, religion, national origin, social origin, or disability among persons that would weaken possibilities of equal opportunity, prejudice equal access to or continuation of employment, and enjoyment of rights.

Equal pay for men and women

The amendments stressed that while not violating the prescribed rights of working women stipulated in this decree, all provisions governing the employment of workers without discrimination shall apply to women, with emphasis on granting women the same wage as men if they are doing the same work or work of equal value, which will be determined by a decision of the Council of Ministers.

Enhancing ease of business and labor market flexibility

Among the most prominent amendments in the new law is the introduction of new types of work to allow employers to meet their labor requirements and benefit from their energies and productivity at the lowest operational cost through part-time work, temporary work, and flexible work, as well as allow employers to employ workers whose work contracts have expired, but who are still in the country, through easy and flexible procedures.

Defining part-time, temporary, and flexible work

Part-time work allows work for an employer for a specified number of hours or days. Temporary work is work whose implementation requires a specified period of time or is focused on work that ends with the completion of a specified job. Flexible work is work for which working hours or workdays change according to the volume of work and economic and operational variables of the employer.

The executive regulation of the law will specify the conditions and control of work patterns and the obligations arising from each worker and employer, depending upon the type of employment including what is related to end-of-service gratuity and as required by the interest of the two parties to the work contract.

Payment of wages in any currency

The law grants companies the flexibility to pay wages in UAE dirhams or in any other currency, according to the agreement between the two parties in the work contract.

Non-disclosure and noncompetitive clause

The decree-law also permits the employer to prohibit the worker from competing with the employer or participating in any competing project in the same sector, if the work entrusted to the worker allows him or her to know the employer’s clients or access his or her trade secrets — provided that the condition is specified in terms of time, place and type of work to the extent necessary to protect legitimate business interests and the period of non-competition shall not exceed two years from the date of contract expiry.

Fixed-term contracts and unlimited contracts defined

The decree-law specifies fixed-term contract (Limited) as one not exceeding three years, and it is permissible, by agreement between the two parties, to extend or renew this contract for a similar or lesser duration once or more.

The provisions of the decree-law shall apply to employment contracts of indefinite duration concluded in accordance with Federal Law No (8) of 1980.

The law also states that Unlimited employment contracts are to be converted into fixed-term employment contracts, in accordance with the conditions, controls, and procedures contained in this decree by law, within one year of the effective date of the existing contract and may be extended by the Council of Ministers for further periods as required in the public interest.

The law also assigns the employer the responsibility to bear the fees and cost of recruitment and not to collect the same from the worker either directly or indirectly.

Worker welfare at the core

The new decree-law has the idea of worker welfare and wellbeing at its core. In keeping with that, a host of measures have been provided to ensure a safe and healthy work environment for all employees in the private sector.

Rest days, paternity leaves, and more

All private-sector workers are entitled to a paid, weekly rest day, with the possibility of increasing the weekly rest day at the discretion of the establishment, in addition to providing vacations for the workers, including mourning leave ranging from three-five days, according to the degree of the employee’s relationship with the deceased. In addition, paternity leave of five days is granted to private-sector workers. Any other leave is decided by the Council of Ministers.

No withholding of documents, employee’s ease of movement

The law stipulates the prohibition of withholding official documents, such as passports, belonging to the workers and forcing them to leave the country at the end of an employment contract. This has been done to allow the worker to move to another establishment in the labor market. The worker shall also have the right to obtain his or her wages on the due date in accordance with the regulations approved by the ministry and according to the conditions and procedures as specified by the Executive Regulations of this decree-law.

Exemption of workers from paying litigation fees

The decree-law exempts labor cases from judicial fees in all stages of litigation, execution, and requests made by workers or their heirs, the value of which does not exceed Dh100,000.

Rights and obligations of the worker

The new law regulates the obligations of the employer, the most prominent of which is the establishment of labor regulations, the obligation to provide adequate housing, as well as train workers and help them develop their skills.

On the other hand, the law also regulates the workers’ obligations based on the terms of the employment contract and in accordance with duties, including performing work during the specified times, adhering to good conduct and ethics, preserving work secrets, seeking to develop job skills, committing not to work for another competing employer, vacating the labor accommodation within one month of expiry of employment contract and other obligations.


Nexus, Asinta’s employee benefits consulting Partner in the UAE provided this article about the UAE’s end of service gratuity calculation.