With the United Arab Emirates (UAE) new Labour Law of February 2 (Federal Decree by Law No. 33) entering into force, it is important to discuss the update of how much a private sector employee should receive as a severance pay.

In this sense, two fundamental issues must be analysed: first, the concept of payment of bonuses in itself; and second, to compare the position of the previous law against the new one regarding the calculation of the payment.

The Emirates Government recently amended the Employment Law. The resulting text pays great attention to the right to severance pay (“the Gratuity”). UAE labour law has long established that employees have the right to be paid a bonus at the end of their contract.

The Emirates Government recently amended the Employment Law. The resulting text pays great attention to the right to severance pay (“the Gratuity”). UAE labour law has long established that employees have the right to be paid a bonus at the end of their contract.

A worker who has spent one year or more in continuous service shall be entitled to an end of service gratuity upon the termination of their service. The days of absence from work without pay shall not be included in the calculation of the period of service and the gratuity shall be calculated as follows:

– If a worker has worked for less than 1 year, they are not entitled to any gratuity pay.
– If a worker has served for more than 1 year but less than 5 years, they are entitled to full gratuity pay based on 21 days’ salary for each year of work.
– If a worker has served more than 5 years, they are entitled to full gratuity of 30 days’ salary for each year of work after the first five years.

In all cases, the total gratuity shall not exceed the wage of two years.
The quick calculation of the compensation to which an employee is entitled can be done through this link.
https://dda.gov.ae/en/gratuity-calculator/gratuity-calculator

In case of any doubt or dispute on the gratuity amount, contact us. It will be a pleasure to help you.