As an employee in a limited contract, you may have questions on how gratuity is calculated on resignation. Gratuity refers to the end-of-service benefits received by an employee upon leaving the company. In the UAE, the gratuity payment is regulated by the Federal Law No. 8 of 1980 on the Regulation of Labor Relations.
The calculation of gratuity is based on the employee`s length of service and their last drawn basic salary. For those on limited contracts, the length of service refers to the duration of the contract. The formula for calculating gratuity for employees on limited contracts is as follows:
Gratuity = (Total Basic Salary ÷ 21) x (Number of Years of Service)
The total basic salary refers to the employee`s salary before any deductions. The number of years of service is calculated based on the duration of the limited contract. For example, if you have completed two years of service on a limited contract with a total basic salary of AED 5,000, your gratuity calculation would be as follows:
Gratuity = (5,000 ÷ 21) x 2 = AED 476.19
It is important to note that if an employee completes a limited contract and is rehired within two months of the contract`s termination, their previous service period will be added to their new contract`s tenure for gratuity calculation purposes.
In addition to the gratuity payment, employees on limited contracts are also entitled to receive accrued leave days and airfare tickets home. The number of accrued leave days is calculated based on the duration of the limited contract and the employee`s last drawn basic salary.
It is essential to know your rights as an employee on a limited contract when it comes to gratuity payment. If you believe that you have not received the correct gratuity amount upon resignation, you can seek legal advice and file a complaint with the Ministry of Human Resources and Emiratisation.
In summary, gratuity calculation for employees on limited contracts is based on the employee`s last drawn basic salary and the duration of the contract. Understanding how gratuity is calculated can help you ensure that you receive the correct payment upon resignation.
