This article explains the Dubai free zone gratuity calculation 2024 for employees working in Dubai’s free zones. Knowing how gratuity is calculated is essential for employees and employers to ensure compliance and prevent potential disputes.
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Dubai Free Zone Gratuity Calculation Rules
The UAE Labour Law (Federal Decree-Law No. 33 of 2021) and specific regulations applied in each free zone determine the gratuity in Dubai’s free zones.
Both employees and employers must understand the accurate process of calculating gratuity and when it is due.
Eligibility for Gratuity
Employees must complete at least one year of continuous service to be eligible for gratuity. Any periods of unpaid leave are not counted towards the total service period, and if an employee has not served for one full year, they are not entitled to gratuity.
Moreover, any outstanding debts the employee owes to the employer, such as loans or advances, can be deducted from the gratuity amount.
Gratuity Calculation for Full-Time Employees
Gratuity for full-time employees is calculated based on their length of service and their last earned basic salary. The gratuity calculation follows these guidelines: if an employee works for less than five years, the gratuity is calculated as 21 days’ salary for each year worked.
After five years of service, the gratuity increases to 30 days’ salary for each additional year worked.
For example, if an employee has worked for four years and their last basic salary was AED 5,000, their gratuity would be calculated as follows:
4 years × 21 days = 84 days
Gratuity = (84 days ÷ 30) × AED 5,000 = AED 14,000
It’s important to note that the total gratuity amount cannot exceed two years’ salary, regardless of the number of years worked.
Gratuity for Part-Time and Non-Standard Contracts
The gratuity is calculated using a pro-rata formula for employees who work on part-time contracts or non-standard employment arrangements. This involves dividing the total number of hours worked in the contract by the total number of hours in a full-time contract.
This percentage is then applied to the full-time gratuity entitlement to determine the amount of gratuity the employee is entitled to.
Savings Schemes and Traditional Gratuity
Some employers offer the Savings Scheme, an alternative and voluntary system for Dubai free zone gratuity calculation. Under this system, the employer and employee contribute to an investment fund.
The employee’s gratuity is then paid based on the fund’s accumulated balance, including any returns generated from the investments.
Employers must contribute 5.83% of an employee’s monthly salary if the employee has been employed for less than five years. If the employee has served over five years, the contribution increases to 8.33%.
Employees may also choose to make voluntary contributions to the fund, up to 25% of their annual salary. The contributions are transferred into the investment fund and should be processed within 15 days of each month’s beginning.
Under the Savings Scheme, employees can withdraw or transfer their voluntary contributions and any returns.
However, upon termination, the total end-of-service benefits they receive will be based on the accumulated funds in the investment scheme.
Authorities of financial free zones oversee and address complaints about the alternative end-of-service benefits system within their scope.
Payment of Gratuity
All end-of-service benefits, including gratuity, must be paid within 14 days after the termination of the employment contract. If the employee has participated in the Savings Scheme, the payment will be made as the balance accumulated in the fund.
When the employee’s participation is confirmed, the employer must ensure that any prior contributions or entitlements are preserved in the fund.
Learn more about the calculation of gratuity in UAE free zones.
Legal Services Related to Gratuity Calculation in Dubai Free Zones
Our labor lawyer in Dubai specializes in legal services for gratuity calculation and dispute resolution for employees and employers in Dubai’s free zones. We provide expert guidance to ensure compliance with the UAE Labour Law, particularly end-of-service benefits.
Dispute Resolution for Gratuity
If an employee believes their gratuity has been miscalculated or withheld, our legal team is equipped to handle such disputes.
We represent employees seeking to recover their rightful gratuity payments through negotiations or legal action. We aim to ensure that employees are compensated fairly and according to the law.
Assistance with Gratuity Calculation
Our law firm offers detailed assistance in Dubai free zone gratuity calculation, particularly for complex cases such as employees working under part-time contracts, non-standard employment arrangements, or those participating in the Savings Scheme.
We ensure that the correct method is applied to each unique situation, preventing any discrepancies in the calculation.
Legal Representation for Gratuity Disputes
Our firm offers full legal representation in cases where an employee’s gratuity is disputed. We handle negotiations, settlements, and litigation to resolve unpaid or wrongly calculated gratuity issues.
Whether an employee faces wrongful deductions or non-payment of gratuity, we are ready to take legal action to enforce their rights.
Employer Compliance with Gratuity Laws
Our law firm provides guidance on ensuring full compliance with gratuity-related regulations for employers in Dubai’s free zones. We also assist businesses in establishing clear and legally sound policies for calculating and paying gratuities.
We also offer legal advice on properly implementing the Savings Scheme and managing employee entitlements in line with the law.
Contract Review and Gratuity Advice
We assist employers and employees by reviewing employment contracts to ensure they accurately reflect gratuity entitlements and comply with UAE Labour Law.
Our legal team helps clarify contract gratuity provisions and advises on any necessary changes to ensure compliance. We also assist businesses in drafting contracts that protect both parties and prevent gratuity-related disputes.
Savings Scheme Guidance
We provide expert guidance to employees and employers involved in the Savings Scheme to ensure that gratuity contributions are handled correctly.
Our law firm explains the scheme’s details, how contributions are calculated, and how to withdraw or transfer gratuity benefits when employment ends.
If you need legal assistance regarding gratuity calculation in Dubai’s free zones, our law firm is here to help. We offer consultations and legal support to ensure that employees and employers comply with the current regulations and that gratuity payments are well managed.
FAQs about Calculating Gratuity in Dubai Free Zones
Understanding the Dubai free zone gratuity calculation process and seeking legal assistance when necessary can help employees and employers avoid misunderstandings and meet all legal requirements.
Whether you need assistance with calculations, disputes, or compliance, our law firm is ready to offer expert legal advice and representation.
Contact our labor law firm in UAE for expert help. Click the Whatsapp icon below.
A legal consultant specializing in UAE labor law. He regularly publishes articles on the website and writes on various areas of UAE law, with a specific focus on labor law.
