Gratuity calculated on 
last basic salary


Gratuity calculated on 
last basic salary

Published: Mon 2 Jul 2012, 10:39 AM

Last updated: Tue 7 Apr 2015, 12:39 PM

Gratuity calculated on 
last basic salary

My husband has been working as an administrative staff on an unlimited contract for three years. As per his offer letter, the air ticket is provided only every two years.

He now wants to work for another company. As per the labour law, a person who resigns will only get 1/3 of the total gratuity. Salary as per the contract is only Dh2,500, but he is getting Dh3,750 as he has recently been granted an increment. In the law, it says that he should give the employer a 30-day notice period. How should he mention this in a letter? Should he say, ‘no longer wishes to continue the contract?’ or ‘resigning?’

The contents of the 30 days’ notice will not make any difference as long as your husband is leaving the job and is not terminated by the employer. The law is clear that if an employee is leaving the job within the first three years, he is entitled to one third of the end of service gratuity as per Article 137 of the UAE Labour Law. Your husband may submit a simple resignation with 30 days’ notice.

Furthermore, the end of service gratuity is based on the basic of the last salary without adding any benefits or allowances of any kind as per the terms of Article 134 of the Labour Law.

Company replacement

My visa will expire on July 4. I submitted my resignation with a one-month notice period. If in case they cannot find a replacement, am I obliged to stay in the company until they find one? My colleague who submitted her resignation letter three months before expiry of visa is still here due to lack of replacement. They renewed her visa and verbally agreed that she could leave early. I want to leave exactly on the expiry of my visa with or without replacement. Will I be liable to any ban?

It depends upon the nature of your contract. If your contract is for an unlimited period, as per Article 117 of the UAE Labour Law, after completion of two years with the current employer, you may terminate it any time with a 30 days’ notice. In such an event, you may leave the company regardless of whether the company finds a replacement or not. You are not legally obliged to stay until the company finds a replacement.

However, if your contract is for a limited period, then it has to be examined carefully especially the clauses dealing with termination, and will be dealt with accordingly. If nothing is mentioned in your limited employment contract about the renewal or prior notice, then, it will be terminated upon the expiry of the contractual period in accordance with Article 113 of the UAE Labour Law. Again, you are not legally obliged to stay until the company finds a replacement.

Limited contract

I have been working with a company here on a limited contract for three years. It will expire in July 2013. Rumours are that the employees will be sent home due to an imminent closure. Can the company really do that? Are we entitled to any compensation? What are our options? Please advice.

Since your contract is for a limited period and if the company terminates you for any reason not mentioned in the Article 120 of the UAE Labour Law, then you are entitled to a compensation of not exceeding the total pay due to you for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise, in accordance with Article 115 of the UAE Labour Law. Therefore, it is necessary to review your employment contract regarding the compensation issue. If your contract provides any compensation in case of termination, then, it will be implemented, otherwise, it will be decided according to Article 115 of the UAE Labour Law.

Furthermore, and in addition to a return flight ticket, you will also be entitled to end of employment benefits in accordance with Article 132 of the UAE Labour Law which states: “The employee, who has completed one year or more in the continuous service, is entitled to the end of service remuneration at the end of his service. Days of absence from work without pay are not included in computing the period of service, and the remuneration is to be calculated as follows :

  • Twenty one day’s pay for each year of the first five years of service.
  • Thirty days pay for each additional year.
  • The entire total remuneration shall not exceed two year’s pay.
  • Compiled by Ahmed Shaaban

Mushtaq Ahmad Jan is a lawyer at the Global Advocates and Legal Consultants, with a Master’s Degree in International Commercial Law, University of Hull, Kingston-upon-Hull, England. Readers may e-mail their questions to: or send them to: Legal View, Khaleej Times, PO Box 11243, Dubai.

By Mushtaq Ahmad Jan

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