Limited Contract Resignation in UAE 2021: Understanding the Gratuity Payment

If you are working in the United Arab Emirates (UAE) and you are under a limited contract, it is important to have a clear understanding of the rules and regulations governing the resignation process in 2021. One of the most important aspects of resigning from a limited contract is the gratuity payment, also known as end of service benefits. In this article, we will discuss the legal requirements, calculation, and payment methods for the gratuity payment in UAE.

Limited Contract Resignation: Legal Requirements

Under the UAE labor law, an employee who resigns from a limited contract is entitled to receive an end of service gratuity payment. The gratuity payment is calculated based on the employee`s basic salary and the duration of employment. However, there are certain legal requirements that must be met before an employee can receive the gratuity payment. Firstly, the employee must have completed at least one year of continuous service. Secondly, the resignation must be initiated by the employee and not by the employer. Finally, the employee must have given a notice period of 30 days to the employer, as stipulated in the labor law.

Gratuity Payment Calculation

The gratuity payment for a limited contract employee in UAE is calculated based on the following formula:

Gratuity = (Basic salary ÷ 30) × 21 × Years of service

Where basic salary refers to the monthly salary earned by the employee, and years of service refers to the duration of the employment contract. The 21 in the formula represents the number of working days in a month.

For example, if an employee earning AED 5,000 per month has worked for 4 years, the gratuity payment would be calculated as follows:

Gratuity = (5,000 ÷ 30) × 21 × 4 = AED 14,000

Payment Methods

The gratuity payment can be made by the employer in either of the following ways:

1. Lump sum payment: This means that the entire gratuity amount is paid to the employee in one go, upon completion of the notice period.

2. Installments: This means that the gratuity amount is paid to the employee in installments over a period of time. However, this option is only available if the employee agrees to it in writing.

Conclusion

In conclusion, if you are planning to resign from a limited contract in UAE, it is important to understand your legal rights and entitlements with regards to the end of service gratuity payment. By following the legal requirements and understanding the calculation and payment methods of the gratuity payment, you can ensure a smooth and hassle-free resignation process.