End of Service Gratuity

End of Service Gratuity is a benefit payment for employees when they resign from their work or when their job contract ends. This payment is practiced in some countries like United Arab Emirates, Saudi Arabia, Qatar and so on.

In this article, End of Service Gratuity calculation will be discussed according to the United Arab Emirates Labor Law.

If your company is located in United Arab Emirates, the End of Service settings are already set up according to the UAE Labor Law.

There are two types of Contracts: Limited and Unlimited Contract.

If the employee has the Contract Start and End dates set in their profile, then the employee is said to get an end of service payment based on the limited contract calculations. If the employee doesn’t have the Contract Start and End dates set in their profile, then the system will recognize them as Unlimited Contract employees.

The system calculates end of service gratuity either by Resignation or by Termination. Let’s calculate the end of service gratuity of an employee who has a limited contract.

If the employee has completed more than 5 years of continuous service with your company and has resigned, then for the first 5 years he/she is eligible for 21 day’s basic salary and for service above 5 years, he/she is eligible for 30 day’s basic salary for every year of service.

Calculation:

Hire Date: Jan 01, 2012
As of Date: Dec 15, 2017
Basic Salary: 5000 per month
Basic Salary per Day: 5000*12/365 = 164.3836
Total Number of Days Worked: Hire Date – As of Date = 2176
Total Number of Years Worked: 2176/365 = 5.96164
21 Days Basic Salary: 164.3836*21 = 3452.055
30 Days Basic Salary: 30*164.3836*(5.96164-5) = 4742.353 (for above 5 years).
Total Gratuity: 5*3452.055 + 4742.353 = 22002.63

The end of service calculates the gratuity total according to the reason you choose and date you choose. Other calculations are made according to the End of Service Settings in your account using the same formula.

Resigned Employees

If the employee is already resigned, the gratuity can be added from the End of Service Gratuity page. In order to add it, the employee should have the Resignation Date set in his/her profile.

Once the End of Service Gratuity is added for the resigned employee, a single payrun will be automatically added in the Single Payrun list with a draft status.

Created by Aziza Israilova, 
April 2019