End of Service Benefits in UAE Free Zone

The United Arab Emirates has a number of separate free zones spread out over the country. While Dubai has a large number of free zones, others can be found in Abu Dhabi, Sharjah, Ajman, and Fujairah.

Each free zone caters to a certain business category or categories, and the FTZ operating license is issued by an independent Free Zone Authority (FZA) to brands establishing businesses in that UAE free zone.

Some of the popular free zones in Dubai are:

Jebel Ali Free Zone
Dubai Healthcare City
Dubai Academic City
Dubai Media City
Dubai Knowledge Village
Dubai Techno Park
Dubai Airport Free Zone
Dubai Maritime City

What is end of service benefits in UAE?

Despite the fact that the UAE is a popular business destination for multinational corporations, there are a variety of employment restrictions that may be unexpected or unknown.

The UAE End of Service Benefit is one of the specific criteria that we help our clients through (EOSB). The End of Service Benefits is a compensation payment owed to an employee upon their termination or resignation.

Even though your employee is still a resident of your home country, this is a necessary payment that cannot be avoided. The most common name for the End of service benefits severance is Gratuity.

How to calculate Gratuity in UAE?

Are you thinking about resigning from your current job in UAE Free Zone? Planning to leave the country for good? Then according to UAE’s labor law, those who have completed a full term of their employment contract are entitled to receive gratuity at the end of their service which depends upon:

The type of contract they hold
The total number of years they serve in the organization
Reasons for the termination of their contract
Their basic salary

How many types of employment contract are there in UAE?

There are two types of employment contract in UAE:

Limited Contract
Unlimited or Open Contract

The terms and conditions relating with the employee’s gratuity according to their type of contract are:

Limited Contract:

The employee and employer have mutually agreed upon the tenure of employment.
If the employee resigns before the contract ends, they may lose their labor rights and payment from the employer which may also result in a labor ban in UAE.

Unlimited Contract:

There is no tenure of service signed at the time of contract sign-up.
A notice period of 1 to 3 months is required by the employee before they decide to resign.

According to Article 68 of the new labor law, companies have one year to modify their employment contracts from unlimited to limited.

Employees on unlimited contracts will have their end-of-service gratuity computed according to the scheme outlined in the former Labour Law No. 8 of 1980 until that time comes.

Moving future, the provisions of the new labor law will apply to their renewed limited contracts.

Calculation for End of Service Benefits in UAE Free Zone

The payroll department of any company in UAE has complex tasks to carry out for each employee during their service. Most businesses choose to partner with payroll processing companies or Employer of Record for payroll services in Dubai.

Similarly the calculation for their employees’ end of service benefits in UAE Free Zone, businesses tend to consult with companies offering payroll outsourcing in Dubai.

End of service gratuity is a sum of money that an employer is legally obligated to pay an employee following the termination of their working relationship, provided that the employee meets specific conditions outlined in UAE Labor Law.

The end of service gratuity scheme was established 40 years ago to ensure that when work connections ended, employees who did not have pension benefits received a lump sum payment to help them with the transition or to put towards their savings.

The payment is based on the employee's basic wage and length of service, although it may be decreased depending on the circumstances of the employee's departure and where they worked.

Criteria for the Calculation of End of Service Gratuity

After completing a minimum of one (1) year of service, an employee is eligible for the End of Service Gratuity. For each of the first five (5) years of service, the Employee is entitled to a 21-day End of Service Gratuity.

When an employee has worked for more than 5 years, he or she is entitled to 30 days' pay for each additional year worked, as long as the total amount of End of Service pay does not exceed 2 years' pay.

For a fraction of a year, the End of Service Gratuity will be determined on a pro rata basis. Certain deductions apply if an employee leaves his job within the first five years of employment.

The days when employee was absent are not included in the calculation for end of service gratuity.
The End of Service Gratuity is calculated using the basic wage specified in the contract as a starting point. This End of Service Gratuity does not include any housing, transportation, travel, overtime, representation, or cashiers allowances provided to the employee.
The Employer has the right to deduct any sum from the End of Service Gratuity owed to him.

Need further assistance on End of service benefits in UAE Free Zone?

Payroll Middle East, one of the leading payroll processing companies in UAE was established in 1985.

With exceptional payroll services in Dubai, Payroll Middle East has embarked a successful journey where it has enabled 100+ clients from all over the Middle East to strengthen their payroll processing functions and hire excellent human resources.

If you need more details on end of service benefits in UAE free zone, let us enlighten you through wholesome experience.