Leave, Attendance & Gratuity Computation

Under Federal Decree-Law No. 33 of 2021, an employee who completes one year or more of continuous service is entitled to gratuity based on basic wage (excluding housing, transport, and other allowances) at 21 calendar days' wage for each of the first five years of service, and 30 calendar days' wage for each additional year beyond five, with the total capped at two years' wage. An employee with less than one year of continuous service is generally not entitled to gratuity.

Under the current Decree-Law No. 33 of 2021 framework, where limited-term contracts are the default, the historical distinction that reduced gratuity for unlimited-contract employees who resigned before completing a set number of years is far less commonly applicable than it was under the pre-2022 Labour Law. However, the specific contract type, its start date, and any transitional provisions must still be checked — legacy unlimited contracts that have not yet been converted may carry different terms. PNPC verifies the contract's actual terms and start date before finalising any figure rather than assuming a single blanket rule.

Article 44 of Decree-Law No. 33 of 2021 sets out specific circumstances under which an employer may terminate without notice and, in some of those circumstances, without paying end-of-service gratuity — but the statutory conditions are strict, and the burden is on the employer to document that the specific grounds genuinely apply. A termination labelled 'for cause' by the employer without proper investigation, written warnings, or documented evidence is highly vulnerable to challenge before MOHRE or the Labour Court.

No. Most DIFC-registered employers must enrol eligible employees in DEWS (the DIFC Employee Workplace Savings scheme), a defined-contribution arrangement that has replaced the lump-sum gratuity calculation for the large majority of DIFC employees since the scheme became mandatory. Under DEWS, the employer makes regular contributions into a qualifying scheme on the employee's behalf rather than accruing a lump-sum liability calculated at separation. Certain categories of employee may fall outside standard DEWS enrolment and should be checked individually.

ADGM applies its own ADGM Employment Regulations 2019, distinct from both the mainland Decree-Law No. 33 of 2021 framework and the DIFC's DEWS scheme. The specific end-of-service benefit structure and any registered employer scheme must be confirmed against the ADGM regulations and the individual employment contract rather than assumed to mirror either the mainland or DIFC approach.

Under the mainland Labour Law, an employee accrues a minimum of two days of annual leave per month of service after completing more than six months but less than one year of continuous service, and 30 calendar days per year once the first year of service is completed. Employers may offer more generous leave than the statutory minimum, and once granted as a consistent practice or contractual term, the enhanced entitlement generally becomes binding.

Yes. Periods of unauthorised absence do not count toward the service period used to accrue annual leave, and can also result in a corresponding salary deduction. Authorised leave, including approved sick leave taken within entitlement, does not interrupt annual leave accrual. Getting this distinction right requires attendance records that clearly show which absences were approved and which were not.

After completing the qualifying probation period, an employee is entitled to up to 90 days of sick leave per year (not necessarily consecutive), structured as full pay for the first 15 days, half pay for the next 30 days, and no pay for the remaining 45 days, subject to a valid medical certificate from an accredited UAE healthcare provider or facility recognised for this purpose.

Yes. Any annual leave accrued but not taken at the point of separation must be encashed and paid to the employee as part of the final settlement. This leave encashment is calculated on the employee's full ordinary wage (basic wage plus allowances that form part of ordinary pay) rather than the narrower basic-wage-only base used for the gratuity calculation itself — the two figures use different wage definitions and should not be confused.

At minimum: the signed employment contract showing basic wage and allowances separately, WPS payroll records for the full employment period, attendance and leave records including any unauthorised absence, the resignation or termination notice with its stated reason, and — where relevant — documentation supporting any for-cause termination grounds. Missing basic-wage documentation is the most common reason a calculation is delayed while we request supporting salary certificates.

For an employee whose leave and attendance history has already been tracked under an existing PNPC payroll engagement, a final settlement statement is typically produced within a few working days of the resignation or termination notice being received. For a standalone calculation where records must first be collected and reconciled from scratch — particularly across a multi-year employment history — 5 to 10 working days is a realistic range, longer if source documents are incomplete.

No. Gratuity is a statutory entitlement under the Labour Law once the one-year service threshold is met, and it cannot be unilaterally withheld or reduced by an employer as a discretionary penalty for performance issues. Gratuity may only be affected in the specific circumstances the law itself provides for — such as a properly documented Article 44 for-cause termination — not as a general management decision.

The Wage Protection System (WPS) is the MOHRE-mandated electronic salary transfer system requiring employers to pay wages through approved banks or exchange houses, generating a verifiable payment record. WPS records are the primary evidentiary source PNPC uses to confirm actual basic wage paid over time, actual salary deductions applied for unauthorised absence, and the payment history relied on to calculate both ongoing leave-linked pay and end-of-service settlement figures.

Gratuity is generally calculated on the basic wage applicable at the time of termination or resignation, applied across the full period of service — it is not typically recalculated year-by-year at each historical basic wage rate. This means a salary increase part-way through employment generally increases the effective value of gratuity attributable to earlier years of service as well, once the final calculation is performed at separation using the final basic wage.

This scenario requires careful review of continuity of service, since the Labour Law generally treats continuous employment with the same employer as a single period of service for gratuity purposes regardless of a contract-type conversion, provided there was no genuine break in employment. The applicable formula and any conditions tied to the contract type in force at termination are then applied to the full continuous period.

Yes. The Executive Regulations under Decree-Law No. 33 of 2021 provide specific frameworks for part-time work, flexible work, temporary work, and job-sharing arrangements, and leave accrual and gratuity for employees under these arrangements are generally calculated on a pro-rata basis reflecting actual hours or days worked rather than the standard full-time formula applied without adjustment.

Muslim employees who have completed at least one year of continuous service are entitled to unpaid leave to perform Hajj once during their period of employment with the employer, for a duration not exceeding 30 days, subject to the employer's operational discretion on timing and subject to the employee not having previously taken this leave with the same employer.

UAE maternity leave entitlement under Decree-Law No. 33 of 2021 provides a defined period of leave with full and partial pay tiers depending on length of service, plus additional unpaid leave in specific circumstances, and separate provisions for a nursing period following return to work. Maternity leave does not interrupt annual leave accrual, and the specific pay treatment must be tracked distinctly from both annual and sick leave categories.

Yes, and where an employer has consistently applied more generous terms — whether documented in an employee handbook, offer letter, or established company practice — those enhanced terms generally become binding, since the Labour Law sets a floor, not a ceiling. Employers cannot apply terms less favourable than the statutory minimum regardless of what a contract or policy states.

Delayed final settlement exposes the employer to a MOHRE complaint, and MOHRE has an established conciliation process for wage and end-of-service disputes that, if unresolved, can be escalated to the Labour Court. Beyond the underlying amount owed, unreasonable delay can itself be treated as an aggravating factor in a dispute, and cases proceeding through the Labour Court can also carry statutory interest and cost exposure for the employer beyond the base gratuity figure.

Both. PNPC offers standalone final settlement calculations for a single employee's separation — commonly requested when a company needs an independent, defensible figure for a contested termination or a one-off resignation — as well as ongoing leave, attendance, and gratuity tracking bundled into a monthly or quarterly payroll and compliance outsourcing retainer.

We prepare an independent recalculation from source documents — WPS records, attendance logs, the employment contract, and the stated termination reason — showing the statutory formula applied line by line with citations to the relevant Labour Law articles or DIFC/ADGM provisions. This document is structured to be usable as supporting evidence in MOHRE conciliation or Labour Court proceedings if the dispute is not resolved directly between the parties.

The UAE does not levy personal income tax, and end-of-service gratuity paid to an employee is not subject to any UAE payroll withholding tax. From the employer's perspective, gratuity is a deductible business expense for UAE Corporate Tax purposes when properly incurred and documented, subject to the general deductibility conditions under the Corporate Tax Law administered by the Federal Tax Authority.

We map each employee to the correct governing framework based on their actual employing entity and contract, maintain separate leave and gratuity ledgers reflecting each regime's distinct rules (Labour Law formula for mainland and most free zones, DEWS contribution reconciliation for DIFC, ADGM Employment Regulations for ADGM), and consolidate the resulting liability figures for group-level financial reporting and workforce planning.

Both, where requested. Beyond individual employee calculations, we compute the aggregate end-of-service benefit liability across the workforce and provide the provisioning figures and supporting workings needed for the balance sheet, prepared on a basis consistent with IAS 19 principles as commonly applied in UAE financial reporting, to support the company's bookkeeping or the external auditor's review.

Basic wage is the fixed base component of an employee's pay, excluding allowances such as housing, transport, and other benefits. Gross salary is the full total, including all allowances. Gratuity under the mainland Labour Law is calculated strictly on basic wage — using gross salary as the base, whether by mistake or by employer practice, produces a figure that does not match the statutory formula and is vulnerable to being disputed by either party depending on which direction the error runs.

Whether accrued annual leave can be taken during a notice period, or whether the employer can require the employee to work through notice and encash the leave instead, generally depends on the specific contract terms and operational agreement between employer and employee, within the bounds of the Labour Law's notice period requirements. This is a point PNPC reviews on a case-by-case basis against the specific contract language.

Annual leave generally begins accruing from the start of employment, though the ability to actually take leave, and certain entitlements such as sick leave, may be subject to qualifying conditions tied to the probation period under the contract and the Executive Regulations. Gratuity itself only becomes payable once the one-year continuous service threshold is met, which includes time served during probation as part of that continuous period, provided employment continued beyond probation.

We recommend retaining the full employment contract history, WPS payment records, attendance and leave approval records, and any termination or resignation correspondence for the full duration of employment plus a reasonable period after separation, given that a former employee can raise a MOHRE complaint or Labour Court claim after the employment relationship has ended, within applicable limitation periods.

We work with both. Many of our leave, attendance, and gratuity engagements are for the UAE subsidiary or branch of a company headquartered elsewhere, where the parent's finance or HR team is not familiar with UAE-specific Labour Law formulas and relies on PNPC's Dubai-based team to compute and document UAE employee entitlements correctly, independent of how the parent company's home jurisdiction treats similar payments.

PNPC prices leave, attendance, and gratuity computation either as part of a monthly or quarterly payroll and compliance outsourcing retainer covering ongoing leave-ledger maintenance, or as a standalone fixed fee for a specific final settlement calculation, dispute-support recalculation, or aggregate liability provisioning exercise. The exact fee depends on employee headcount, the complexity of the employment history involved, and whether records must be reconstructed from incomplete source data. We confirm the fee in writing before work begins in every case.

Payroll software calculators apply a generic formula and rarely distinguish correctly between mainland, free zone, DIFC, and ADGM regimes, rarely separate basic wage from gross salary reliably without careful configuration, and rarely assess whether a termination genuinely qualifies for a for-cause gratuity reduction under Article 44. PNPC reviews the underlying facts — contract type, jurisdiction, wage base, and termination circumstances — before applying the formula, and produces a calculation with statutory citations that can withstand a MOHRE or Labour Court challenge, not just a payslip line item.

The employer remains legally responsible under the Labour Law for maintaining accurate wage, leave, and attendance records and for the correctness of any final settlement it pays. PNPC acts as the employer's outsourced compliance function, building and reconciling the leave ledger and gratuity working papers, but the underlying employment decisions — who to hire, terminate, or discipline — and the responsibility for source records generated internally (contracts, attendance devices, approvals) remain with the employer.

We treat this as a control failure to be resolved before any leave or gratuity figure is finalised, not a discrepancy to average out. We trace both the attendance log and the WPS-paid amount back to source — biometric export, manual timesheet, or bank file — identify which record is authoritative for the period in question, and document the reconciliation so the final figure is defensible if either the employee or a regulator later questions it.

Yes, though we flag the opening leave and service-period balance as an assumption that management must confirm and sign off, since we cannot independently verify pre-engagement history we were not present for. Where prior records exist — even incomplete ones — we reconcile them into an opening position; where they do not, we document the gap explicitly rather than presenting an assumed balance as verified fact.

We do not resolve the underlying factual or HR dispute — that is a management and, where necessary, legal question — but we will recompute the leave and gratuity position under each version of the facts the employer asks us to model, so management can see the financial exposure of each scenario before deciding how to proceed with the employee or, if it escalates, before a MOHRE hearing.

Both models work. Where the client's HRIS, biometric system, or accounting software supports a data export or API connection, we can work from a recurring export cycle synced to payroll; where the client has no formal system, we build the leave ledger from manual timesheets, contracts, and WPS records directly. The reconciliation discipline is the same either way — the source format changes, the verification standard does not.

Individual final settlement uses the specific employee's actual service period, basic wage, and termination circumstances to produce a payable figure at separation. Financial statement provisioning instead estimates the aggregate end-of-service benefit liability across the entire current workforce as at the reporting date — a forward-looking, IAS 19-consistent estimate covering employees who have not yet left, rather than a payment due today. The two use the same underlying formula but serve different purposes and audiences.

Whether service transfers continuously between related entities for gratuity purposes depends on the specific transfer mechanism used, the employee's contract terms, and whether there was a genuine break in employment or simply an administrative transfer between group entities. This is assessed on the facts of each transfer rather than assumed either way, and we document the basis for whichever treatment is applied.

Domestic workers in the UAE are governed by a separate legal framework (Federal Law No. 9 of 2022 on Domestic Workers) with its own leave and end-of-service provisions distinct from Decree-Law No. 33 of 2021. PNPC's core leave, attendance, and gratuity engagement is built around the private-sector Labour Law and DIFC/ADGM regimes; domestic worker calculations are handled as a distinct scope with the correct governing law confirmed before any figure is produced.

PNPC's Dubai compliance team tracks MOHRE circulars, Cabinet decisions, and Executive Regulation amendments affecting leave and end-of-service entitlements as part of the ongoing retainer, and updates the computation methodology and client-facing guidance when a change takes effect — rather than the client discovering a change only when a calculation is challenged.

Whether employee service and accrued leave/gratuity liability transfer to the acquiring entity, or whether employment is terminated and re-commenced with the target, depends on the transaction structure (share sale versus asset/business transfer) and the specific terms agreed. PNPC computes the accrued liability position as at the transaction date for due diligence and completion accounts purposes, and confirms with legal counsel how continuity of service is to be treated post-completion before updating the ongoing ledger.

Yes, though a multi-year backlog reconciliation takes materially longer than an up-to-date monthly cycle, since we must first establish opening balances, trace historical WPS payments and attendance records for each affected employee, and identify any period where source documents are missing or contradictory before a final leave and gratuity position can be certified.

Overtime pay itself is calculated and paid separately under the Labour Law's overtime provisions and does not form part of the basic wage used for gratuity, nor does it directly affect annual leave accrual. However, overtime records are still relevant evidence when reconciling actual hours worked against attendance logs and confirming the employee's genuine working pattern, particularly for part-time or flexible arrangements.

UAE labour claims are subject to limitation periods under the Civil Procedure and Labour Law framework, and the specific applicable period can depend on the nature of the claim and when the cause of action arose. PNPC does not provide a general limitation-period opinion as part of a computation engagement — that is a question for UAE legal counsel — but we do retain and can reproduce the underlying calculation and evidence for as long as the client requires it available for defence.

Using gross salary instead of basic wage as the gratuity base is by far the most frequent error we correct, followed closely by applying the wrong regime (mainland formula to a DIFC or ADGM employee) and mishandling the resignation-versus-termination distinction under contracts spanning the 2021-2022 legal transition.

Both, within this engagement's scope. Where a company has no leave policy beyond the statutory minimum, or an outdated policy pre-dating the 2021-2022 Labour Law changes, we can recommend a compliant, documented leave and end-of-service policy alongside the computation work — though a full employee handbook or broader HR policy redesign beyond leave and gratuity terms sits with our HR policy and handbook design engagement.

Gratuity is a genuine employment cost and is generally deductible for UAE Corporate Tax purposes under Federal Decree-Law No. 47 of 2022 when incurred wholly and exclusively for the business and properly documented. The timing question matters: financial statements prepared on an accruals basis, following Ministerial Decision No. 114 of 2023 on accounting standards for Corporate Tax, recognise the end-of-service liability as it builds up (an IAS 19-style provision), whereas the deduction interacts with the Corporate Tax adjustments for provisions. Because the provision is an estimate, the movement in the provision — not just cash paid out — is what flows through the accounts, and the Corporate Tax computation must reconcile the accounting charge to the amount actually deductible in the period.

This is a frequent source of confusion because sick leave has three pay tiers (15 days full pay, 30 days half pay, 45 days no pay per leave year) but the pay tier is a wage-payment question, not a service-continuity question. Authorised sick leave taken within the 90-day statutory entitlement is a period of authorised leave and does not break continuity of service for gratuity, and it does not interrupt annual leave accrual — even the unpaid 45-day tier. What changes is the pay the employee receives during those days, not whether the days count as service. Unauthorised absence is the opposite: it does not count as service and does interrupt accrual.

The Wage Protection System transfers and records the total agreed wage each cycle, but gratuity is computed on basic wage only, so the WPS file alone does not give you the gratuity base — it confirms what was actually paid, which you then split against the contract's basic-versus-allowance breakdown. MOHRE's 2025-2026 WPS model integrates payroll data directly with financial institutions through the Central Bank, which raises the evidentiary bar: the WPS-recorded amount and the payroll register must agree, and any gap between contractual basic wage and what WPS shows paid needs explaining before it becomes a gratuity dispute. We reconcile the two rather than trusting either in isolation.

Wages must be paid through WPS monthly under MOHRE rules, and the final settlement (salary to last working day, leave encashment, and gratuity) is due promptly on end of service — the law frames end-of-service benefits as payable at the end of service. Persistent WPS non-payment can trigger MOHRE enforcement against the establishment, including effects on the ability to issue or renew work permits, quite apart from the individual employee's complaint. Because settlement timing also gates work-permit and residency-visa cancellation, a delayed gratuity payment can stall the whole labour-file closure and prolong the employer's exposure.

Employment particulars including wage are recorded with MOHRE, and material changes to the contract — including basic wage — should be reflected in the MOHRE-registered contract rather than kept only in an internal salary letter. This matters for gratuity because the base used is the basic wage in force at separation applied across the whole service period; if a raise was agreed internally but never updated in the registered contract, you face a mismatch between the MOHRE record, the WPS-paid amount, and the figure you calculate. We flag any undocumented mid-service basic-wage change so it is regularised before it distorts the settlement.

Deductions from an employee's end-of-service entitlement are constrained by the Labour Law's rules on lawful deductions, and gratuity cannot be treated as a free pool the employer nets whatever it likes against. Genuine, documented amounts — an outstanding salary advance the employee acknowledged, or a notice-period shortfall where the employee left without serving notice — may be set off within the limits the law allows, but only against properly evidenced sums and within the deduction caps. Disputed or undocumented 'costs' cannot simply be withheld from gratuity.

Once the one-year threshold is met, gratuity is calculated for completed years at 21 days' basic wage each for the first five years and 30 days each thereafter, and the fractional final year is paid pro-rata for the actual days served in that part-year, not rounded down to the last completed year. So four years and seven months is four full years at 21 days plus a pro-rata portion of the fifth year's 21-day entitlement for the additional seven months. Rounding the fraction away understates the figure and is a common under-payment.

Gratuity requires one year or more of continuous service, so an employee separating during probation — whether they resign, are terminated, or abscond — is generally below the gratuity threshold and no gratuity is due. Accrued but untaken annual leave, however, is a separate entitlement: leave begins accruing during employment, so any accrued leave balance is still encashable on separation even within the first year, subject to how the contract and Executive Regulations treat leave taken during probation. Absconding additionally triggers a specific MOHRE reporting process that interacts with the labour and visa file.