Unpaid leaves have always been a controversial subject when it comes to gratuity pay calculations. This new rule aims to bring more clarity to this matter.
In a recent statement, the Ministry of Human Resources and Emiratization (MOHRE) clarified that unpaid leave days would not be included in the calculation of gratuity pay for employees in the UAE. The new rule is set to make the calculation of gratuity of departing employees clear and encourage employees to take their available time off more frequently.
What is Gratuity Pay?
Gratuity pay, also known as end-of-service benefits, is a form of compensation given to employees upon the completion of their contract or upon the termination of their employment. It is calculated based on the employee’s length of service and their last basic salary. Check out our blog explaining all you need to know about the new gratuity rules under the 2022 labor law.
How Unpaid Leave Affected Gratuity Calculations In The Past?
At the end of the employee’s service, gratuity was calculated based on the last basic salary of the employee and included the number of leave balance remaining. Any paid time-off balance remaining was either compensated by cash or taken as leave during the notice period of the employee when exiting the company.
However, the leave balance was deducted from the employee’s gratuity upon exiting the company, which was a disadvantage employees had to go through. The usual cases where employees were forced to take unpaid leave were when their sick leave balance was fully consumed or cases of emergency leave due to family circumstances.
What Is The New Rule For Unpaid Leave And Gratuity Calculation?
MOHRE has stated that unpaid leave days will not be included in the calculation of gratuity pay. This means that if an employee has taken unpaid leave, the number of days taken will not be added to their length of service, and their last basic salary will not be adjusted to include the days of unpaid leave.
How Does This Rule For Unpaid Leave Affect Gratuity Calculation?
This clarification will have a major impact on both employers and employees in the UAE, as it ensures that the calculation of gratuity pay is fair and accurate. It also ensures that employees who have taken unpaid leave are not at a disadvantage when it comes to receiving their gratuity pay.
It’s important to note that this clarification applies to all types of unpaid leave, including sick leave, vacation leave, and other forms of leave. Employers should take note of this, and employees should be aware of their rights when it comes to unpaid leave and gratuity pay.
The Ministry of Human Resources and Emiratization (MOHRE) has clarified that unpaid leave days will not be included in the calculation of gratuity pay for employees in the UAE. This means that leave days will not be added to the employee’s length of service and the last basic salary will not be adjusted to include the days of unpaid leave.
This clarification ensures that the calculation of gratuity pay is fair and accurate for all employees and employers in the UAE. It also establishes the employee’s right to take the necessary time off when it is needed and not try to accumulate the balance of leave days to try to cash it in. Putting employees’ mental and physical wellbeing at the forefront of workplace priorities.