7 Common Mistakes Employees Make While Calculating Gratuity

In the UAE, end-of-service benefits are the legal right of every employee who is eligible. However, many people make certain mistakes while calculating it, which often leads to receiving a lower gratuity amount.

Here we will highlight the common mistakes people make and also explain how you can avoid them to ensure you receive your full end of service entitlement.

1. Including Allowances in Calculation

Many employees, while calculating their end-of-service benefits, mistakenly add housing, transport, fuel, medical, and other allowances. This results in a reduced gratuity amount. In reality, it is calculated only on the basic salary, and allowances are not included.

2. Not Knowing the Type of Contract (Limited vs Unlimited)

It is very important to know the type of contract when calculating gratuity, because the formula depends on it. Many job holders make the mistake of ignoring this factor.

Limited Contract: If an employee resigns before completing the agreed period, they may receive either no gratuity or a reduced amount.

Unlimited Contract: The rules for resignation and termination are different under this type of contract.

Further, read here: Limited vs. Unlimited Contract in UAE

3. Ignoring Partial Years of Service

Some employees only count complete years, while ignoring months and days. For example, if an employee has worked 5 years, 3 months, and 10 days, they should not only count 5 years — the 3 months also count in the calculation.

4. Forgetting the Probation Period

In most companies, employees start with a probation period where they are tested before being confirmed. The probation period does not count towards end of service benefits, but many people mistakenly include it in the calculation.

5. Applying the Wrong Formula for Resignation vs Termination

The formula for calculating gratuity is different in cases of resignation and termination.

Resignation: An employee must complete at least one full year of service to be eligible, and the gratuity amount will depend on the terms of the contract.

Termination: If an employee is terminated without cause, they are entitled to the full gratuity. Many people mix up these formulas, which reduces their actual entitlement.

6. Not Updating According to the Latest UAE Labour Law

The UAE Labour Law is updated frequently. Many employees calculate their gratuity based on outdated rules, which leads to incorrect and reduced results.

7. Relying Only on Manual Calculations

Manual or verbal calculations can easily lead to errors. Without using a proper formula or calculator, the results are often inaccurate, which again affects the final settlement.

If you want to get rid of these mistakes and make your end-of-service benefit calculation completely accurate, then you should calculate it on Free & Online Gratuity Calculator UAE 2025 (MOHRE Updated)