Jafza Gratuity Rules: Service Requirement

Jebel Ali Free Zone (Jafza) is a powerhouse in the United Arab Emirates, attracting businesses with its tax advantages, streamlined operations, and world-class infrastructure. But Jafza isn’t just about economic benefits – it also prioritizes employee well-being. One key aspect of this is the mandatory gratuity scheme or Jafza Gratuity Rules, an end-of-service benefit that provides financial security for employees upon leaving a Jafza company.

This gratuity isn’t simply a bonus; it’s a legal right included in UAE labor law. Jafza takes this obligation seriously, ensuring employees receive a fair payout based on their service tenure.

Whether you are an employee navigating your first Jafza job or a business owner seeking clarity on Jafza gratuity rules and regulations, this guide will equip you with the knowledge you need. Keep reading…!

Jafza (Jebel Ali Free Zone) and its Role in the UAE

Jafza, short for Jebel Ali Free Zone, is a free economic zone located in Dubai, United Arab Emirates. It’s essentially a designated area within Dubai that offers businesses special economic benefits to attract investment and trade. These benefits can include:

Companies operating in Jafza are typically exempt from corporate and income taxes.
Jafza boasts streamlined import and export processes, making it easier for businesses to move goods around the world.
Unlike some other parts of the UAE, Jafza allows companies to be fully owned by foreign entities.
Jafza provides excellent infrastructure, including warehouses, offices, and transportation links, to support businesses of all sizes.

Jafza plays a significant role in the UAE’s economy by acting as a major hub for international trade and logistics. It’s home to thousands of companies from various sectors, including manufacturing, logistics, e-commerce, and more. So, Jafza is essentially a special economic zone within Dubai that attracts businesses with its tax breaks, simplified procedures, and excellent infrastructure.

Understanding Jafza’s Gratuity Rules

Employees working in companies under Jebel Ali Free Zone (Jafza) are entitled to gratuity payments as part of their end-of-service benefits. That provides financial security for employees leaving a Jafza company. This gratuity isn’t discretionary; it’s a legal right guaranteed by UAE labor law. Jafza adheres to these regulations, ensuring employees receive a fair payout based on their service tenure. Here’s a breakdown of Jafza’s gratuity rules:

Who is Eligible for Jafza Gratuity?

Employees with more than one year of service qualify for gratuity.
Gratuity is not paid if: (Forfeiture)
Dismissed for reasons listed in Rule 11.8.4 (likely misconduct).
Resigns before completing one year.
Gratuity is paid to the employee’s beneficiaries in case of death.
Upon termination (except dismissal or employee-initiated termination), the employer provides airfare to the employee’s home country’s nearest international airport.

Jafza Gratuity Eligibility: Understanding the Minimum Service Requirement under Limited and Unlimited contracts

When it comes to Jafza gratuity eligibility, there’s a minimum service requirement of one year. This means for an employee to be entitled to a gratuity payout upon termination, they must have completed at least one year of continuous service with the company. Here’s where the type of employment contract plays a role:

Unlimited Contracts

There’s no difference in eligibility for gratuity based on contract type for employees with unlimited contracts. As long as they surpass the one-year minimum service mark, they are entitled to gratuity upon termination, regardless of the reason (except for dismissal due to misconduct).

Limited Contracts

For employees on limited contracts, gratuity eligibility depends on who initiates the termination:

Employer Termination: If the employer terminates the contract after the employee completes one year of service, the employee qualifies for gratuity.
Employee Resignation: If the employee resigns before the one-year mark, they forfeit gratuity entitlement under Jafza regulations.

How is Gratuity calculated in Jafza?

The gratuity is based on your last month’s basic salary, excluding allowances. The rate depends on your service duration:

1-5 years: 21 days of basic salary for each year of service.
More than 5 years: 30 days of basic salary for each year of service.
There’s a pro-rata calculation for service periods less than a year after the first year.
The maximum gratuity payout is capped at two years’ worth of your basic salary.

Formula for UAE Gratuity (General)

There’s no single formula for the entire UAE as the gratuity depends on service years and daily salary. However, for Jafza with unlimited contracts and resignation with notice (after 1 year):

First 5 Years: Daily Salary x 21 days/year x Number of Years (First 5)
After 5 Years: Daily Salary x 30 days/year x Number of Years (After 5)

Explanation:

Gratuity payment upon termination is determined by an employee’s length of service and their last month’s basic salary. According to the provided regulations, for the first 5 years of service, an employee is entitled to 21 calendar days of pay for each year worked. Beyond 5 years, this increases to 30 calendar days per additional year. However, the total payment cannot exceed two years’ basic salary.

Additionally, payment is pro-rata for any partial years served after the first year. It’s essential to calculate gratuity based on the basic pay rate outlined in the employment agreement. For instance, if an employee has served for 7 years and their last month’s basic salary is $5,000, their gratuity payment would be calculated based on these criteria, ensuring a fair and regulated compensation upon termination of service.

Example for Jafza Gratuity Calculation

Jafza Gratuity (Unlimited Contract)

Employee: Ahmed
Basic Salary: AED 10,000/month
Service: 7 years (2 years 3 months)
Reason for Leaving: Resignation with notice
Daily Salary: (Monthly Salary x 12) / Days in a Year ≈ AED 328.77

Jafza Gratuity Calculation:

First 5 Years: Daily Salary x 21 days/year x 5 years ≈ AED 34,778.85
Remaining Period (Days): (Years x 12 months) + Remaining Months = 810 days
Remaining Period Gratuity: Daily Salary x 30 days/year x Remaining Period (in years) ≈ AED 78,604.05
Capped Total Gratuity: Minimum of AED 240,000 (2 years’ salary)

Jafza gratuity depends on employee type (limited/unlimited contract), reason for leaving, and service time. There’s a maximum gratuity of two years’ salary. For unlimited contracts with resignation and notice period after one year, gratuity is:

21 days’ salary per year for the first 5 years (multiplied by daily salary).
30 days’ salary per year after 5 years (multiplied by daily salary).

Please remember that this is an estimate. Use Dubai Trade’s calculator and consult Jafza’s Labour Affairs for the final amount.

Jafza Gratuity Calculator

The Jafza gratuity calculator is an online tool developed by Dubai Trade, the service arm of Jebel Ali Free Zone (Jafza). It helps businesses registered under Jafza easily calculate the gratuity (end-of-service benefit) they owe to their employees upon termination.

Complies with UAE Law, it ensures calculations adhere to Article 139 of the UAE Labour Law, which mandates gratuity payments for all qualifying employees. It automates the gratuity calculation process, saving businesses time and effort. It’s important to remember that this is just an estimate, and the final approval will come from Jafza’s Labour Affairs Section.

How does the Freezone Gratuity calculator work? Input Requirements

To effectively use a calculator for employment-related calculations, such as determining final payments or settlements, a company needs to gather specific information about the employee’s situation. Here’s a breakdown of the key factors to consider:

Type of Employment Contract: Determine whether the employee is on a limited-term contract or an unlimited-term contract.

Reason for Leaving the Company: Ascertain the reason behind the termination of employment. This could include:

Resignation with a notice period: The employee voluntarily decides to leave the company and provides notice as per the terms of their employment contract or local labor laws.

Termination of employment: The company terminates the employment of the individual, which could be due to various reasons such as redundancy, poor performance, misconduct, or other legitimate reasons. The notice period in case of termination may vary based on the employment contract and applicable laws.

Term of Employment: Determine the duration of the employee’s employment, especially relevant for limited-term contracts.

For limited-term contracts, note the start and end dates of the contract, any renewal or extension clauses, and whether the contract has reached its natural expiration or is being terminated early.
For unlimited-term contracts, it’s important to know the start date of employment and any relevant milestones, such as probationary periods or anniversary dates.

Factors Affecting Jafza Gratuity Payment

Here’s a breakdown of factors affecting Jafza gratuity payment:

Jafza Gratuity Resignation

Employees with unlimited contracts who resign with proper notice after one year of service are entitled to the full gratuity amount calculated based on their service period. This indicates that fulfilling the contractual notice period is essential for employees to receive their full gratuity entitlement.

Employer Deductions

Employers are not allowed to deduct any outstanding debts, such as advances or loans, from the gratuity amount. Gratuity is considered a separate entitlement by law. However, employers can pursue legal channels to recover outstanding debts separately, but these cannot be directly deducted from the gratuity payout.

Gratuity Limit

There’s a maximum limit on gratuity payout, which is capped at two years’ worth of the employee’s basic salary. Even if the gratuity calculation based on the employee’s service time exceeds this limit, the employee will receive a maximum of two years’ salary as gratuity. This implies that regardless of the length of service, the gratuity payout cannot exceed this limit.

FAQs

What are the rules for gratuity in UAE free zones?

Most free zones, including Jafza, follow the UAE Labour Law regarding gratuity payments. This means all employees in the free zone are entitled to gratuity based on their service time and basic salary.

How is gratuity calculated in Jafza?

It depends on the contract and reason for Leaving. The gratuity amount depends on whether the employee has a limited or unlimited contract and the reason for leaving (resignation, termination, etc.).

For Unlimited Contract and Resignation with notice (after 1 year), the employee receives full gratuity.

Calculation:
First 5 years: 21 days’ basic salary per year
After 5 years: 30 days’ basic salary per year

Limited Contract: Gratuity is usually pro-rated based on completed service (unless terminated early without fault by employer).

What is the law of gratuity in UAE?

Employees who serve from 1 to 5 years are entitled to 21 days of basic salary for each year of service for their gratuity. For those with over 5 years of service, the entitlement increases to 30 days of basic salary for each year worked. This ensures that gratuity payments reflect the length of an employee’s service accurately.

Conclusion

Jafza prioritizes employee well-being by mandating gratuity payments upon leaving a company. This gratuity is a legal right based on service time and isn’t discretionary. Jafza offers clear guidelines:

Minimum service requirement of one year.
Calculation based on last month’s basic salary, excluding allowances.
21 days’ salary per year for the first 5 years, 30 days’ thereafter (unlimited contracts with resignation and notice).
Capped maximum at two years’ basic salary.

Understanding these rules ensures a smooth experience for both employers and employees in Jafza.

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Jafza Gratuity Rules: Service Requirement | Gratuity Calculation

Jafza (Jebel Ali Free Zone) and its Role in the UAE