UAE Labour Law: How much job termination salary are you entitled to?

UAE courts tend to favour employment contracts that are more favourable to employee


The amount of money that is given to an employee on termination can vary depending on several factors, say UAE-based legal experts. Knowing the law, therefore, is vital.

When in doubt, employees should refer to their contracts, which should specify the amount that will be due to them on termination.

“It [compensation that one is supposed to receive upon termination] varies depending on the circumstances of each case,” says Jamie Liddington, Head of Employment at legal firm Hadef & Partners.

“An employee who is dismissed arbitrarily can expect to receive an award of compensation to include (among other contractual entitlements) – payment in lieu of any unpaid part of the notice period; payment in lieu of accrued but untaken annual leave; up to three months’ wages as compensation for arbitrary termination and end of service gratuity,” he told Emirates 24|7.

“Each employee’s notice period should be written in the contract of employment. All employees must be paid their full salary and benefits for the duration of the contractual notice period until their termination date,” says Thenji Macanda, Senior Associate at Taylor Wessing (Middle East) law firm.

What the law saysuae-labour-law-2015-expatmoney (1)

As per Macanda, if no notice period is specified in the contract of employment, then according to Article 117 of the UAE Labour Law, at least 30 days’ written notice should be provided. This period differs for daily paid workers who have been employed for less than 5 years.

“Article 118 of the UAE Labour law states that a contract of employment will continue to be valid for the notice period and the parties cannot agree to reduce or dispense with the notice period. If, however, an employer reduces the notice period and terminates the employee before the end of the notice period then in accordance with Article 119 of the UAE Labour law, the employee must be paid compensation in lieu of notice equivalent to the notice period. The parties can increase the notice period and if this is done, then the employee must be paid their contractual pay for the duration of the notice,” she elaborates.

When can your employer forfeit your termination compensation?

The law fully protects workers in the country but there are certain clauses under which there will be notice period from the employer’s side and subsequently no payments.

Liddington clarifies that employees who are dismissed “for cause” (under Articles 88 or 120 of the Labour Law) will not be entitled to receive notice of termination (or payment in lieu of notice) and they are likely to forfeit the end of service gratuity.

Contract letter v/s Labour Law – what will hold?

What will hold – the contract letter that is signed between the employer and the employee or the labour law of the country in case of termination? Again, there is no clear cut verdict that can be followed here but the courts usually uphold the one that is more favourable to employees.

“Where there is inconsistency or conflict between the company supplementary contract and the Ministry of Labour contract/free zone contract, the courts tend to favour the employment contract that is more favourable to the employee,” says Macanda.

“As an example, if the company supplementary contract sets out a two month notice period (which is over and about the one month statutory notice set out in the Labour Law), the company will be held to the longer notice period of two months. We always recommend to employers that they should strive to ensure that the all contracts mirror each other as far as possible to avoid uncertainly,” she adds.

The Hadef expert says ideally, the Labour courts will allow the employee to rely on whichever (contract or Labour Law) is most favourable.

“Both the standard form (Ministry of Human Resources and Emiratization or free zone) employment contract and any supplemental private contract are potentially enforceable documents and to the extent that the terms of any contract are less advantageous to the employee than the Labour Law, they will not be valid or enforceable.

“In the event that the terms of the contract(s) are more favourable than the Labour Law, the courts will apply the more favourable contractual term.  Where the terms of the standard form contract conflict with the terms of the private contract, the courts’ approach is to allow employees to rely on the more favourable of the two conflicting terms,” he adds.

COURTESY : Emirates 24/7

Know the Law: When, why UAE employer can withhold your gratuity

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There are areas where employer can build case for not paying employee in service for more than one year: legal experts.

The UAE labour law dictates that gratuity or end-of-service benefits are payable to employees who have completed one year or more in continuous service.

Despite meeting that criterion, there are a few clauses that can keep an employee from receiving the payment.

The first most obvious clause is less than a year of service, which is common knowledge.

“Where an employee is engaged under an unlimited term contract, no end-of-service gratuity (ESG) will be payable where the employee has been continuously employed for less than one year,” Jamie Liddington, Head of employment at Hadef & Partners, told this website.images (2)

There are other areas as well where the employer can build his case for not paying the employee despite being in service for more than one year.

It’s also important to understand some core points of difference when it comes to gratuity for those under a limited or unlimited contract, and here are the scenarios that can keep you away from getting your gratuity amount in your bank account.

According to Liddington, those under unlimited term contract may have to skip this amount if s/he “has been continuously employed for more than one year but resigns without providing the minimum period of notice required under the contract and without reasonable grounds to show that [firstly] the employer had, at the time of the resignation, failed to honour his contractual obligations to the employee or [secondly] he was assaulted by the employer or his employer’s legal representative.”

Then, there is a list under article 120, which employees should be aware of when it comes to gratuity entitlements.

Speaking to Emirates 24|7, Sara Khoja, Partner at law firm Clyde & Co says: “An employee who is terminated under article 120 of the Federal Labour Law, Law no 8 of 1980, is not entitled to end -of-service gratuitimagesy benefit or notice.”

Another scenario when the gratuity payment can be withheld is when “the employee has been continuously employed for more than one year but the employee’s employment is terminated for a reason set out under Articles 88 or 120 of the Labour Law,” states the expert at Hadef & Partners.

Khoja explains the clauses in article 120, under which gratuity will not be paid.

These include:

• Termination during probation or on its expiry.

• If the worker has adopted a false identity or nationality or submitted forged certificates or documents.

• If a worker makes a mistake causing substantial material loss to the employer provided the employer notifies the relevant labour department within 48 hours of the accident.

• If the worker disobeys instructions regarding industrial safety or the safety of the workplace provided the instructions have been issued in writing and are posted conspicuously in the workplace in a language accessible to the employee or explained to him orally.

• If the worker does not perform his basic duties under the contract and persists in violating these despite being investigated and receiving a written warning notifying him of termination in the event of repeat offences.

• If the worker reveals his employer’s trade or business secrets or confidential information.

• If the worker is finally sentenced by a competent court for an offence involving honour, honesty or public morals.

• If the worker is drunk or under the influence of an illegal drug during work.

• If while working the worker assaults the employer or his manager or a colleague.

• If the worker is absent from work without a valid reason for more than 20 non-consecutive days or more than 7 consecutive days.

Those working in another company without getting set approvals from the employer can also jepoardise their gratuity.

“Article 88 concerns working for another employer (without permission) during a period of annual or sick leave,” says Liddington, and this can lead to problems for the employee.

In cases where an employee is engaged under a limited or fixed term contract, “no ESG will be payable where the employee resigns before completing five years of continuous service unless he can show that (i) the employer had, at the time of the resignation, failed to honour his contractual obligations to the employee or (ii) he was assaulted by the employer or his legal employer’s legal representative,” he explains.

As per Khoja, those engaged on an unlimited term contract may get a reduced amount if the minimum term is completed.

If an employee “resigns in the first five years of employment, the end of service gratuity entitlement is reduced to 1/3rd if the employee has between 1 and 3 years of service and to 2/3rd if the employee has between 3 and 5 years of service. The employee may resign without suffering any reduction in gratuity if he has 5 years of service or more.

“If an employee is engaged on a fixed term contract then he must complete the duration of the term in order to be entitled to gratuity. If he has 5 years or more of service then he can resign without completing the term of his fixed term contract and will still be entitled to end of service gratuity,” she adds.

The above information is relevant for UAE onshore companies and not those domiciled in the DIFC, which has a different employment law – Law No 4 of 2005 as amended.

courtsey: Emirates 24/7

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