On completion of one year or series of years, an employee is entitled to end of service remuneration at the end of their employment. The Gratuity Calculation in UAE includes only paid days off work.
The gratuity calculation is as follows:
1.Each year of the first five years include twenty-one day’s pay
2. Each additional year includes thirty days pay.
3. However, the total remuneration shall not be more than two years pay.
On completion of one year of service, the worker shall be entitled to a gratuity for the saved fraction of the year.
Without prejudice to provisions of certain laws, employees getting paid on daily basis will receive the end of service gratuity on their daily average. However, employees getting paid on weekly or monthly basis receive their gratuity based on their last wage as set forth in Article 57.
The wage used for calculating gratuity shall not include payments to workers in reimbursement, housing, transport and travel allowance, overtime salary, representation allowance, cashier’s allowance, children education allowance, allowances for recreational and social services and any other bonus or allowances.
If any amounts are due by the employee to employer or organization they are deducted from end service remuneration.
The preceding cases of employment coming into force of present law shall not be deemed cases for which the worker is entitled to end of service gratuity with the exception of cases such as nationals, without prejudice to any rights exercised by the worker by virtue of revoked labour laws, employment contract, regulations or by-laws of establishment.
In the case of death of the worker, his beneficiaries shall be entitled to his end of gratuity service.
The worker is entitled to one-third of gratuity set forth in the foregoing ARTICLE if the worker bound by the employment contract with vague term may leave the work with his own choice after a continuous service of at least one year to three years at most.
If his service continues to three years or maximum five years than he shall be entitled to two-thirds of the said gratuity and in a case of the period exceeding five years he shall receive the full gratuity.
A worker bound by an employment contract with an insistent term, leave his work by his choice prior to the expiry of his contract, he shall not be entitled an end of service gratuity unless his service period exceeds five years.
The worker shall not be entitled to end of service gratuity in the following cases:
1. If the worker is terminated from his service due to any of the reasons set forth in ARTICLE 120 hereof or he should or he leaves his employment in order to avoid dismissal in accordance with said ARTICLE.
2. If the worker leaves the employment of his own settlement, and with such regard to contracts with vague terms, and without notices other than mentioned in ARTICLE 121 hereof, prior to completion of continuous service of five years with regard to the contract with determined terms.
If the establishment has a saving fund for the workers and it stipulates that the funds deposited into fund on behalf of the employees are in return for the legal obligation in regard to end of service gratuity, so the workers are entitled to receive the amount saved in fund or the amount duly due as a gratuity which one is greater.
If the rules of the fund are not set forth that the amount paid by the employer are in return for his legal obligation with regard to gratuity, the worker shall receive the amount due to him from saving fund besides he statutory end of service gratuity.
An establishment having a retirement system, insurance scheme or any similar scheme, the worker entitled to the pension may choose between the prescribed gratuity, pension or the money entitled thereto from retirement system or under the insurance system which one is favorable.
Compensation for Occupational Injuries
Schedule 1 or Schedule 2 defines the occupational injuries and diseases. His responsibility of the employer is to provide treatment, communicate with parties and properly state the incident in the document.
If illness prevents the party from working than employer must pay him allowances as mentioned in ARTICLE 145. In a case of permanent disability from injury or disease. Compensation is provided in accordance with the worker based on percentages specified by Schedule 2 and assessing the level of disability.
If illness results in a death of an employee, his family members shall be entitled to compensation for 24 months, equivalent to last basic pay earned by an employee before his death, provided that the amount of compensation shall not be less than eighteen thousand Durhams and shall not exceed thirty-five thousand Durhams.
The employee is not entitled to any compensation if it is proved that employee injured himself intentionally, due to a usage of alcohol or drugs, or was disobeying safety measures at work place.
If any dispute occurring between the employer and one employee or number of employees fails to resolve than worker should file the complaint or claim in writing to employer and labor department. The employer should communicate with the employee and labor department within seven days; if he fails to do so then the labor department will work on reaching a settlement.
Labor inquiries are carried out by expert inspectors affiliated with Ministry of Labour and Social Affairs to fortify that workplace is compliant with all the laws stated in Federal Law No.8 of 1980. The inspector may make modifications to the facilities if he finds them insufficient or dangerous.
Potential penalties with reference to ARTICLE 181 are imprisonment for a period of six months and a fine between three thousand to ten thousand Dirhams in a result of the violation of obligatory provisions of law.
Similar violations by breach of law may result in double penalties. Recent updates to labour law.If any of the criteria mentioned below is satisfied that an employee shall receive a new work permit and may not face any labour bans. If the following skill levels are reached than employees are exempt from any six months employment requirements in case of both limited and unlimited company:
Level 1: Employees holding university degree
Level 2: Diploma holders
Level 3: high school
Limited Contracts and labor ban:
Workers under limited contracts are more open to labor bans than those under unlimited contracts.
Under the following circumstances, no ban shall occur:
- If the contract is not renewed after its expiration.
- If both parties mutually terminate the contract before completion of fixed duration as long as the employee has finished at least six months of labor.
- Termination of employee without reason after his serving period of at least six months
- Termination of contract after it has been renewed, such that
- The proper notice is given by the terminating party
2. The requirements by the terminating party are fulfilled in regard to the early termination compensation.
Following circumstances may not give rise to ban:
- Termination of contract by mutual agreement between the parties provided that the service of employee is not more than six months
- If the employee service is at least six months and provides notice according to the contract and labor law has been observed properly.
- If the employee has been terminated without any reason and he has provided the service of at least six months.
Mutual labor ban key points for Limited/Unlimited Contracts:
Further, no labor ban shall occur for both limited and unlimited contracts, under the following circumstances:
- When an employer fails to comply with any obligations of the employment contract i.e. if he fails to pay wages for extra sixty days and if he violates the terms of the contract.
- When the business is shut down for some reason and the worker is not able to perform their duties.
- If labor court has issued any order stating that the employee is owed wages for more than two months, the employee is entitled to compensation for either for early termination or unpredictable dismissal of the contract; if there are any pending dues from the employer such has service and remuneration.
Termination of Limited Contracts
- The duration of limited contract has reduced from four years to two years
- The contract may be terminated by mutual consent of employee and employer.
- The contract may be terminated by at any time by either of the parties
However, the following procedures must be kept in mind to avoid legal consequences:
- The written notice of termination must be given by the party doing so, to the other party to make the termination possible. The period of notice is one month and may not exceed three months.
- During the notice period, the performance of obligations of terminating party shall continue until the contract is terminated.
- Three months gross wages shall be compensated by the terminating party to the other party
Termination of Unlimited Contracts
- A contract may come to end with mutual agreement of both parties
- If proper notice is issued and all the contractual duties are fulfilled during the notice period, either party may terminate the employment contract.Legal consequences are to be faced by terminating party if the failure to comply with these conditions. However, both parties retain the right to seek compensation under the labor law UAE. Termination of Limited/Unlimited Contracts by employee
Termination of the contract by an employee may arise from the following reasons:
- When the employer fails in his obligations such as failure to provide benefits to the employee
- A labor complaint has been filed by the employee to Ministry of Labor on the grounds of authoritarian firing or before time termination of a fixed-term contract.
- The closing down of business and failure of the employer to protect the employment of the employee.