Tag Archives: UAE Labour Law

Gratuity Benefits and its Calculation under UAE Labour Law

Court Representation by Top Dubai Lawyers Experts on Dubai Law and the UAE Legal System

The term “gratuity” refers to a monetary benefit given by the employer to his employee in the event of retirement, resignation or termination of services.

The practice of giving gratuity has originated in order to ensure that patrons receive the best service possible. This practice has later evolved as a custom which allows rewards to the service providers for providing good services.

Under Article 133 of the UAE Labour Law, the worker shall be entitled to a gratuity for the served fraction of a year provided that he completes one year of continuous service. In simple words, an employee who has spent one year or more continuous service is entitled to gratuity as an end of service benefit. Therefore, an employee, who served for less than one year is not legally entitled to get gratuity.

Further, as per Article 135, the employer may deduct from the end of service gratuity any amounts due to him by the worker.

 

Computation of Gratuity

Under the UAE Labor Law, the method of calculation of gratuity is different according to the nature of the employment contract, whether limited or unlimited.

Further, as per Article 134 of the UAE Labour Law, the calculation is based on the last wage due to monthly, weekly and daily – paid workers. In case of the workers getting paid by the piece, the calculation would be on the basis of average daily wage.

For this purpose, the term ‘wages’ shall not include allowances for housing, transport and travel, overtime pay, representation allowances, cashier’s allowances, children education allowance, allowances for recreation and social services, and any other bonuses or allowances.

With regard to the calculation of gratuity,

1. Under Limited Contract (contract with limited term)

On termination of a limited contract, the amount of gratuity shall be calculated as follows:

  • If the period of service is less than one year, no gratuity is payable
  • For an employee whose period of service is 1 to 5 years, he is entitled to 21 calendar days’ basic salary for each year of the first five years of work.
  • If an employee has served more than 5 years, he is entitled to 30 calendar days basic salary for each additional year, provided the entire compensation does not exceed two years pay.

2. Under Unlimited Contract (contract with unlimited term)

The computation of gratuity, under an unlimited contract is different on termination by the employer and the employee.

On termination of the employment contract by the employer,

  • If the period of service is less than one year, no gratuity is payable
  • If the period of service is 1 to 5 years, the employee is entitled to 21 calendar days’ basic salary for each year of the first five years of work.
  • If an employee has served more than 5 years, he is entitled to 30 calendar days basic salary for each additional year, provided the entire compensation does not exceed two years pay.

On resignation of an employee under an unlimited contract,

  • If the period of service is less than one year, no gratuity is payable
  • If the period of service is between 1 and 3 years, the employee is entitled to one third (1/3) of 21 days basic salary as gratuity pay.
  • If the employee has served between 3 and 5 years, he is entitled to two-thirds (2/3) of 21 days basic salary as gratuity pay.
  • If an employee has served more than 5 years, he is entitled to full 21 days basic salary as gratuity pay.

 

Persons Ineligible for Gratuity

As per Article 139 of the UAE Labour Law, the employees are not eligible for gratuity from their employers under the following circumstances:

1. On dismissal by the employer by invoking any reasons mentioned under Article 120 of the UAE Labour Law which allows summary dismissal of an employee on eleven exhaustive grounds mainly considered as instances of gross misconduct on part of the employee. An employee who resigned from his employment in order to avoid such dismissal also is not eligible for gratuity.

2. On resignation from the employment without notice except for the reasons mentioned under Article 121 of the UAE Labour Law as per which the employee can abandon his work without notice if the employer fails to honour his obligations towards him or if he is assaulted by the employer or the employer’s legal representatives, and such with regards to unlimited contracts, or prior to the completion of five years of continuous service with regard to limited contracts.

The UAE Labour Law provisions are more advantageous to the employee and its prime objective is to ensure the welfare of the employees. As per Article 141, if the establishment has a retirement system, an insurance or any similar scheme, the employee has an option to chose between the more beneficial retirement scheme or severance pay.

For any queries or services regarding Labour matters, you can contact us at +971 4 3298711 or send us an e-mail on consultants@uaeahead.com . Also visit our website www.uaeahead.com

Article by ProConsult Advocates & Legal Consultants the Leading Dubai Law Firm providing full legal services & legal representation in UAE courts

Arbitrary Dismissal of Workers under UAE Labour Law

Court Representation by Top Dubai Lawyers Experts on Dubai Law and the UAE Legal System

The UAE labour laws are very much lenient to the workers. When an employer dismisses an employee without a notice or warning letter or forces him to resign from the job without any reasonable grounds, such dismissal would amount to an arbitrary dismissal. Article 122 of the UAE Labour Law defines that when a worker is dismissed by his employer for a reason irrelevant to the work, it is ‘arbitrary termination’.

According to Article 123 of the UAE Labour Law, if arbitrary dismissal is proven, the Court can order the employer to pay an additional compensation to the employee.

As per the UAE Labour Law, there can be two types of employment contracts between the employer and the employees. They are (i) Limited Term Contracts and (ii) Unlimited Term Contracts.

In case of a limited contract, there is no notice provision under the UAE Labour law for the termination of limited term contract. Such contracts simply expire at the end of the term or on the date specified in the contract (unless terminated earlier by either party).

In case of an unlimited contract, it can be terminated by either the employer or employee at any time subject to serving a notice to the other party for a period of at least 30 days, unless the Employment Contract provides for a longer notice period.

It is an obligation of the employer under Article 46 of the UAE Labour Law to give a trainee enough time to acquire theoretical knowledge. He should also give the trainee a sufficient time to learn the principles of the occupation and the skills for which he is recruited.

Further, the Labour Law allows summary dismissal of an employee by the employer on eleven exhaustive grounds under Articles 88 and 120 of the UAE Labour Law.

The grounds on which an employee can be dismissed without a notice are:

  1. Use of false identity or nationality and submission of forged certificates or documents.
  2. If an employee is engaged on probation and is dismissed during or at the end of the probationary period.
  • On committing a fault due to which a substantial loss was caused to the employer. In such cases, the employer should have notified such an incident to the labour department within 48 hours of becoming aware of its occurrence.
  1. On disobeying instructions on the safety of work or workplace. This is subject to a condition that such instructions are in writing and posted at a conspicuous place and are communicated verbally to an illiterate worker.
  2. On breach of his basis duties under the employment contract and fails to redress such default despite a written interrogation and a warning that he will be dismissed if such default is repeated.
  3. On revealing any confidential information of the firm for which he works.
  • On conviction by a competent court of a crime against honour, honesty or public morals.
  • If he was found in a drunken state or under the influence of a narcotic drug during working hours.
  1. If he assaults the employer, the manager in charge or any of his workmates during working hours.
  2. If he is absent from work without a valid reason for more than 20 non-successive days in one single year, or for more than seven successive days.

Alternately an employee may validly resign prior to the expiry of the contract under the provisions of Article 121 of the law as per which, he can abandon his work without notice in the contract or in this Law (a) if the employer fails to honour his obligations towards the worker or (b) if he is assaulted by the employer or the employer’s legal representatives.

The concept of Arbitrary dismissal under the UAE law is very much similar to the concept of unfair dismissal under the UK Law where natural justice principle is strictly followed. After an employee is terminated from the employment, he may pursue claim for arbitrary dismissal by the employer. Therefore, it is compulsory for the employer to strictly follow the statutory norms in case of termination of an employee.

The established jurisprudence and practice in the UAE is that the Courts will not deem a termination as ‘arbitrary’, if it is found that either (i) the employee is guilty of one of the specified (and exhaustive) gross misconduct type reasons listed in Articles 88 and 120 of the UAE Labour Law, or (ii) the employee is a poor performer (and there is documentary evidence supporting the poor performance or misconduct).

 

Compensation for Arbitrary Dismissal

According to the UAE Labour Law, the maximum additional compensation that can be awarded for an ‘arbitrary dismissal’ of an employee is three months’ remuneration, calculated based on the last pay received by the employee prior to dismissal. 

For determining the amount of compensation, the Court will consider the type of work, the extent of damage incurred to the employee and the total period of the employment. The amount, however, should not exceed three months wages.

In addition to the aforementioned compensation, the employee can claim his gratuity, notice period dues, payment in lieu of untaken leave or any other unpaid dues and post-termination entitlements he is entitled to from his employer under UAE Labour Law.

For the purpose of computation, the term ‘remuneration’ refers to an employees’ full pay (basic salary plus any monthly allowances).  In addition, where the employee receives regular or guaranteed bonus or commission payments, these may also be considered by the Court while determining the employee’s remuneration.  The actual amount of the award, if any, is ultimately determined by the Court.

For any queries or services regarding labour law, you can contact us at 043298711 or send us an email on consultants@uaeahead.com. Also visit our website www.uaeahead.com

Article by ProConsult Advocates & Legal Consultants the Leading Dubai Law Firm providing full legal services & legal representation in UAE courts