The UAE Law entitles employees in the country to a specific set of end of service benefits (EoSB) which includes gratuity in the UAE. These benefits are extended as a token of appreciation for the employee’s hard work and dedication to the company. EoSB is paid after the termination of the employment contract on an accumulated basis for the tenure served. Here is everything you need to know about the employee end of service benefits in the UAE.
This post is applicable to employees working in private sector companies in the UAE.
What Are End of Service Benefits In UAE?
Once an employment contract in the UAE is terminated, the employee is eligible for the following gratuity benefits. These inclusions are subject to change based on the type of contract the person is employed under. We will be discussing the two types of employment further on in the post.
The payment of EoSB is subject to the type of contract the employee is under. There are two types of employment contracts under the UAE Labour Law:
The Unlimited Contract: These contracts do not have an expiry date. Unlimited contracts give employees the right to terminate or resign from the job contract with a one-month written notice.
The Limited Contract: These job contracts are time-specific and are terminated once the specified time duration lapses.
Here are the leading provisions included towards the end of service benefits for private-sector employees in the UAE.
- A notice period in case of an unlimited contract or any outstanding dues in lieu of this notice period
- Any unpaid wages or overtime payments due
- Encashment of unutilised leaves
- Any repatriation expenses applicable as per the employment contract and/or the UAE Labour Law for end of service benefits
- End of service gratuity
Additional Benefits in Case of Unfair Dismissal
Employees facing unfair dismissal can approach the legal authorities.
- Eligible employees can be compensated for up to three months salary provided they meet the necessary criteria.
- For limited contracts, the compensation amount should not exceed the total three-month remuneration or the amount due for the remaining contractual period – whichever is shorter, unless specified otherwise in the contract.
How to Calculate Gratuity in UAE
The most important part of the end of service benefits in the UAE is the gratuity pay. Gratuity is a monetary compensation given at the end of the service period to the employee by the employer.
The calculation of gratuity is based on the type of contract; limited vs unlimited contracts and the reason for ending the contract. If the reason for leaving the company is resignation as opposed to termination, the number of days based on which gratuity in the UAE is calculated can vary.
For Employees under Limited Contract
After termination of a limited contract, employees are entitled to gratuity pay in the UAE. The amount is calculated as follows:
- There is no entitlement to gratuity pay if the length of service is less than 1 year
- For service of more than 1 year and less than 5 years, the full gratuity pay would amount to 21 days salary for every year of service. For example, if you have worked for 4 years in a company, your gratuity would be 21 days wage multiplied by 4
- For employees who serve longer than 5 years, the gratuity would amount to 30 days salary for each year worked over the 5-year threshold.
If the employee resigns voluntarily, they will only be eligible for gratuity if they have served for 5 continuous years.
For Employees under Unlimited Contract
When an employer terminates the employee’s unlimited contract, the gratuity to be paid as the end of service benefits is calculated using the following guidelines.
- On service of less than 1 year, the employee is not entitled to a gratuity payment
- On service of more than 1 year and less than 3 years, the gratuity amounts to one/third of the basic salary for each year served
- On service of more than 3 years and less than 5 years, the gratuity amounts to two/third of the basic salary for each year served
- For employees who serve up to 5 years, the gratuity amounts to 21 days of the basic salary for each year served
- Employees who serve more than 5 years are entitled to 30 days basic salary for every additional year served with the maximum amount payable not exceeding the employee’s two years’ pay.
Also, there are times when an unlimited contract is not terminated by the employer, but the employee resigns instead. In such cases, gratuity calculation as part of EoSB in UAE is done as follows:
- If the employee ends the contract before 1 complete year of service, there is no gratuity due
- A service that lasts more than 1 year but less than and up to 3 years is eligible for a gratuity tantamount to one-third of 21 days basic salary
- The gratuity pay amounts to two-thirds of 21 days basic salary if the service lasts more than 3 years but less than and up to 5 years.
- If the employee serves more than 5 years, their gratuity entitlement amounts to 30 days basic salary for each year.
- An employee is eligible for gratuity pay in UAE if they complete 12 consecutive months of service with the employer.
- Absence without pay from work is not included when calculating the period of service
- The total gratuity payment, regardless of the type of employment contract, will not exceed the amount of the employee’s 2 years’ salary.
What Happens If the Ex-Employer Refuses to Pay End of Service Benefits Upon Termination?
According to the UAE gratuity Law, an employee is entitled to immediate payment of their end of service gratuity upon termination, unless the employee is terminated for gross misconduct.
Disputes arise when the ex-employers refuse to pay the due end of service benefits to the terminated employee. The best way to deal with the issue is to file an immediate complaint at the Labour Office and then pursue legal proceedings in the Labour Court.
In such matters, each case is different from the other and so, a resolution that worked for another employee might not be the best one for you. You will need to consult an advocate for legal counsel and dispute resolution.
How to Protect Your Rights before Leaving the Job
When you take to the Labour Court for dispute resolution of your end of service benefits, it is important to have proof that reinforces your position. Your post-termination rights are more likely to be upheld if have documented everything leading to your dismissal.
The best way to go about it is to maintain an employment diary that dates and records all significant events at work (salary bumps or slashes, reprimands and commendations, performance reviews, informal remarks by the employer). Note everything with time, date, location and the presence of witnesses (if any). Also keep track of the written materials including memos, emails and evaluations pertaining to your work.
That’s a wrap to this post on end of service benefits in UAE. We hope you find this information useful. To be able to work in the UAE, you need a valid work permit. Most of you would already have one, but it’s still important to keep up with the new list of UAE work permit fees for 2019. Also, the UAE now allows work permits for men sponsored by their wives.
If you wish to work, study or live in the UAE, you also need a police clearance certificate. You can obtain a police clearance certificate via a simple procedure. The process is mostly hassle-free as long as you know what you need and how to go about it.
For more updates and information on the UAE law, real estate and latest happenings, don’t forget to subscribe to MyBayut.