Is it done if UAE just attracts international talents? Going a step ahead, UAE knows that it is accountable in ratifying the conventions to protect the labour rights for the domestic as well as the international workers. Through the highly beneficial policies and programmes, UAE seeks to implement the utmost transparency and balance between the Emiratis and foreign talents. Many advanced and integrated legislations approved the change of jobs and in terminating the contracts. The Ministry of Human Resource and Emiratization is committed in guaranteeing the security of the workforce. Hence, this Ministry has launched a series of initiatives in promoting the welfare of the workers in the country. In addition to this, this department takes initiatives in standardizing the labour markets by creating transparency for both employers and the workers.
As per the UAE labour law, all the employees who have completed their employment contract are qualified for receiving the end-of-service benefits also known as gratuity. Gratuity of any person employed in UAE majorly depends on the following factors
- Contract type
- Basic salary pay
- Total number of years served
- Reason behind the termination
Standard employment contract in UAE
According to the Ministerial Decree (764) of 2015, implementation of the ministry of labour’s released standard employment contracts. Listed below are the major elements for any labour contract signed with the registered employers of UAE.
- Employment contract forms shall be adopted only when the expatriate singed the employment offer
- The standard employment contract shall be submitted to the Ministry of Human Resources and Emiratization
- No new clause should get added to the standard contract referred to, unless they are consistent and compliant with other clauses of the standard contract and are approved by the ministry
Various employment contracts in the private sector
According to the UAE labour law, an employee staying with the company depends on the type of the agreement. Time of resignation in your service period may impact employee’s gratuity pay. Under the Labour Law No. 8 of 1980, UAE offers two types of employment contracts. Limited or fixed term contract and unlimited term contract. The difference between these two contracts lies in the period of service termination and provision of the end of service benefits. In recent times, by 2018, UAE implemented the part time contract system.
- Fixed term contract (Limited): As a rule of thumb, limited term contracts will have the service begin date and service end date, as a standard employment period. If this contract is not renewed, the contract tends to get cancelled automatically. Many employers hire such employees for a specific project for a specific duration. In UAE, limited contracts have a maximum duration of 4 years. Issued contracts should always have the notice for termination.
- Unlimited term contract: This is the most commonly used contract in UAE. The unlimited term of contract is open-ended with more flexibility by its nature. These kinds of contracts can be terminated with mutual consent or through issuing the notice period between one to three months. Both the parties involved in the contract should always stand by their obligations throughout the notice. The term of employment relation deemed to have ended without due process by termination either by the employer or the employee, which can be done by without complying to the legal procedures. Any wronged party may initiate the legal action and the compensation.
- Part-time contract: The Ministry of Human Resource and Emiratization (MoHRE) implemented a new rule, which allowed the entities to recruit employees under the multi-employer contract. This contract is subjected only to the skilled workers from inside the country as well as from abroad. Under this contract, the employees can abide by one or more companies and there is no necessity to acquire the original from neither of the companies. Several jobs can be taken at a time but should be obligated to take permits from the Ministry of Human Resource and Emiratization. This contract should be subject to the common rules of the other two regular contracts mentioned above. This contract cannot be converted as a regular contract until the end of the part-time employment contract.
End of service benefits
If the employee served at least one year of his terms of service. Entitled to the gratuity pay. When calculating the gratuity pay, it includes the latest basic pay from his salary, but not including any allowances like housing, furniture, conveyance, utilities, travel, overtime pay, recreational, children education allowance, representation allowance and any other bonuses. In case, if the employee terminates on his or her own will before completing a year, will not be entitled to any gratuity pay. The employer cannot deduct any gratuity money unless the employee owes any money to the employer in prior. According to the Title Seven termination of contract and end of service gratuity released by the Ministry of the Human Resource and Emiratization has the notable pointers that are stated below:
- The non-working days without the pay shall not be considered in the period of service. In that case, the wage of 21 days for the first five years and the wage of thirty days for the successive years shall be calculated for gratuity
- Employers who have saving funds for their workers, can deposit the stipulated fund into it, in return to the legal obligation in regard to the end of service benefits. The amount which is saved or the duly due gratuity shall be paid to the worker. If the fund is not stipulated with regards to end of service benefits, worker shall receive the amounts due from the savings as well as end if service gratuity
- If an entity has the retirement system, health insurance or any other similar schemes, can choose their benefits between the insurance scheme, money entitled from retirement system or the prescribed gratuity
- In case of death of any workers, his end of service amount will be paid to the beneficiaries thereof
Gratuity pay calculation
i. Gratuity pay for limited contract:
- An employee who has spent one year or more in continuous service shall be entitled to an end of service gratuity upon the termination of his service. The days of absence from work without pay shall not be included in the calculation of the period of service and the gratuity shall be calculated as follows:
- If an employee has served for less than 1 year, he is not entitled to any gratuity pay.
- If an employee has served for more than 1 year but less than 5 years, he is entitled to full gratuity pay based on 21 days’ salary for each year of work.
- If an employee has served more than 5 years, he is entitled to full gratuity of 30 days’ salary for each year of work following the first five years.
In all cases, the total gratuity shall not exceed the wage of two years.
ii. Gratuity pay for unlimited contract:
In the event where the employer terminates an unlimited contract, calculation will be as follows:
- If an employee has served for less than 1 year, he is not entitled to any gratuity pay.
- If an employee has served more than 1 year but less than 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.
In the event where the employee under an unlimited contract resigns, calculation will be as follows:
- If an employee resigns before completing 1 year of service, he is not entitled to any gratuity pay.
- If an employee has served between 1 and 3 years, he is entitled to one third (1/3) of 21 days’ basic salary as gratuity pay.
- If an 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.
No gratuity pay?
According to the article 139 by the labour law, in two scenarios employees shall not be able to get the gratuity pay benefits. Those reasons are as follows :
- If one terminated from his job in view of avoiding the dismissal there from submitting false certificates, documents, false identity and nationality, workers under probation
- If an employee left the job in his own accord, without notice in regard to the contract with undetermined term or prior to completion of five years of continuous service with determined term
The Ministry of Human Resources and Emiratisation of the United Arab Emirates strives to meet the global standards in various aspects and so the law is subject to change, interpret or redefine. It also strives to lessen the jeopardy of litigation. The degrees of success of every redefinition of the legal laws constantly reflect the changes in the society itself. Hence, the above stated is not the static law. The law amendments in areas such as end of service benefits, calculation of gratuity will definitely ease the way of settlement. To stay up-to-date about the latest updates related to the law enforcement by The Ministry of Human Resources and Emiratization, check out our blogs here.
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