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What is the employee entitled to on the termination of his employment contract?
On the termination of the employment contract, an employee is entitled to the following:
2. In the case of an unlimited contract, compensation for unreasonable dismissal if the contract was terminated by the employer for unreasonable cause.
3. In the case of a limited contract, compensation equivalent to the period until the end of the contract, or three month’s wages, whichever is shorter.
4. Payments equivalent to the balance of unutilised leave or any part thereof.
5. Payments for overtime or any balance of wages due and not yet paid.
6. End of service gratuity calculated on the duration of the employment.
7. Repatriation expenses as per the Law or the employment contact, subject to the employee not being in violation or in breach of either the Law or the employment contract.
What does the term end of service gratuity mean in terms of compensation?
In the case of an employment agreement for a unlimited term, an employee who completes one year or more in continuous service shall be entitled to gratuity at the end of their service. The gratuity shall be calculated as follows:
(1) 21 days wages for each year of the first five years.
(2) 30 days wages for each additional year on condition that the total of the gratuity does not exceed the wages of two years.
I have been working in a shipping company for around seven years. I will be 60 years’ old by the first week of November. As far as I know, the Labour Law states that Dh5,000 need to be deposited to stamp the employment visa after 60 years. Now, I have been offered a job by one of the companies and they need my service urgently.
Since you have completed more than two years with your current company, you can resign the job any time with a thirty-day notice as per Article 117 of the UAE Labour Law or otherwise in accordance with the terms and conditions provided in your employment contract.
1. Twenty one days’ pay for each year of the first five years of service.
2. Thirty days’ pay for each additional year, provided that the entire total remuneration shall not exceed two years’ pay.”
How to calculate your gratuity pay?
Between 1 year and 5 years of service
5 or more years of service
a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30
b. 330.30 x 21 = 6,936.30. So 21-days salary is Dh6,936.30 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to 5 years.
For 30 days calculation for those exceeding 5 years of service
c. 330.30 x 30 = Dh9,909. So 30-days salary is Dh9,909 in gratuity entitlement for each year of service – so long as the total figure does not exceed two years total salary figure.
Calculations for Unlimited Contract gratuity pay
Between 1 year and 3 years of service
Between 3 years and 5 years of service
5 or more years of service
a. 10,000 ÷ 30 = 333.30. Your daily wage is Dh330.30
b. 330.30 x 21 = 6,936.30. So 21-days salary is Dh6,936.30
Of this figure of Dh6,936,30, only 1/3 is payable if you have worked between 1 and 3 years, so the total gratuity pay would be Dh2,312.10.
Only 2/3 is payable if you have worked between 3 and 5 years, so the total gratuity pay would be Dh4,624.20.
The full Dh6,936.30 is payable if you have completed 5 years.
These calcultions are not to be treated as law, they are for your reference only. For any disputes or further clarification, contact the UAE Ministry of Labour.
2. Daily wage x 21 = 1 year gratuity figure (Or x30 if applicable)
3. 1 year gratuity figure x years of service = Total gratuity owed
Only continue for Unlimited Contract calculation
4. Total gratuity owed ÷ 3 = One third (1/3) of total gratuity
5. Either take this figure or multiply it by two for final figure. (GN)
visaprocess.ae is not responsible for any amendments made to the UAE Labour Law. All labour disputes must go through the Ministry of Labour. This article may only be used as a guide.
I have been working in a company here on an unlimited contract. I have resigned recently with 30 days notice period. I would very much appreciate if you kindly advice me on the labour ban, if any, end of service benefits, and my passport which they kept with them.
First of all, the employer does not have the right to hold the employee’s passport without the latter’s consent. Secondly, according to Articles 125, 131, 132,133 and 137 your end of service benefits are; a certificate of service (free of charges), the expenses of sending you back to your home country (a ticket and any other agreed upon expenses according to the labour contract), and your gratuity would be the salary of 21 days for each year divided by three. Finally, Under the UAE laws, if an employee leaves a job without completing two years, then, the Ministry of Labour will impose a work ban for six months or for one year if requested by the employer (KT).
On what basis is gratuity calculated?
Would a commission or payment by percentage be considered a basic wage?
Can the employer deduct any payment from the gratuity payable to the employee?
Is the amount calculated for gratuity affected if the employee resigns from employment?
Under what circumstances can an employee be deprived of his end of service gratuity?
An employee may be deprived of his end of service gratuity if he has been dismissed for one of the reasons stated in Article 120 of the Law, or if he terminated his employment to avoid such dismissal.
Under Article 121 of the Law, an employee will be entitled to gratuity on termination without notice in either of the following circumstances:
(1) The employer has failed to comply with his obligations towards the employee, as provided for in the employment contract or in the Law.
If the establishment or company has a pension scheme, which is beneficial to the employee, is this a substitution for the payment of gratuity?
Can the employee and the employer agree to pay gratuity for the termination of the employment contract for a preceding period?
Where an employee has worked for an employer in two or more countries, will he be entitled to gratuity?
Can an employee mortgage or assign payment of his gratuity?
When does gratuity become due and payable?
Gratuity will only become due and payable on the termination of an employment contract.
Are the end of service gratuity and other dues payable to the employee considered priority debts?
How effective are foreign employment contracts in the UAE?
I finished my three-year contract. I told my employer I wanted to resign. My contract is limited. My employer claimed I am not entitled to end of service benefits. It is right? What are my entitlements? Whom should I talk to?
Since you have spent more than a year with your employer, according to Article 132 of the federal labour law, you are eligible to 21 days’ salary for each year you have worked for the employer. In addition to the gratuity, you are eligible for a ticket to your home country or to the country that you have agreed to travel to with your employer at the beginning of your work.
Gratuity is based on basic of last salary
I work as a safety officer with a private company here on a three-year limited contract. I have completed three years in service but my company has not renewed my visa. The company did not give me a one-month notice period before terminating my service. The management has, however, made me sign a clearance paper and promised to pay my salary, the end of service benefits, air ticket, and one-month salary against notice period. A friend of mine said they are lying, and will give me nothing as I have signed the clearance paper in which I acknowledged that I have received all my entitlements. What should I do?
Don’t sign clearance paper before getting entitlements
Federal Law No 8, For 1980, On Regulation of Labour Relations
A worker who has completed one or more years of continuous service shall be entitled to severance pay at the end of his employment. The days of absence from work without pay shall not be included in calculating the period of service. The severance pay shall be calculated as follows:
21 days’ wage for each of the first five years of service.
A worker shall be entitled to severance pay for any fraction of a year he actually served, provided that he has completed one year of continuous service.
Without prejudice to the provisions of laws that grant pensions or retirement benefits to employees in certain firms, severance pay shall be calculated on the basis of the wage last due for monthly, weekly and daily paid workers, and on the basis of the average daily wage referred to in Article 57 hereof for those paid on piecemeal. The wage used as a basis for calculating severance pay shall not include whatever is given to the worker in kind, housing allowance, transport allowance, travel allowance, overtime pay, representation allowance, cashier’s allowances, children education allowance, allowances for recreational and social facilities, and any other bonuses or allowances.
An employer may deduct any amounts owed to him by a worker from the latter’s severance pay.
For the purposes of Article 132, no severance pay shall accrue for the employment cases that preceded the enforcement of this Law except where the worker is a National. This, however, shall be without prejudice to any rights acquired by the worker under the repealed labour laws, the employment contract, or under any agreement, regulations or work rules of the firm. In the event of the worker’s death, his severance pay shall be paid to his legal heirs.
Where a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article. Such a worker shall be entitled to two thirds of the said severance pay if his continuous service exceeds three years up to five years, and to the full severance pay if it exceeds five years.
Where a worker under a definite term contract abandons his employment at his own initiative before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years.
A worker shall forfeit entitlement to his entire severance pay in any of the following two cases:
Where a firm has a provident fund for the workers and the rules of the fund stipulate that whatever the employer pays into the fund for the worker’s account is in discharge of his legal obligation in respect of severance pay, the worker shall be paid the savings balance in his account or the severance pay due under the Law, whichever is the greater. Where the rules of the fund do not stipulate that the amounts paid by the employer are in discharge of his legal obligation toward the severance pay, the worker shall receive whatever is due to him in the provident fund in addition to the statutory severance pay.
Where a firm has a retirement, insurance or a similar scheme, a worker who is entitled to a retirement pension may opt for treatment under the said pension or severance pay or under the pension or insurance scheme, whichever is more advantageous to him.
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